Cars are typically one of the most expensive purchases someone will make behind a home. As a result, many people view a car as a long-term investment and plan to drive it until the wheels fall off and the engine falls out. We even get attached to our cars, naming them and giving them a personality. But the truth is cars are a depreciating asset and it can be the right move to update every few years based on your circumstances.
Here are five signs it’s time to trade in your car
1. You’re coming to the end of your loan
We offer car loans from three to five years. If you’re coming to the end of this period, congratulations, you are now the sole owner of your car! While this is a great achievement, the end of your loan period can also be a great time to trade in your car. Once the car is yours to do with as you please, you’re able to sell it for cash. You can then obtain another loan for a different car, potentially an upgrade, with similar repayments you had on your old car, while also having the cash from the sale of your old car.
2. You need a different car to suit your changing needs
A lot can happen in a few years. You could change jobs, move interstate, get married and start a family, the list is endless. People typically choose cars based on their personal circumstances and how the car best suits their environment. For example, a young person living in the city might prefer a three-door automatic hatchback, while a middle-aged person with three kids living in the suburbs might prefer a seven-seater four-wheel drive. As your life changes, your car will probably need to change with it, which is often a sign it could be time to trade in.
3. You’ve taken out a loan with a balloon payment
A balloon payment is an agreed-upon lump sum you pay your lender at the end of your loan term. They typically represent anywhere from 30-50% of your loan amount and as a result, can bring down your repayments substantially.
At the end of your loan period, one of the best ways to cover the balloon payment can be to sell the car. You can then apply for a new car loan to fund the purchase of a new vehicle.
4. You’ve driven the same car for over ten years
Cars can be a sentimental thing that we attach memories and times in our life too. They can also be very expensive, so if the car you’re driving works, why trade it in? Research has shown drivers who continue to drive vehicles older than ten years quadruple their chances of being killed or seriously injured in a crash. In 2017, the NSW Centre for Road Safety said nearly 80% of young drivers under 20 who died and 71% of those who were seriously injured in car crashes on the state’s roads in the past five years were driving cars older than 10 years. That research was consistent with national data showing drivers of older cars, made before 2000, were four times more likely to die than those in a new car.
5. Repairs are more expensive than the car
Cars can be expensive enough in upfront costs. In addition to this, it’s highly likely you’ll have to pay for some sort of repairs on your vehicle, often through no fault of your own, and these repairs in themselves can be very expensive. If you’re having to take to your car to a mechanic a lot, at a high cost, it’s important to keep track of these repairs. A car is a depreciating asset and these repairs can quickly add up. If the repairs are becoming more expensive than what you paid for the car, then it may be a sign it’s time to trade in.
If you’re ready for a new car and need a car loan, get in touch with our friendly lending specialists today.