Best age to sell your car
Replacing your car every three years – a motor industry guff or good economics? From the archives: Mike Wills speaks to late economist Mike Schussler about when is the best time to sell your car.
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We're trawling our archives for good, evergreen content, and found this perfectly relevant interview from a few years ago. Enjoy!
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It's car industry propaganda, suggests Mike Wills, that we ought to be trading in our cars for a new one about every three years.
In this interview from our archives, Wills, standing in for Bruce Whitfield on The Money Show, ponders whether there's an actual equation for working out when the best time is to sell a car.
Wills put the question to late South African economist Mike Schussler, who said the first three years is when you'll see the biggest depreciation in the value of a new car.
"Car prices depreciate quickest in the first year... and falls very rapidly after that."
- Mike Schussler, late South African economist
"Stats SA, for example, gets a very negative second hand car price year-on-year, most of the time, and they only use the first three years of cars, so that gives you a pretty good idea that in the first three years the car is depreciating very, very rapidly."
- Mike Schussler, late South African economist
Schussler highlights the importance of calculating your car's 'utility value' (i.e., taking you to work, or taking the kids to school).
"That utility value... is going to probably be higher than the value of the car."
- Mike Schussler, late South African economist
Most people pay their cars off over five years; replacing them soon after does not make sense, according to Schussler.
"To go immediatley and buy another car... I don't think that's the wisest decision..."
- Mike Schussler, late South African economist
But, what if the manufacturer brings out an updated version of your car?
"You normally get model updgrades every seven or eight years... why would you want to buy another car that's got similar features to your car, it doesn't really improve the fuel efficiancy, other than pleasing you asthetically, or your ego?'
- Mike Schussler, late South African economist
Schussler agrees with Wills. The suggestion to replace our cars every three years or so is likely based on the motor industry's need to push their products.
'I think that's to keep car sales going.'
- Mike Schussler, late South African economist
Scroll up to the audio player to listen to the interview.