Repairing items is very expensive and I want to use repair kits for this but I cannot find them. Where is the best place to find repair kits?
You can buy Repair kits in general stores, find them in lootable objects such as chests and the like, and pickpocket them from some NPCs. The most reliable way is to purchase them from the general stores.
You can get by in this game with the loot that spawns in chests and such - the detect hidden skill may help with finding some loot in stashes, but for the most part just doing some of the quests will net you some named weapons and sufficient equipment to keep you stocked throughout the game. As long as you keep swapping out when you find better equipment, you shouldn't have to worry about repairs.
Playing finesse, I personally did not need to repair until quite far into the game and by that point, I could probably have afforded the blacksmith if I weren't so cheap. Generally, you don't want the enemy to hit you as if they do not, your armour shouldn't take damage. Dodging is highly effective and never be afraid to run away - the enemies aren't going to heal and they'll forget about you. While the game seems to imply that warriors and mages shouldn't, they can actually benefit from stealth attacks under the right circumstances. Ranged attacks for mages and rogues are also a good way to avoid taking hits and to be ready for quick escapes. Warriors have a harder time of keeping their distance, but if you build them correctly, the enemies should be dead before they can get in any hard hits.
If you are finding the game too difficult, there is a difficulty setting that you can change which will not affect what drops or experience gained. The difficulty setting only affects enemy stats for the most part and I'm thinking that enemies with less health tend to die while getting less hits on you and with less wear on your equipment.
General good vendors stock them, and you'll find this type of vendor frequently in inns. Beckry Aideh in Canneroc is one such merchant.
Sometimes there are vendors inside blacksmith shops in towns who sell them, but blacksmiths themselves don't sell items, they'll simply charge you to do the repairs themselves, at a considerable markup.