Timing your next trade-in well can help you extract the most value possible out of your current car.
According to pre-owned vehicle retailer Motus Select, four factors determine when it’s a good time to think about swapping your ride for a new one.
These comprise how much you still owe on your finance agreement, the status of the warranty and service plan, the time of the year, and the age of the car.
Break-even point
The break-even point is when your settlement amount, which is the amount you still owe the bank, is less than what the vehicle is worth – in other words, its trade-in value.
Trading in your vehicle after it has crossed this point is when it becomes most cost-effective to enter into a new finance agreement.
If you trade in too soon, when you owe more than the car is worth, that difference will need to be settled out of your pocket before you can finance your next purchase.
The break-even point is different for every individual and depends on factors such as whether you put down a deposit or took a balloon payment at the beginning of the contract, the structure of your finance deal, the vehicle age, and the make and model.
“Different vehicles depreciate at different rates which will also affect the specific break-even rate of your vehicle paired with your finance agreement, so it is important to do your calculations carefully before deciding to trade in your vehicle for a new model,” said Motus.
Warranty and service plans
Trading in your wheels before the warranty and/or service plan expires will positively affect what you can get for it as the car will be more valuable to subsequent buyers.
A warranty gives the next owner extra peace of mind knowing they are protected in the event that something goes wrong on the vehicle due to no fault of their own.
Similarly, a service plan serves as proof that the vehicle has been looked after in line with the manufacturer’s guidelines, and that the cost of the next service, or services, are covered.
Time of the year
The last three months of the year are the best time to trade in a car before it becomes one year older in terms of the model year.
Vehicle valuation tools consider the year in which the car was registered to determine the value, thus waiting until the new year to let go of your prized possession could cost you significantly in terms of the trade-in price.
On the other hand, buying a new car in the last part of the year is not the best idea for the same reason.
“It is therefore pertinent to try find a balance between the two transactions, this could mean renting a car for a few months between trading in and buying,” said Motus.
Model life-cycle
It is a good idea to trade in your car before a facelift or new generation of the same nameplate is introduced.
Carmakers launch new generations every seven to 10 years. Once the new model arrives, your car will be seen as previous generation and could be less appealing to buyers.
If you’re looking to let go of your ageing daily driver, keep an eye on the media to find out when the next evolution will arrive so as to secure the best trade-in value.
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