There comes a point in the life of your car, where we have to ask the question, “Is it time to get a new one?”
Often much of the focus is on which fancy new car you should get, however little attention is paid to how you should deal with your old faithful – or in fact whether it’s worth trading in your car at this point in time at all.
A newer car can be better, as you will likely face lower servicing costs and potentially lower running costs. However with that comes higher insurance premiums and registration costs.
So what do you need to consider when trading in your old car?
Private Sale or Dealers
Ultimately the decision as to whether to offload your old car with a dealer or privately comes down to convenience.
At the end of the day a dealer is a business and it’s their job to not only purchase your old car, but then on sell it at a profit.
If you’re looking to sell your car directly to a used car dealer, then it needs to be in reasonable shape. Older cars that are beaten up and in need of repairs, don’t have much value to a used car dealer as there isn’t any margin left fro them to on-sell.
In many cases if you poor old car is in pretty rough shape, it might be worth just offloading it to a wrecker and collecting any outstanding registration.
If your car is in good shape with a proper service history and it’s less than 10 years old you will have the option of selling it to a dealer directly.
If you do you will likely receive around $2000 less than you would if you sold privately. Because as previously mentioned the dealer needs to make a margin on the sale and is taking on the risk of not being able to on-sell the car.
Again for the seller this comes down to convenience.
If you’re wanting to trade in your old car with the dealer that’s selling you your new car – then they’ll more than likely take it off your hands regardless of the condition.
Many new car dealers also sell well maintained second hand cars. Any trade-ins that are in bad condition generally get shipped off to used car dealers.
If you want to trade your car in directly with the dealer, again you’re likely to be doing it at a discount to its market value. That’s certainly going to be the case for older cars.
Know your car’s true value
Spend 15 minutes searching for similar makes and models in your area, to see what type of value your car is actually worth.
Take a look at carsguide.com.au and carsales.com.au to get an accurate estimate of what your car is worth – both privately and at a dealer.
And remember the dealer is likely to offer you around $2000 less than what you would like to get.
Most people don’t know the value of their own car and dealers are going to be more than happy to do business with these particular customers – so don’t be one of them.
Weighing up the costs
The costs of running an older car can quickly start to mount up. When a car gets to around 10 years old, the rate at which they need repairs increases.
These expenses can quickly begin to mount and the cost of any significant mechanical issue can end up being greater than the cost of your car.
New cars are far less likely to require any kind of repairs, and they are also covered by a new car warranty, or a dealer warranty in the case of a used car.
Something to consider with new cars, is that they can be required to be serviced by the dealership and these prices are often higher than you would pay with a mechanic.
The reality of the situation is that newer cars are going to be worth more than your old faithful and as a result you’re going to end up paying higher insurance premiums.
You insurance and registration costs can be significant and vary from state to state.
Many drivers of older vehicles only carry mandatory or third party insurance because of the low value of their own cars.
If you’re taking out a comprehensive insurance for your family you can expect to pay as much as $2300 per year in some states.
Before going to the dealer and signing on the dotted line, make sure you’ve done your research on car insurance as it might well save you thousands of dollars per year.