When Should you replace your vehicle
- Vehicles today are Expensive especially when you take into account the financing terms
- Vehicle repairs can be expensive
- Is it better to buy a new vehicle every 5 years or keep it for 10 years?
- A vehicle can lose 30% of its value in the 1st year of ownership
- Are vehicles meant to last 10 years?
- Canadian Average vehicle out of service mileage stats
- Imagine having a dependable older vehicle with no payments?
Do you know just how expensive vehicles are today? The ad say, “Just a low monthly payment.” But have you seen how long the terms are? The monthly term could be up to 8 years. On the other side, if you don’t want to take on more debt, then you have to repair your vehicle. And repairs are so expensive. How do you know when it’s the right time to buy a new vehicle or repair the existing one? Where is the sweet spot? Let’s look at an example.
You and your neighbor, Bob, have very different strategies when it comes to vehicles. You both buy $35,000-vehicles. But that’s where it changes. Bob keeps his vehicles for 10 years, whereas you replace your vehicles every 5 years. Who pays more?
Well, to understand this, you have to dig deep. We have to look at the original purchase price, the depreciation, the trade-in when the vehicles were traded in, the maintenance costs, the sales tax, the dealer add-ons, insurance costs, fuel costs, and financing costs. Let’s look at who paid more.
You paid twice as much per vehicles, but you had a higher residual when you traded in your vehicles, they were only 5-year-old vehicles, but you paid a much higher depreciation cost. You paid less in maintenance, because Bob had older vehicles. You’ve had a newer vehicle and they didn’t cost as much, but you paid more in financing costs. You also paid more in insurance costs, paid less in fuel costs because the vehicles were more fuel efficient, and you also paid higher freight and PDI dealer costs.
Let’s face it, the biggest cost in replacing a vehicle happens in the first year. A vehicle loses up to 30% of its value in the first year. So the bottom line is you paid $30,000 more than your neighbor, Bob, did. He saved $30,000 by keeping a vehicle 10 years as opposed to replacing it every 5 years.
But you ask the question, is a vehicle meant to last 10 year? Well, let’s look at some information from the government of Canada.
Before they allow a recycler to crush a vehicle, the government requires two pieces of information be given to them, one, the mileage of the vehicle, and number two, the vehicle identification number. This information is then compiled in a national database to give the average out-of-service mileage for today’s vehicle. They’ve been compiling this for the past 60 years. Have a look at the information. You can see that in the ’60s, the average out-of-service mileage was around the 170,000-K mark, whereas today, it’s almost 310,000 kilometers. So in answer to your question, will a vehicle last 10 years? The answer is a resounding yes.
With 95% of Canadians today financing their vehicles, imagine if after 5 years, you didn’t have a vehicle payment. Imagine that that remaining 5 years, you had your dependable vehicle. At mechaniQ, we’re here to help you to understand that this is possible, to have a dependable older vehicle. Thank you for listening.