Economics of selling and buying a new car

I decided to deviate slightly off the share market topic and write about buying and selling used cars.  Everyone will have to buy and sell used cars at sometime in their life.  So I think people will find this post useful.

Buying and selling used cars are interesting because mainly there are so many used cars of all shapes and sizes.

I myself am trying to sell off an old 1995 BMW 3 series e36.  It's not a bad car, I happen to think of all the models in that era, it is one of the nicest for its class.

Here are some the buying and selling used car economics:

1.  Every 5 years your car will approximately decrease in value by 50 percent.   

Judging by this, usually the best value of a car is gotten around the 10 year mark.  By that time, the car will be over 75% lower than its sale price.  Assuming a car is 75k at year 10, If you would buy at 10 year and sell at the 15 year mark, the cost would be 8k per year.    If you would buy at the 10 year mark and sell at the 20 year mark, the cost would be 5-6k per year.  But this is without the maintenance charges.

2.  Best time to buy a used car is after the model changes, and the best time to sell is just before the model changes.

This is super interesting.  The main reason for this anomaly is the difference between model changes is usually quite drastic, producing sort of a step pattern price chart.  I found the difference between a 2008 model now and a 2005 bmw model is not much different only about 10k difference, while a 2004 model is half the price of the 2005 model.  Unfortunately most people won't be able to take advantage of this because they will need to buy and sell their car and the same time.

3.  People will generally want to keep the best car of that era for as long as possible and would rather not sell it if they could.  

This is a postulation of sorts and can't be proven, but I'd argue that the best car in class for that era, people would not want to sell it.  And therefore supply limited while demand for that car would still be there.

4.  Resale probabilities of smaller engine cars are better than larger engine cars due to the Malaysian road tax system.

At this price level, Road tax is a significant percentage of the car's cost.  2.5 to 3 litre engines are less in demand due to 1.6k road tax per year.

5.  At 20 years old, the highest resale value does not always equal the easiest to sell.  After all if a dealer has 5 used cars of that era, it is unlikely he will take another one on.

Common cars at 20 years old become hard to sell as the market is flooded with these types of cars and the market for old cars isn't a huge one.

The only part of these rules which I'm not fully confident on is part 3 and 5.  These are kind of speculatory and not proven and also have exceptions.  At any rate most of these can be confirmed with a call to your used car dealer.