One of the biggest questions many car owners have is when the best time to transition to their next car is.
You might be unclear as to what’s an appropriate value for your car, when your next major service will be due (and how much that will cost), as well trying to get a firm price for out of warranty repairs. All these factors make it confusing to work out a resale value that is realistic for buyers, but won’t leave you high and dry without a car.
At Motorama, we’ve kicked off a program to help our customers understand where their car may be in its lifecycle. We extend invitations to our guests to have an obligation-free chat about their options in transitioning from their current car to an all-new model.
For example, Des and Dorothy Baird came to Motorama to service their 2005 Corolla Ascent Hatch. Even after ten years, the Baird’s were still happy with their car and weren’t considering trading up.
“It served us well, while only having 77,000kms on clock and never missed a beat,”
“If this wee car was running so well, never missing a beat, why on earth give it up?” Mr Baird said.
The Baird's spoke with a Lifecycle Specialist, who assessed their current vehicle and introduced the idea of upgrading to the latest model.
As part of the Lifecycle discussion, the specialist highlighted some of these common questions. Here are just a few ways to know if your car is ready for market.
It can be difficult to assess when your car is at it’s most valuable to buyers in the used car market. Depreciation is the largest cost applied to a car, and this is often at its peak in the first years of car ownership, before evening out as the car ages.
Ideally, you want to trade your car when the resale value spikes above the depreciation amount. Depending on what kind of car you have, your resale value will be highest if your car is a recent model in a similar style, and has been well-maintained.
Luxury cars generally have the steepest depreciation in the first years of ownership, but will regain their resale value fairly quickly because of their limited availability.
Popular cars tend to have a slower depreciation curve, because supply is plentiful – however their resale value spikes later on, and depends more acutely on how well maintained the vehicle is.
Whether your car is in or out of warranty will also factor into how valuable your car is. A vehicle with even some factory warranty available should carry a little more value than a vehicle without, because it gives potential buyers of your vehicle a reassurance that the manufacturer covers them just in case something goes wrong.
Des and Dorothy’s vehicle is an outstanding example. While their car was a ten-year old vehicle, the Baird’s regular servicing, and the careful use translated into a low kilometre small car that is known as a strong performer with any used car buyer.
Your car is often the second largest purchase after a home. This means that it’s rare for anyone to buy a car (especially a new car) without at least some finance.
If you’ve financed more than 40% of the vehicle, making a profit when you resell your vehicle may seem difficult until the loan is paid out. This could miss the point when your car is at it’s most valuable to used car buyers.
The goal is to sell your car for an amount that will pay out your finance, and hopefully give you enough to put a deposit towards your next car. You can, of course, refinance and roll any amount into your next car loan – but this is less than ideal and creates higher repayments.
Emily Green was hesitant about exchanging her Corolla, not knowing if her repayments would increase.
“Initially I was unsure whether this was a good idea however I was more than willing to discuss my options,”
“[Motorama's Lifecycle Specialist] definitely made the transition from my old car to my new car easier. Through the discussions had and options provided a deal that was too good to be true,” Ms Green said.
Once she had a better idea of her car’s lifecycle, Emily promptly switched her old model for a brand new one.
“I really think this is a valuable service. Knowledge is power. If people know their options I believe more people will do what I have done,” she said.
Most car brands in Australia come with some form of capped price servicing scheme – that is a fixed price to service your car at regular intervals. These programs can last anywhere from 3 years to the lifetime of your vehicle, depending on the brand.
While servicing costs generally don’t balloon to unreasonable amounts outside of the capped price servicing; they may increase.
Capped price servicing does help you work out a budget for your car, and new cars always enjoy the benefit of lower costs, as your expenses for servicing will rise as the car gets older.
As your car ages, tyres, brakes and batteries will start to wear out – these are not commonly covered by capped price servicing schemes, and will add to your overall costs of ownership.
Warranty periods for cars can vary wildly, but are mostly available from 3 to 10 years after purchase. It is uncommon to make a warranty claim within the time limit, however if you do have a major claim outside of warranty it can become costly.
There’s always have the option to extend your warranty, but these expire as well, and you may not consider you need the warranty extension necessary.
And while cars sold in Australia are reliable when properly maintained and serviced, it is reassuring to have the manufacturer warranty backing you if a major failure does occur.
You may want to upgrade or change your vehicle simply because of your changing driving needs. If your household is a few members lighter, you may want to downsize to a smaller car. Similarly, if you have a growing family, it may be time to start looking at getting into a more spacious vehicle.
The financial costs of upgrading may be less than the costs in time and inconvenience of keeping a car that doesn’t suit your lifestyle.
If you’ve thought that a new car is out of reach, or you’ve been considering upgrading but are unsure of your options, make an appointment with a Motorama Lifecycle Specialist who can do an obligation free lifecycle assessment of your car.