Many South African motorists who are feeling the burden of inflation, soaring fuel prices, the recent repo rate hike and last year’s VAT increase are now considering moving into 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 car that motorists should bear in mind.
Lower monthly repayments and fuel bills will ease the pressure on household finances, but motorists should keep in mind that 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 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 just to make a move into a more affordable car.