How do you know it’s time to trade in your current vehicle for a new one? Should you trade-in your car every five years? The decision is usually up to you, and several factors may play into it. I’ve listed a few questions to ask yourself to help you decide.
Do You Love Having a New Car?
Maybe you love cars and can’t stand the thought of keeping your current one for five or more years. Still, you’ll want to hold off trading in your new car for at least two years, when your car’s value depreciates the most.
Do You Want to Enjoy Years Without Car Payments?
So long as your car is enjoying good health, you can keep driving it. The older it is, the less money you’ll get for it, of course, when you trade it in. However, if you keep your car in excellent condition, stay on schedule with regular maintenance check-ups, and stay out of accidents, you could enjoy many years without monthly car payments.
However, if you find that the amount of money you’re paying for repairs exceeds several months’ worth of car payments, it may be time for a new vehicle. A new vehicle — including most used vehicles. — will come with a warranty. Although warranties don’t cover you for every situation, they may still work out to be cheaper than all the repairs you have to pay for now.
Has Your Situation at Home Changed?
Sometimes the question of when to trade in your car isn’t about your love of cars or about car payments. Maybe your family has grown, or someone’s physical health requires a different kind of vehicle. Or perhaps you or your partner have lost a job and can no longer afford your current payments. If a different car would fit into your family’s lifestyle, then considering a trade-in could be a good idea.
Do You Usually Buy New or Used?
If you buy a used car, you will likely have to trade it in earlier than a new one. (You can check out Consumer Reports and JD Powers for reliability ratings.) It used to be that hitting 100,000 km was the trigger mark that would send your trade-in value plummeting. However, the original trigger was 100,000 miles or 160,000 km.
Of course, the longer and farther you drive a vehicle, the less trade-in value it will carry for you. That means that you’ll be able to keep a new car longer than a used one. If you purchased a new car that was 4 years old and already had 40,000 km on it, you won’t be able to hold on to for as long as a new one.
Are You in a Lease?
A lease is set up such that you pay for the vehicle’s depreciation, not its full value divided over the course of your loan. This is why leasing payments are lower than loan payments and have a buyout at the end if you want to purchase your vehicle outright. Ideally, you’ll wait until your lease is over before you enter into a new one with a new vehicle. However, if the urge to lease a new vehicle is too strong, do check your contract: there may be penalties for breaking the lease early.
Knowing when to trade in your car will usually be a personal choice. If you’re not sure what you’ll get for it, take it to your dealer to have it appraised. It’ll cost you nothing, and then you can decide, using concrete figures, if it’s worth it to buy a new one right now.