Reason for trading
Determining whether you should trade your vehicle in after just one year of ownership comes down to a host of individual considerations. Are you trading in the vehicle because you are looking to upgrade? Are you looking to downscale? What sort of finance deal did you sign in the first place? Let's have a look at some key considerations.
Depreciation
Depreciation is the term used to describe the market-related value of your vehicle relative to what you paid for it when it was new. In most instances, a vehicle's depreciation is relatively steep during the first few years of ownership and will slowly decrease over time. Therefore, knowing just how much your vehicle has depreciated is important if you are looking to trade it in after just one year.
Residuals
This refers to how much money you still owe on the initial finance contract. If you are still paying off the interest charges on the vehicle after the first year, you will then be subject to the remainder of the interest as well as the full new list price of the vehicle. Therefore, trading the vehicle in with the aforementioned deprecation will mean you will have either pay off the amount owing on the car or load that amount on to the finance deal on your new vehicle. If your finance contract was set up in such a way that you will break even or even make some money back when trading the vehicle in, then trading after a year is more viable.
Personal finances
Depending on where you are financially, trading your vehicle might be essential as part of a downscaling process, or perhaps it comes from a desire to upgrade from your current vehicle. This means that when determining whether you should trade your vehicle in after just one year, you should take your time and analyse where you are financially before making any decisions.
Should you do it?
Generally speaking, we would say that you should not do it as the majority of finance deals will leave you with an outstanding amount to pay on a vehicle after just one year of ownership. Having said that, there are of course exceptions to this, and your personal financial situation may demand that you trade the vehicle in.
