There are numerous factors to take into account when trying to decide on the best time to sell or trade-in your car – and making the correct decision can save you a large sum of money.
CarZar, an online marketplace for the second-hand vehicles, says there are a number of questions to ask before deciding on the right time to sell.
- Is the car starting to cost you too much?
- Does the car require a significant amount of money to repair it, or does it keep breaking down?
- Is the vehicle becoming too expensive to run – is it compromising your personal finance through instalments, fuel costs, and rising insurance premiums?
- Is the warranty about to run out?
- Is your car set to be discontinued?
If, like Citroen did, your car maker is set to stop distributing in South Africa, or if the car will be discontinued due often to poor sales, “sell as soon as possible, as you can expect a drastic decrease in value due to the brand no longer being in the country, which brings about difficulties finding parts to perform proper maintenance on the vehicles,” said CarZar.
“If the warranty is about to run out, sell your car before it ends. This will allow you to hold on to the value of the vehicle. Once the warranty is finished, the value will drop dramatically,” the online auto-dealership said.
“Similarly, if your motor plan is about to run out, sell your car before it ends,” it said.
The ‘rule of thumb’ when it comes to timing when to sell your type of car:
- Expensive cars are very costly to maintain – once they age their value drops significantly. “These models should definitely be sold before the warranty or motorplan expires,” CarZar said.
- Popular models like VW Polos and Toyota Corollas generally hold their value much longer.
- If the vehicle is brand new (0 km) when you buy it, try to sell within three years, as the plans will still hold value.
- If the vehicle is older (between three and seven years) and it is out of warranty and motorplan, try to sell within two years.
- Vehicles that are older than 10 years sell for about 50% less than their book value. This mainly because they are not granted bank finance.
- Mileage has a strong impact on the price of the vehicle. The value of the car drops drastically if the mileage is more than 250,000 km, as well as the vehicle having more mileage than the expected average for the age and type of car.
According to CarZar, 25,000 km per year is the expected average for regular models – “anything more, and you can expect at least a 10% drop in market value,” it said.
Wesbank notes that the most desirable cars are always ones that are still under warranty and/or motor plan. “Second-hand cars tend to start having issues after 100,000km so that would be a good time to trade it in, or when your motor plan expires,” it said.
Mike Schussler, chief economist at economist.co.za however, has advised that consumers keep their vehicles for as long as possible for the obvious reason that its value depreciates the minute you drive it off the showroom floor – and quickest in the first year.
“Why would you want to buy another car so soon except to boost your ego,” he said.
According to the Automobile Association (AA), a new car loses value as soon as you drive off the forecourt, and by the end of the first year will have lost around 40% of its value.
If you do 16,000 kms a year, the average car will have lost around 60% of its value by the end of its third year, the AA said.
It is widely reported that most cars depreciate at a rate of 15% – 20% per year, and by year five, your vehicle will generally be worth half what you originally paid for it.