Should I sell my car and buy a cheaper one?
Any car can be a money-sink, but some guzzle those precious pounds even more furiously than they burn through fuel. If your car is a diesel-hungry monster, or a beautiful machine that costs a bomb whenever a part needs replacing, it’s natural to want to have a look around to see if there might be a more cost-effective way to get from A to B.
To help you make the right decision, we’ve written up a handy guide that goes through some of the main points you need to consider.
Is the car still on finance?
First and foremost, you need to assess the finance situation of the car itself. If you’re still paying off a finance deal, you can’t just sell up and wipe your hands of it. Before you can sell the car you have to own it outright, which means paying off the rest of the finance deal in one go. If you’re near the end that’s probably not too big a deal, but if you’re still in the first half of the scheme, it’s likely to be a pretty hefty chunk of cash you’ll need to part with.
In general, if you look to sell when you’re car is still in its first years of finance, you’re going to lose a wad of money without getting much use out of the vehicle. Cars depreciate sharply in their first year of use, so buying and selling immediately is equivalent to throwing away money. Unless you have a compelling reason to sell, you should probably wait until you own the car outright in the normal run of things.
The value of the car
Linked to the ideas of the previous section is the current value of your car. As we’ve mentioned, the worst depreciation happens in the first year, and continues rapidly until around the third. If you sell in this time, you’re going to lose a lot of money and get very little in return. If you wait until the third year and beyond, however, all the money you ‘lose’ will have instead gone to several years of using the car, which is valuable in itself.
At this point, whether or not you should sell your car to buy a cheaper one really depends on the market value of your specific model. If your ride is a desirable make and model and in great condition, you’re likely to get a good sum of money from its sale, possibly even enough to buy another car outright.
If, on the other hand, your car is older or less desirable, the amount of money you receive for it might not be enough to make a dent in the price of another car, even a model that looks cheaper. And, if your car’s value is low enough, it might be worth staying away from anything even cheaper, as past a certain point they’re likely to be unreliable or in bad condition.
Your financial situation
Along with the value of your car, whether or not you sell it for a cheaper model is going to be affected by your current financial situation. If your monthly budget can’t sustain your current car’s fuel, insurance and maintenance costs, then it’s likely going to be worth looking for something cheaper to run, even if you have to lose a bit of money on the up front cost.
However, if your desire to move to a cheaper car is less a necessity and more the thought that it would be nice to make a saving, you should look at all the costs more carefully to make sure that you’re making the best financial decision in the long term. Weigh up all regular costs along with the cost of the buying the new car to see if there are actually any worthwhile savings to be had.
The final consideration is lifestyle. Do you need the car you have for the things you do with it? If you have a big SUV but the kids have all left the nest, maybe you can afford to downgrade to something cheaper and more efficient? However, if you’re expecting to grow your family, you should possibly look at upgrading, if anything!
Size isn’t the only factor to take into account. If you’re commuting an hour or more each way to work you probably want a car that has a good mpg, but you also want to make sure that you’re paying for a good level of comfort and safety.
Getting a good deal for your motor
If the time for you to sell up for something cheaper, make sure you don’t jump at the first offer you see. There are plenty of options out there for selling privately or to a commercial buyer, but not all of them are going to give you a good price, and some of them take a long time to go through.
To see what your options are more clearly, sell your car with Jamjar by using our car selling valuation tool to see a range of offers, with different options such as free collection. You can also continue to browse our car selling guidance section for more information about different things to consider if you’re thinking about selling.
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