Kiplinger's financial experts explain the benefits and disadvantages of buying a year-end car.
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Year-End Car Buying Tips
Kevin McCormally: I’m Kevin McCormally of Kiplinger. I’m here with Mark Solheim the Automotive Editor of Kiplinger’s Personal Finance magazine to talk about buying last years car or next years car.
Mark seeing the model here means the new cars is on the show room, the old cars are being pushed out with some great deals. How does the buyer decide between buying the last of this year’s model or the first in year?
Mark Solheim: Well first of all, you have to realize that the older model cost less usually because it’s worthless. While it’s been sitting on dealer’s load, it’s essentially bled resale value. It’s depreciated.
Kevin McCormally: How much or less is it?
Mark Solheim: Well it’s not unusual for a car to lose five percent of its value. You have two new cars. One’s a new model year, one’s old model year and that gap could be five percent which on a $30,000 car is $1500.00.
Kevin McCormally: And so, how do I decide if that $1500.00 is worth it to me?
Mark Solheim: It depends on what kind of buyer you are. If you’re the kind of buyer that thinks you're going to trade in the car in three years or in five years, you might pay less now but got that much less or even less than when you trade it in.
But on the other hand if you’re the kind of buyer that holds the car until it’s expires and dies, it really doesn’t matter that much how much it depreciates, you get the same warranty, same new car, you’re the original owner.
Kevin McCormally: So anything that you could consider when you’re trying to decide between the two models?
Mark Solheim: You do need to look at the difference in content between the older and the newer model manufactures often, add new content. Sometimes they won’t raise the price all that much but that is the sticker price and they’ll add more standard features.
Kevin McCormally: Like what do they look for?
Mark Solheim: Some people will look for a bigger engine with more horse power, with sometimes happens in a model year or a better sound and stereo system. Personally on this particular for safety, if the manufacturer is added standard safety equipment or another very good feature electronic stability control then that would make the sale.