When to trade in your vehicle

Is there an optimum time to trade in your ride for something more economical?

Many SA motorists who are feeling the burden of inflation, soaring fuel prices, the recent repo rate hike and 2018’s VAT increase are now considering moving to more cost-effective cars.

A simple switch from an expensive gas guzzler to an affordable runabout might seem like a wise move, but the transition alone can be costly and there’s certainly an optimum time to trade in a vehicle which motorists should bear in mind.

Significant losses can be made by trading a car at the wrong time.

The best time to trade in a vehicle is when the trade-in value is in line with the settlement amount owed to the bank it’s financed with.

This is called the breakeven point, and trading in before this time could see a consumer paying in just to get out of the finance contract.

In other words, if your car’s trade-in value is R200,000 but you owe the bank R250,000, you’ll be required to come up with R50,000.

“Vehicles, especially those which are less than a year and a half old, often depreciate at a faster rate than their owners have made payments on the loan,” WesBank executive head of sales and marketing, Ghana Msibi says.

“For many consumers this could mean it’s cheaper, in the long run, to wait until a later stage to trade in.”

WesBank’s data shows the majority of vehicle finance contracts are in place for six years (72 months).

In these cases, a break-even point would normally arrive at between 24 and 36 months into a contract. – BDLive