I have a 2008 imac and the hard drive has went bad. Whould it be worth replacing it or should I just purchase a new computer?

My 2008 imac started running very slow. I took it into 'Simply Mac' to have them look at it and try and fix it to perform at a normal speed. The performed diagnostics on it and got back to me telling me that it is the hard drive and it will need to be replaced. They said that the best thing would be to just purchase a new computer because the one I have is more or less obsolete, in Apple's eyes. I did not like hearing this because it was performing just fine prior to slowing down and it did everything that I could possibly want it to do. I would rather spend a couple hundred dollars replacing the hard drive than $1800 for a like-kind newer model. Please supply comments on your experiences and if it would be better to just purchase a new one than to sink money into an older model that might continue to need upgrades / repairs. ie video card, monitor, etc.

Thanks.