The preferred approach is to fix it as long as it is feasible (and even a badly ripped Sefer Torah can normally be fixed by replacing that part of the parchment - since a safer Torah is constructed by stitching together many smaller parts of parchment). R Moishe Dovid Lebovits mentions this here
A sefer Torah that is non-kosher and not checked should either be
fixed or put into sheimos. However, we will discuss the parameters of
this below. If it can’t be fixed one should bury it, but if it can be
fixed then one should fix it (Asei Lecha Rav 6:65, V’ata Kisvu, Y.D.
He goes on to describe what should be done in case the sefer Torah is too damaged (typically burying it near the grave of a almid chacham).
At least in Israel, there is always demand for sifrei Torah, whether for new synagogues or for the army that aims to have one with every group of soldiers and doesn't always succeed.