When should I replace my car?

Car value depreciation is almost inescapable but there are things you can do to minimise the loss

Dear WhichCar

I’m currently researching when is the best time to replace your car: how long is long enough before you should start thinking about moving up to a newer model, etc. With that in mind, I was wondering if I could run a few questions by you? -Jamie

How long does the average Australian hold onto their car before ‘upgrading’ to a newer model?

Hi Jamie,

The simple answer is that Australians replace their car every five to seven years but the period of ownership generally depends on the age of the vehicle when purchased. Drivers who prefer new cars may trade in their vehicle as frequently as every three years to take advantages of incentives offered by the manufacturer.

The various deals provide mutual advantages and, in return for various benefits such as guaranteed trade in price, the customer remains loyal to the brand.

However, a recent warranty extension by many mainstream brands to five years and beyond is encouraging more new car owners to hold onto their vehicle for longer, while longer lease deals are providing owners with another reason to do the same. Owners of used vehicles typically keep their vehicles for the longest.

How long should you hold onto a car to avoid being stung by depreciation?

Unless you get your hands on something unusually rare or desirable, new cars depreciate. There are no two ways about it. Depreciation is highest in the first year at about 20 per cent and then slows to about 15 per cent in years two and three. However, there are a number of things you can do to minimise the loss when it’s time to sell.

A good car depreciation calculator might be a good place to start but, broadly speaking, demand dictates value so buying a popular car that will be easier to sell later and for a good price makes sense.

But remember that, conversely, choice creates competition so you’ll be up against many others when it comes to selling which could drive prices down. Full-service history at approved serviced centres, good maintenance and keeping your car clean and tidy is money maximising must.

There is no particular mainstream brand that is either good or bad across the board and resale value comes down to individual models and variants so, as always, do your research. But most importantly, don’t let depreciation put you off your dream car if it’s what you really want for a whole host of other reasons.

The simple answer is, if depreciation is high on your list of car-buying concerns, shop in the nearly new or used market.

What’s the single most important thing to look for in a new car?

There is no such thing. Many drivers would put a premium on safety, whereas others would lean towards a car with better driving dynamics. For some, space and practicality are key but all-terrain ability might be the defining feature for a different type of use, for example.

No single thing will be at the top of everyone’s list, nor can any one car do everything. The most important thing is that every car buyer establishes their individual priorities before hitting the showrooms – and sticks to them.​​

You can arrange a convenient time to speak to Jesse Bruno, our mortgage broker at CentraMoney by clicking here.

Article reproduced from WhichCar by Daniel Gardner.

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Zac Zacharia (Managing Director) has been assisting clients to create wealth and secure their futures for over 14 years.

He is also an accomplished presenter and educator

Co-authoring the popular investment book, Property vs Shares.