Selling a Car or Keeping It

Question

I currently have a 5-year-old car which has been paid-off and maintenance has been relatively cheap. However, I will not be needing it soon. My brother will learn how to drive in 1.5 years.

Currently, I have two options:

• Selling the car and buying a cheaper new car when he needs it
• Keeping it until he needs it (buying a used car is out of the options)

Which one would make more economical sense?

Disadvantage of the first choice would be my brother would get a lower quality car (which might require more maintenance anyways), and you would instantly lose about 10% of the new car's value to depreciation.

However, the second choice has the similar issues - an older car needs more maintenance and the car would depreciate by staying idle under the hot tropical sun for 1.5 years (probably also about 10%).

In terms of convenience, both choice are similar - as my parents would have the convenience of an extra car (which they would rarely use), and my parents would have to drive it once a week to prevent it from falling apart, which is also an inconvenience.

Answer 1

From an economical point of view, we don't have enough information to give you a definite answer. Other factors that will come into play:

• How much are the annual taxes/fees associated with the current car?
• Does it cost you anything to store the current car (parking fees, for instance)?
• Is there currently a good market for the current car, or will it be difficult to sell for what you believe it to be worth?
• Why is buying a used car not an option? That is illogical.

There are very few reasons to buy a brand new car instead of buying one that's 1 or 2 years old. A brand new car will depreciate as soon as you drive it off the lot. A 1-2 year old car will likely have relatively low miles on it, have already had the "off the lot" depreciation, and will probably still have time/mileage left on the original manufacturer's warranty.

As you mentioned, if you decide to keep the current car, you need to continue driving and maintaining it so that it doesn't experience significant problems 1.5 years from now. The oil still needs to be changed, tires rotated, etc. It won't need much, just drive a couple of miles a week, but it shouldn't just be abandoned in the tropical heat for 18 months. You can get a cover for it which will help negate sun and light weather damage as well.

You seem to answer your own question, really. If you think the limited maintenance and care needed to keep the current car ready for your brother is such an inconvenience, then sell it. Invest the money for 18 months, then buy your brother a lightly-used car. Again, there really is no legitimate reason to buy a brand new car in the scenario you're describing. Especially not for someone who is just learning to drive. Insurance costs will be high enough as it is for them. Get them something used and reliable (do your research), and let him save up to buy himself a brand new car if he decides to in the future.