This article has been updated from a previous version.
Your car has taken you everywhere, from family gatherings to work and every errand and journey in between. You may even have a nickname for your vehicle, which is why it can be hard to decide to part ways. But, when circumstances change, or the maintenance costs become too much, it may be time to upgrade.
What should I consider before upgrading my vehicle?
The reason for selling your car may fall under one of these categories: starting a family, changing lifestyles, cashing in on what value is left in your vehicle, requiring a new car after a collision, or facing a mechanical failure. However, the process for finding a new car is relatively the same.
Determine your car’s worth
Start by determining what value your vehicle has and whether it may be worth keeping for a while longer.
According to Consumer Reports, vehicles typically depreciate by 64% within the first five years and some even faster. That means a car that once cost $34,000 would lose $21,760 in value over that period. So, would it be worth keeping? It depends.
If you have financed a large portion of the price of your car, there may be a fine line between when you can pay off the loan, the value that has depreciated, and the amount you can make by selling your vehicle. If you wait too long, your car’s value may decrease so much that you can’t use any of its value toward a reasonable trade-in or selling price.
Consumer Reports suggests that if the annual repair bill for your car exceeds a year’s worth of car payments, then you should start considering an upgrade. On the other hand, making a few large repairs may still cost less than a new car and can keep your vehicle roadworthy.
Determine your car’s resale value
Your car’s resale value may vary from what you see online. Plug the make and model of your car into your search engine and compare the average cost of similar vehicles, looking at a comparable year, the kilometres on the odometer, and history.
If your vehicle has been in a collision, it would generally affect the resale value. Some companies can provide you with a report and documentation for your car’s collision history so that you can disclose it to a future buyer. You may also want to recommend the buyer has a pre-purchase inspection done on the car before they agree to the purchase.
To trade-in or sell privately
You may want to get some money back for your car while it is still in usable condition. Most dealerships will offer you some money for a trade-in, but you may want to sell it privately if your car has some value.
However, trading in your car can save you the time and effort of finding the right buyer, and the money goes toward the purchase price of your new vehicle.
To get the best price for your trade-in from a dealer:
- Consider the appearance. Having a clean, scratch-free car may help boost your trade-in value.
- Bring in comparable listings. Although dealers generally offer you a carefully calculated number for your car, you may be able to haggle if you have done your research.
- Consider the state of the market. You may be able to negotiate a higher price if there’s strong demand for used cars. In 2021, the global supply of new cars shrank due to a microchip shortage, causing more people to seek out used cars.
If your car is roadworthy but a little worse for wear, you also have another option. Many charities will offer you a sizeable tax receipt for your vehicle. It helps someone in need get from point A to point B, and you may see a higher return than you would from a trade-in.
What to look for in a new vehicle
When looking for a new vehicle, make sure to do your research. Here is a list of qualities you may want to compare when seeking your next ride:
- Fuel efficiency: This can save you money year over year.
- Safety features: Some safety features, such as backup cameras, are mandatory on new vehicles in Canada, while others are a bonus.
- Depreciation: Some cars can hold their value longer than others. Consider searching for a list of the fastest-depreciating vehicles online before you shop around.
According to iSeeCars.com, the Jeep Wrangler holds its value the best, only depreciating by 9.2% over five years. The worst, the Nissan Leaf, with an average five-year depreciation of 65.1%.
When to buy your new car
Car dealerships typically offer their salespeople commissions, which means there are usually sales targets. Here is how you can use them to your advantage:
- Shop late in the month. Businesses generally calculate targets monthly, quarterly, and yearly. This means you may be able to get a better deal while your salesperson is trying to make their monthly sales numbers.
- Shop late in the year. Not only are salespeople trying to make their final targets (monthly, quarterly, and yearly), but there are usually Black Friday or holiday deals as well.
- When it’s a buyer’s market. The microchip shortage of 2021 reduced the inventory of new cars and triggered a spike in the price of used ones. Some used cars sold for as much as new models, according to salespeople. Conditions like these favour sellers rather than buyers. If possible, you may want to wait until prices stabilize.
Additionally, you may also save when the next year’s model hits the floor. The dealership will want this year’s model off the lot to make room for new inventory.
If you don’t have the time to wait for an end-of-year promotion, try shopping during the week instead of the weekend. The salesperson may have more time for you when the dealership is not as busy, allowing for a more personalized shopping experience and offering more time for negotiations.
New cars and insurance rates
Make comparing car insurance part of your vehicle purchase decision. New cars typically come with a hefty price tag, so you’ll want to make sure you’re fully covered, and there are no surprises. You wouldn’t want to end up with an insurance premium you didn’t expect after you’ve picked out your new car.
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