Most people in the 90s drove the same car for 6 to 7 years, although some of them, depending on their financial situation, would change their cars every three years when the warranty expired. These days, because of technological advancements that have made cars more durable, people hold on to them for longer – usually around eight years. Plus, the warranties have changed, and they’re often based on mileage. You can still get the minimum three year-warranty, but you can also extend it.
Now, we don’t know how long you’ve had your car, but if you’re reading this article, it would be safe to assume that you’re considering getting another one. However, buying a car is not like buying a pair of shoes. It’s a significant financial investment, so you want to be sure you’re doing the right thing. You may have to pay monthly installments for the next four or five years.
Holding on to your old car for as long as possible is usually the smarter financial decision, but not if the repairs cost you more than the installments for a new car. Then you also have to think about whether your old care still fits your current needs and lifestyle. Maybe you need to replace so you can accommodate a growing family or a longer commute. These are the sort of things we’ll discuss below.
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How Much Does It Cost to Keep Your Car?
You want to start the decision-making process by calculating how much your car is costing you in maintenance. As time passes, some parts wear out, and you’ll need to pay more to have them repaired or replaced. Maybe you still have some sort of warranty, but it may be capped.
Of course, a new car will also require maintenance, but it will cost less. You’ll still have to change the oil or a belt, but major repairs are less likely, and you’ll probably have a much better warranty.
If your car has already gone through several major repairs and it’s costing you more and more, then it makes more sense to spend that money on an upgrade. Otherwise, you risk waiting too long and being forced to buy another car on short notice because your current car is no longer reliable.
You also have to consider how much money you’re paying for gas. Newer cars have better mileage, which can help offset the price of the installments.
Lastly, even if your car is still in relatively good condition, it may no longer fit your needs. Maybe you’ve moved to another area with a different kind of terrain, or the kids are all grown up with their own cars, so you no longer have to drive them around in the gas guzzling family car.
How Much Would You Get if You Sold Your Car?
If it turns out that the repairs, maintenance, and cost are costing you too much, you’ll want to sell your car as soon as possible so you can use this money as a down payment for another car. But how can you know much you should sell your car for? You can begin by doing a quick Google search for dealerships in your area. For example, you can search for used cars and see if they sell the same make and model and for how much. You can always go and ask, but it’s better to do some online research beforehand. Being well-informed helps you negotiate.
Since depreciation varies, it’s not that easy to determine how much a used car is worth. Cars usually depreciate the most in the first year, so most car owners wait until this depreciation rate even out so they can get the best value.
And remember that the depreciation rate does not depend solely on how old a car is. For instance, luxury cars have limited availability. This means that even though their depreciation rate may be steep in the first years, they’ll regain their resale value later on. Likewise, cars that are in high demand and are known to be particularly durable will depreciate more slowly.
We also have to mention the warranty again. You’ll have an easier time selling your car, and you’ll get a better price if you still have a warranty. Also, if you got your car serviced regularly and can prove this to potential buyers, it will increase their interest. Just make sure that any car repairs are done with official parts and following the manufacturer’s recommendations.
Selling Privately vs. to a Dealer
Once you decide to sell your car, you can either try to sell your car privately or to a dealer.
The first option might get you a better price, but it also means more work. With a dealer, you only have to go there, show them the car, negotiate, and that’s it. If you sell privately, it means you have to take pictures, come up with something to write in the classified ad, post the ad on several websites, answer phone calls and emails, set up appointments, meet with people, and negotiate with each one. As you can imagine, it can be quite taxing.
The second option is much faster and involves less legwork and paperwork. The downside is that you’re negotiating with someone that spends at least five days a week negotiating. Chances are they’ll be better at it than you. Plus, you have to remember that they’re buying this car to resell it so you can be sure they’ll try to bring down the price as much as possible.
What Is Your Budget?
After getting an idea of how much you can get for your old car, you still need to figure out how much you can afford to spend on a new one. This is the easiest step of the process. You just have to calculate your budget, which means you look at your income and expenses.
Deduct your rent and mortgage, bills, groceries, debt payments, and so on. The amount you spend on installments for a new car should not exceed 25% of the remaining sum.
You never know what might happen in the next few years. Maybe you have to pay for repairs in your home, or you have a medical emergency, so it’s not safe to spend more than you can comfortably afford. If the car you want to buy means you’ll be pinching pennies for the next four years, buy a cheaper model, or wait a bit longer until you save enough for a more substantial down payment.