When is the optimal time to sell a used car in good condition?
Selling at the right time is key to getting the right price for your car
Determining when is the optimal time to sell a vehicle is a tricky calculation to make as it depends on a variety of factors, but is an important part of the car shopping process to get right as it could save or cost you a substantial amount of money.
If you sell too early you will most probably lose a big portion of money as a new vehicle depreciates most in the first year of ownership.
On the other hand, holding on to a vehicle for too long also has its risks because even though the rate of depreciation slows over time, cars are worth less and less each year. Keeping a car for a long time will mean a wider gap between a new or almost new vehicle and your current vehicle, making upgrading a more expensive transaction.
However this is an over simplification of the factors as a variety of other criteria need to be taken into account too. Age and mileage also play a big role in finding the optimum time to sell a car. In most cases age and mileage work against each other, in the way that the market values vehicles. While mileage drives down the price, the newer a vehicle the more valuable it will be.
For example, two identical vehicles with the same mileage, but differing a year in age could differ in value by as much as R50 000.
In addition, the higher the mileage, the higher the wear and tear. A good rule of thumb is 15 to 20 000km a year, anything more is considered high mileage.
The way a vehicle was used also has an effect on its value. A vehicle that has high mileage on it from highway driving will be in a better condition and more valuable than a vehicle that has lower mileage but spent its life on dirt roads. While having a full service or maintenance plan is vital to achieving the best price for your pre-owned car, selling your car while these plans are still valid will also have a bearing on the price.
Some banks recommend that the optimal time to trade in one’s car is when the trade resale value is similar to the amount owed to the bank. Trading in before this point will mean that motorists will have to pay in to settle their loan with the bank. In South Africa, many cars are financed over six years and very often these agreements include some sort of balloon payment, which means that a breakeven point in terms of your finance agreements is now reached much later in the ownership cycle.
Global supply chain pressures have resulted in limited stock of new vehicles, which has impacted the pre-owned vehicle values. An increased demand for good quality pre-owned cars means that they are worth more, which has in the case of popular models, brought the optimal time to sell forward.
However when vehicles reach between five and seven years in age the decline in their value slows, meaning that if you haven’t upgraded by then, it will make no difference if you wait another year or two as long as you don't accumulate excessive mileage.
In conclusion, the market decides based on supply and demand what pre-owned vehicles are worth. However it is always a good idea to ensure that your car is well cared for and well maintained in order to qualify for pre-owned values at the higher end of the spectrum, when you do decide that it is time to sell.