Running a car can be expensive, and the cost of keeping a vehicle maintained quickly adds up.
If, like many, you’re currently using your car less and looking to make savings, but are unsure about the used car market, there are four factors that show that now is a good time to sell.
Used car prices are buoyant
The used car market in Q3 2020 is performing strongly following the grim first half of the year – which, under lockdown conditions, saw most retailers shutting down their everyday operations.
Whilst many dealers are unlikely to make up the shortfall from weeks of lost sales, late 2020 is tracking ahead of the same period last year and is likely to finish that way according to many insiders.
Further research by online car supermarkets show that there is a growing trend towards users purchasing slightly older models – with four-year-old cars being most popular – and a surprising surge in demand for higher-end luxury cars. Car selling comparison website Motorway has also reported particular strong sales through it’s online auctions for dealers too.
Worries that, in the wake of lockdown, car prices would drop as retailers attempted to kickstart the market by slashing prices have proved unfounded – with average used car prices remaining stable. The market is now stronger than many predicted.
Euro 6 Compliance
There have been fairly stringent regulations about car exhaust emissions in the UK since the 1970s, but escalating fears around health and the environment mean that much tougher rules have been recently implemented.
All combustion engines – petrol and diesel – produce emissions, and the Euro 6 standards were introduced to ensure manufacturers keep harmful emissions within specific limits to help combat vehicle pollution.
If you drive an older car that is not currently Euro 6 compliant, you may be concerned that your car cannot be converted to meet the latest standards.
For most petrol cars, the tech involved to meet the new standards is typically integrated into the car’s design. Upgrading an existing petrol car is expensive and, in most cases, the cost is likely to outweigh the benefit.
Diesel vehicles can more easily be converted to meet emission standards, as a large part of the process to reduce harmful gases takes place in the exhaust system.
Whilst Euro 6 legislation has been a reality for a few years now, as of September 2020, it will have an even greater impact on the automotive industry when London’s Ultra Low Emissions Zone comes into effect.
The prices of non-compliant used vehicles are expected to drop off significantly in the next few years – so, if you own one, now is a good time to sell.
Your car’s value is depreciating
The value of a new car drops faster than any other asset.
A car experiences the steepest depreciation when new – in fact, after the first year, it’ll typically be worth about 70-80% of the money you paid for it.
The process of depreciation continues in a non-linear fashion. After the third year, the value of a new car will have dropped to about half – then, the rate of depreciation begins to slow.
Should you sell now? Well, that depends on your circumstances – however, considering the fluctuating market, being informed – and knowing how to use the depreciation curve to your advantage – has never been more important.
Holding onto your car in an effort to beat depreciation, might not be a great idea either. After five years, a car’s failure rate is higher than at any time, and they generally begin to develop faults from about the 60,000-mile mark.
Sell too early, and you could experience the worst of depreciation; leave it too late, and your car’s reliability might make it a hard sell.
There are cheaper alternatives to car ownership
With many of us now working from home due to lockdown, owning and running a car has started to make much less practical sense – and the mounting costs, including fuel, car insurance, servicing, breakdown cover, and maintenance, are forcing some drivers to reconsider their finances and their priorities.
For those that are using their cars less and looking to make savings, there are cheaper alternatives to car ownership that are worth considering.
If the commute to work is no longer happening and you’re finding that your car is only being used infrequently, it would be more cost-effective to sell your car and sign up to the services of a car club.
These companies allow you to pick up and use cars from designated locations whenever you want, removing the cost and hassle of tax, insurance, and maintenance; or worries about depreciation.
If you’re no longer driving long distance, or are trying to get fit, or reduce your carbon footprint, a good alternative to car ownership is buying a bike. Not only are they inexpensive, they’re also good for you, and good for the environment.
If you are unsure cycling is for you, there are now cycle-hire schemes in place in most big cities.