Worthwhile trading a vehicle every two years?

W

wylie

This is not really about finance for a house, but for a vehicle. I am hoping someone knows the answer to this.

My son is trying to convince me that if he buys a two year old car (lets say it costs $40K) and trades up every two years (he thinks he can spend another $4K every two years trading up to another two year old model) then at the end of ten years he has spent $20K trading up, and will still have a two year old car worth $40K.

(He is not thinking of doing this, but thinks we are mad for having had the same vehicle for eight years with no plans for upgrading.)

I just don't think the numbers would work because if they did, wouldn't everybody be doing it.

My thoughts are that lots of people just don't have a lazy $4K sitting around to upgrade, and I don't even know if $4K is a realistic figure to pay to upgrade to a newer car each year anyway.

Anyone have any thoughts?

P.S. He doesn't believe me that many vehicles depreciate by 20% within two years (some even more than 20%), even though I googled it and showed it to him on several sites.
 
I do it with brand new vehicles every year. I am on to my 8th brand new one.

This way I am not paying rego, repairs, tyres etc....

If you buy well you will shed about 2 or 3k a car, however you also have depreciation and tax to take into consideration aswell.
 
I don't reckon cold hard numbers will be enough.

You've got your proven position and he's got his lifestyle hitched to a spanking new car. You can't pull chicks with some sensible 10 yr old Honda Civic.

Numbers downloaded from the internet won't be enough to shift those positions, imo.
 
If he decides to go down that track it is essential he researches vehicles that hold their value. There are huge differences between the different brands and types of vehicle.
Marg
 
He has only bought his first car this year and it is a ten year old SAAB so it is not something he is looking at. It came up when he pondered whether he should trade his car in another year or so. I just tried to make him see that he possibly could service a housing loan OR keep trading up to better cars.

On a low salary I don't believe he can do both but he will have to make that decision. His ten year old SAAB is far superior in finish and quality to our eight year old own car and has held it's value more than ours.

I tried to explain that keeping our car for ten years or more means we can put the "upgrade" money towards appreciating assets growing in value instead of a nicer car.
 
wylie said:
This is not really about finance for a house, but for a vehicle. I am hoping someone knows the answer to this.

My son is trying to convince me that if he buys a two year old car (lets say it costs $40K) and trades up every two years (he thinks he can spend another $4K every two years trading up to another two year old model) then at the end of ten years he has spent $20K trading up, and will still have a two year old car worth $40K.

(He is not thinking of doing this, but thinks we are mad for having had the same vehicle for eight years with no plans for upgrading.)

I just don't think the numbers would work because if they did, wouldn't everybody be doing it.

My thoughts are that lots of people just don't have a lazy $4K sitting around to upgrade, and I don't even know if $4K is a realistic figure to pay to upgrade to a newer car each year anyway.

Anyone have any thoughts?

P.S. He doesn't believe me that many vehicles depreciate by 20% within two years (some even more than 20%), even though I googled it and showed it to him on several sites.
Click to expand...

I guess it depends on how he plans on upgrading, i.e. trade or private sale.
If you were to trade you would lose more than 20% over the 2 years, as dealers will never give you market value.
So by that rationale, how is a 4k tip in going to get you the next car, unless you keep trading down?

i.e. Now a second hand 2008 C'Dore is around 25k
My 2006 model is now around 15 (which I think I'd be lucky to get)
so if he went down this route his 4k will only get you back to 19k which will essentially get you what you already have... What's the point?

If it's a work related vehicle then it's not so bad:

My example:
I bought a commercial vehicle a number of years ago for $16,500k new, plus reg, stamp duty etc.
2 years later needed to get rid of it (back to Uni)
Got a lot of calls from dealers and also asked around about how much other dealers would pay.
Some said 10, one said 8, one said 12 but when I got there tried to pressure me that 8 was all he could give.
I was lucky and ended up sellling for 12 privately.
A Nathan mentions, yes there was depreciaton and deductions to be had, but if this had of been a private car then I would have been out of pocket by a lot.
As it was I think it cost me about 2k over the 2 years I had it (after tax).
 
Can't be done - no way known.

Just go to http://www.redbook.com.au and look at "one of his preferred cars" that is say 4 years old and see what he can get for it as a Private Sale (which is the most optimistic figure).

eg if he thinks he can get a 2YO BMW 320i for say $40k then have a look at what a 2006 is selling for privately. He won't be able to argue with industry figures.
 
Nathan said:
I do it with brand new vehicles every year. I am on to my 8th brand new one.

This way I am not paying rego, repairs, tyres etc....

If you buy well you will shed about 2 or 3k a car, however you also have depreciation and tax to take into consideration aswell.
Click to expand...

Do you trade them before the rego is due? Wouldn't that mean you trade within the first year?

I wonder is you could post some real figures to show him what you do and what it costs. Does your $2K or $3K changeover cover depreciation?
 
Unless you can claim depreciation etc for business I can't see the advantage in buying a new car.

I've had my car for 11 years. Bought it 18 months old. If hubby had his way we would have upgraded a few times by now. I can't see the point. It hasn't missed a beat and still looks great but is getting a bit tired. So now I've finally agreed to change.

I recently compared new cars to ones 2 years old and the saving is 25-30%. That's a hell of a lot.
The loss drops significantly after that so if you like the upgrade idea I'd be doing it with a 2 year old car but I wouldn't want to be selling a car every 2 years.
 
G_Man said:
i.e. Now a second hand 2008 C'Dore is around 25k
My 2006 model is now around 15 (which I think I'd be lucky to get)
so if he went down this route his 4k will only get you back to 19k which will essentially get you what you already have... What's the point?
Click to expand...

you can buy those special edition commodores for about $33k on the road before haggling. take off your $3k westpac credit card points and you are at $30k. if you can sell it for $25k at year 2, with all the GST credits and tax deductions, isnt that pretty cheap motoring? one $300 service and one rego sticker and that's the extent of your holding costs
 
Just to clarify an example of my post.

Say you have a rrp $40k car, buy it for $30k brand spanker (i am talking bread and butter cars, mum and dad not big market stuff). Keep it for a year, and sell it privately with say 40-50,000kms for $27k. For example.

You also need to factor in the fact that you will soon be up for rego service, tyres, brakes, + any other wear or tear.

This only works if its cash as its hard enough juggling as it is.

You sell and just rebuy.

You always have a new car so you look like an idiot or a champ to your friends, and you have luxury of a new car every year.

Sometimes the hits are larger and sometimes the timeframes are different. However just like buying a house, you must buy right with the cars for this strategy to work.

Hope this makes sense.
 
Ausprop said:
you can buy those special edition commodores for about $33k on the road before haggling. take off your $3k westpac credit card points and you are at $30k. if you can sell it for $25k at year 2, with all the GST credits and tax deductions, isnt that pretty cheap motoring? one $300 service and one rego sticker and that's the extent of your holding costs
Click to expand...

Yes, but there has never been any mention of it being a claimable vehicle.
 
I always buy 2-3 year old top of the line vehicles at auction or private deals.
If I need to sell,after two years I very rarely lose much at all,if any.
This all depends on how good a deal I get.

On the other hand I purchased a brand new ford one tonner for work,total costs around the $40,000 (on the advise of accountant) ,ford are crap,I sold this vehicle for a little over $20K at two years odd ,a loss of 20K :confused:biggest loss in all my life,never again. (That's 10K a year loss)

Another example was an ex government commodore on 30 Ks from a tender center,paid $9100,had this vehicle for two years,it had 110Km on it when I sold,I got 10K cash for it at a car yard.(Costs nothing for two years)

Another example was my Mitsubishi van,ex government,purchased for 19K,I had this vehicle for six years,sold it for 12K private. (Cost $1100 a year)

Another example,my current dual cab ford transit,turbo diesel ,ex government,60ks on the clock,purchased two years ago,now has 120ks,still worth more than I paid for it.

I have other examples,but you get what I mean,I personally believe new vehicles are a waste of money,better suited for a deposit on another house IMHO ;)
None of the above figures take into account the amounts I claimed on tax. :rolleyes:
 
yeh i was pretty hapy with a 2 year old falcon i bought at auction for $15200, sold it back to the auction yard a couple of years later for $11000. car was under new car warranty which was great
 
Cheap reliable motoring can be had with a 2 year old Hyundai Getz. Figures below taken from Glasses Guide at drive.com.au indicate it will depeciate at only about $1000 per year. The problem is who would want a Hyundai Getz, Geez their ugly.
--------------------------------------------------------------------------------

HYUNDAI GETZ SX TB UPGRADE
5D HATCHBACK, 2008, 1.6 lt, 5 SP MANUAL

View valuation details Estimated Valuations:
$8,370 - $10,230 private sale
$8,100 - $9,300 trade in
$12,700 - $15,240 dealer price


--------------------------------------------------------------------------------

HYUNDAI GETZ 1.6 TB UPGRADE
5D HATCHBACK, 2006, 1.6 lt, 5 SP MANUAL

View valuation details Estimated Valuations:
$6,570 - $8,030 private sale
$6,400 - $7,300 trade in
$10,300 - $12,360 dealer price
 
You must log in or register to reply here.

Similar threads

W
Somerton Man
Replies
8
Views
2K
dan c
D
W
How to spread a sale over two financial years?
Replies
7
Views
2K
Scott No Mates
Scott No Mates
T
Share Trading
2 3 4
Replies
78
Views
12K
charlieandkath
C
N
Buy and hold strategy break down
Replies
16
Views
4K
Beanie Girl
B
M
Upgrade Car or Not?
2
Replies
39
Views
4K
china
C
Back
Top