Saying goodbye to a tried and trusted vehicle can be a difficult thing, especially when you have accumulated so many memories over the years and are reluctant to let go. At that point, you might ask yourself, is it worth ploughing more money into your car to keep it in fair condition, or fork out altogether for a new car?
Weighing up a new car
The first thing you’ll want to consider are your immediate near-term costs. Obviously, if you’re in the market for a new car, you’ll have to work out your budget, specifically, what you can afford. But beside that, you should factor in whether there is any salvage value if you trade in your current vehicle, or whether you’ll need to turn to debt or savings to fund a new car.
In addition, you’ll need to consider your ongoing commitments. Whether that be running costs, which should be far cheaper, repayments, maintenance, repairs, rego and insurance. The best way to assess these is by breaking them down into a weekly or monthly cost, then weighing that up against your budget.
Don’t forget, if debt is involved, your interest payments will magnify the total cost of the car by the time it is paid off. However, if you are using your car for business purposes, tax breaks might just give you a little boost when you need it most.
What about my existing car?
Meanwhile, when it comes to an existing car, although you won’t be burdened by a large initial outflow, your ongoing running costs will almost certainly be greater than those associated with a new car. Even assuming you have taken good care of your vehicle, the reality is, if it has been in your ownership for at least 5 years, you’re going to be facing some hefty maintenance and upgrades soon enough.
Anything older than this is only going to be subject to higher repair costs as well. If it’s a common vehicle, that might help reduce expenses, but if it is a luxury maker, don’t expect any favours in terms of pricing for second-hand parts. But there are also intangible aspects that come with this. If one expects older cars to break down more often, how will this impact your ability to earn a living and/or otherwise look after your family? Could costs mount in those areas as well?
Beyond this, you also need to contend with fuel efficiency differences. Older cars are more likely to burn through fuel at a higher rate than today’s latest vehicles, meaning your expenses will add up there as well. Mind you, insurance costs are likely to be in your favour, as older vehicles tend to come with a more affordable premium for coverage.
The majority of depreciation will be incurred in the first few years of ownership, so on the one hand, that’s another expense mitigated, but for new car buyers running a business they may want to leverage depreciation by way of current tax benefits.
As a final thought on the matter – if your running costs and repairs exceed the value of your current car or any loan repayments that remain, provided that you have the cash flow to manage a new vehicle, it could be in your interest to consider buying a new car, especially with record-low interest rates on offer.