Are you considering getting a new car while you still owe on your current one? You don’t need to wait until your finance contract is finished, but you have to look carefully at your options.
Paying off and keeping your car
Once you’ve finished paying it off, you won’t have any more monthly instalments so you can enjoy having more month at the end of your money. You can put this extra cash aside every month to save for something special, create a nest egg for rainy days or for a large deposit for a new car in a few years.
You’ll need to factor the car’s ongoing maintenance into your budget because it’s worth keeping it running smoothly. Cars that are properly looked after can keep running happily for years on end.
Trading in for a new car
Make sure you don’t trade in too early or you’ll probably end up owing money. Ask your bank about the break-even point for your finance agreement – where your car is worth what you still owe on it, so selling it should cover the rest of what’s outstanding.
Depending on the technical specs of the new car, you can end up saving a bit on fuel and maintenance. Safety could also be a deciding factor, as some car brands have better safety features.
In some careers, especially lawyers or salespeople, a car is a big part of their brand. It’s how they portray how successful they are at their job and they use it to create trust in their clients. But it’s not wise to use that as an excuse to upgrade if you don’t actually need it.
You might also be in a situation where you’re struggling to afford your payments on your car, and trading it in for a cheaper one might help your budget. Again, you’ll need to do your sums carefully and make sure you’ll definitely be saving money.