By default, ways will be renewed automatically before they degrade, unless you cannot afford the replacement. You can disable auto-renewal for a section of way, however, by SHIFT+dragging the remove way tool over the way. Similarly, you can choose the type of way to which a way renews (for example, choosing an upgrade) by SHIFT+dragging that way over the old way. Unless you have disabled way renewal manually or cannot afford a replacement, ways will automatically renew before becoming degraded to any extent. Ways will not renew to an obsolete type, but will instead choose the closest current type to the old way, meaning that renewal will automatically upgrade in many cases (although only to the cheapest way that has at least as good a minimum speed and maximum weight as the previous way; so it may be wise to choose an upgrade manually for important trunk routes that should always have the latest way types).