South Africa boasts over 50 automotive brands and 2 500 model derivatives, a number set to grow with new launches and technological advancements. This abundance of choice encourages car owners to consider upgrading or downgrading their vehicles.

Trading in a paid-off car

Trading in a fully paid-off vehicle is relatively straightforward. Ensure you have your ownership documents and obtain a vehicle valuation to negotiate a fair trade-in value.

Trading in a financed car

“For a financed vehicle, the process can be more complex,” says Lebo Gaoaketse, the head of marketing and communication at WesBank. “Understanding the break-even point is essential.”

Understanding the break-even point

This is when your vehicle’s trade-in value equals or exceeds your outstanding loan balance. This is the ideal time to trade in your financed vehicle.

Factors affecting the break-even point

• Finance term: Longer terms delay reaching the break-even point.

• Deposit: Larger deposits accelerate reaching the break-even point.

• Resale value: Vehicles with higher resale values reach the break-even point sooner.

Benefits of trading in at the break-even point

• Avoid overpayment: You avoid paying more than necessary to settle your loan.

• Prevent excessive debt: You avoid rolling old debt into a new loan.

• Maintain affordability: You maintain your current affordability level.

Negative equity

If your trade-in value is less than your outstanding balance, you have negative equity. You’ll need to pay the difference, which could increase your new loan’s monthly payments and total interest.

Tips for trading in a financed vehicle

• Know your contract: Contact your lender for your outstanding balance and settlement amount.

• Shop around: Get trade-in quotes from multiple dealerships.

• Negotiate your new loan: Negotiate interest rates and finance terms on your new loan.

Source: MotorPress/Wesbank