The South African car market has experienced a significant downscaling trend in recent years. This trend continues as motorists seek out more affordable vehicles that are lighter on fuel and cheaper to maintain in a tough economic climate. However motorists need to determine the best time to trade in their car in order to avoid losing significantly by trading in their car at the wrong time and by doing so negating any potential savings that come with downsizing. The following factors need to be considered when determining the best time to trade in a car.

Wait for the break-even point

The break-even point is when your settlement amount, which is the amount still owed, is less than what the vehicle is worth, or the trade in amount.

The break-even point is when it becomes most cost effective to trade in a vehicle and enter into a new finance agreement. If you trade in too soon, when you owe more than the car is worth, that difference will need to be settled out of your pocket, before you can finance your next car.

The break-even point of your finance agreement depends on a variety of factors including the way your vehicle was financed. Factors such as financing a vehicle without a deposit or with a balloon payment will mean that it will take longer to reach a break-even point, and you will need to wait longer before trading in your vehicle. Different vehicles depreciate at different rates which will also affect the specific break-even rate of your vehicle paired with your finance agreement, so it is important to do your calculations carefully before deciding to trade in your vehicle for a new model.

In the last three months of the year

As with many things in life, timing is everything. If possible, trade your car in during the last part of the year, before it turns one year older in terms of the model year. Vehicle valuation tools utilise the year in which the car was built to determine the value of the car and waiting until the new year to trade in your car could cost you significantly in terms of the trade in price. However motorists need to keep in mind that buying a new car in the last part of the year is also not a good idea for the same reason. It is therefore pertinent to try find a balance between the two transactions, this could mean renting a car for a few months between trading in and buying.

Before the warranty or service plan expires

The warranty or service plan on a vehicle is mileage and time based and is transferable to a subsequent owner. Trading in your vehicle before either of these expires will positively affect the trade in value as the car will be more valuable to subsequent buyers, as they will know that the car has been serviced in line with manufacturers guidelines and they will also get the peace of mind that comes with having a valid service plan and warranty in place.

Before a new or replacement model is launched

Motor manufacturers introduce new models every seven to 10 years and trading in your car before a new or replacement model of the same nameplate is launched is a good idea. Once a new model is launched your car will be seen as a previous generation model and could be less appealing to buyers. It is a good idea to keep an eye on the media and to try and pre-empt this in order to secure the best trade in value.