The pain to sell your car and upgrade can easily seem greater than the pain of keeping an old car that continues to let you down. There is a golden turning point though. It’s when your old car is actually costing you as much (if not more) than just getting on with buying a new one. Most people waltz right by that turning point without even realising.
I know what you’re thinking “So, when should I sell my car, then?”. Below are the top 8 questions that will help you determine when it’s the right time you to sell your car, the more you answer “YES” to, the more likely it’s time to sell.
1. IS YOUR SERVICE AND REPAIR BILL CLOSE TO THE COST OF A NEWER CAR?
There will come a time when you’re mechanic visits become more and more frequent. The estimates for repairs will also start getting bigger and bigger. Consider this your trigger that it’s time to stop and calculate the benefits of keeping your car versus upgrading.
Often you’ll find that the expenses are more than what the cost would be to upgrade. Real life example; friends of mine recently spent $7,000 on repairs to their 10-year-old Ford Territory. Hopefully, this means trouble-free driving for a while, but it’s a car that’s only growing older so eventually there will be more problems and more repairs. For the same amount they could have upgraded to a two-year old version of the same car that was still under warranty, was more fuel efficient and cost less on services.
2. ARE YOU ABOUT TO HIT A MAJOR CAR MILESTONE?
Major milestones occur when a car is due for a major service. Typically this occurs every five years or 100,000kms (so yes, it will occur again at 10 years/200,000kms, 15 years/300,000kms and so on). This is the point that you’re likely to spend the most on servicing your car as many of the car’s major parts become due.
The five-year/100,000km milestone is also statistically the highest failure rate of any car during its life! If you’re coming up to a milestone, it’s a great time to ask yourself “should I sell my car?”, because you may be better off spending the money on an upgrade rather than a service.
A note to those who like to sell their cars privately – you don’t want to do this right when your car is due for a major service. Savvy buyers will organise a vehicle inspection and it will reduce the value of your car. If you’re selling privately, it needs to be well before the milestone hits. If you can’t avoid it, then this is a scenario when you’re better off selling to a dealer. The problem is easier and cheaper for them to rectify so it shouldn’t make a difference to what they give you for it.
3. HAS YOUR CAR’S PRODUCTION LINE STOPPED?
If your car’s make and model cease to be manufactured, the cost of servicing and repairing it will skyrocket! Parts will be harder to source and repairs will take longer (sometimes even weeks).
The easiest way to know whether your car’s make and model have expired is to check out the manufacturer’s Australian website. If the car is no longer for sale on its website, then it has expired. You can also check out carsales.com.au and search for your car to see the last year for sale.
If it turns out that your make and model is being discontinued this is a good time to consider selling your car.
4. ARE YOU IN POSITIVE EQUITY?
If you still owe money on your car, it’s important to know whether you owe more than what the car is worth. If you do, then you will be at a financial disadvantage if you sell your car as you’ll have to make up the difference.
You can find out what your car is worth for free on a site like carsales.com.au by comparing the same make, model and year. You’ll have to do the legwork, factoring in price variations due to different conditions/ circumstances etc. If you want someone else to do the valuation for you, consider purchasing a REVS check for $37.
If you’re in negative equity you can calculate when you will be in positive equity by asking your financier for a payout schedule. This will list the total amount owing month on month for the life of the finance. You can then compare this to cars with your make and model but with an older year on carsales.com.au to help you figure out when you will hit neutral or positive equity.
5. ARE YOU LOSING CONFIDENCE IN YOUR CAR’S RELIABILITY?
A fact of life: cars get older and become less reliable. Even parts in the best-maintained cars will start to fail more frequently. The point at which it becomes unreliable varies greatly depending on how well you service and maintain your car, the make and model, your driving style, how many kilometres you drive and also a little bit of luck.
If you keep your car for long enough, eventually you’ll start to notice signs of age and you’ll start to spend more and more time with your mechanic. You may even experience a breakdown or two. At some point, you’ll start to lose confidence in your car’s ability to safely and reliably get you from A to B each day. It’s at this point that you should be considering something newer and more reliable.
6. ARE YOU SPENDING MORE ON FUEL?
Wear and tear on cars impact their fuel efficiency. Technology improvements also mean that new cars are becoming loads more fuel efficient. So even if your car was super green back in its day, it might be lagging way behind newer models. If you drive more than 15,000km’s per year, it’s probably time to compare how much you’re spending on fuel now compared to what you would spend in a newer car.
To compare the difference, research the fuel consumption rating of a car you may wish to purchase with what you’re currently spending on fuel. It’s readily available for all cars (new and used) on sites such as carsales.com.au – the rating will be displayed as L/100km.
7. ARE YOU MISSING OUT ON TAX BENEFITS?
If you’re able to claim part of your car as a business expense for tax purposes, then you’ll know how much of an impact depreciation makes. The more your car depreciates in a year, the more you could be claiming in tax. When you purchase a new car, it loses the most value in its first year. This is when your depreciation claim is the highest. Each year the value will reduce, meaning you’re able to claim less and less each year. By the time a car is four or five years old, most (if not all) of the depreciating value has been claimed by your accountant, so you will lose the tax benefit. The same is true for a used car.
8. ARE MARKET CONDITIONS FAVOURABLE TO SELL?
Finally, you will also need to consider market factors, such as time of year, supply and demand and petrol prices. Selling a convertible in winter is tougher than selling in summer, selling a model of car that’s recently been purchased on mass by a rental company will reduce the value of your car, and selling a petrol-guzzling 4WD when petrol prices are at an all-time high will also influence your car’s value.
THE FINISH LINE: SHOULD I SELL MY CAR?
Many people hold onto their cars longer than they should, assuming the cost to buy a newer car will be more than what they’re currently paying. However, if you answered “yes” to at least four of the eight questions above, then it’s definitely time to consider updating your car for a newer, potentially more cost-effective model.
Still unsure whether or not it’s time to sell? Download our free checklist: 8 Signs It’s Time to Sell Your Car