Buying Leftover New Cars - Is It Better to Buy Last Year's Car Model

2019 Acura RDX Advance ・ Photo by Acura

If you've spent any time watching television or reading a local newspaper, there's a great chance you've seen a car dealer offering big savings "to make room for next year's models." Yes, it's true that your local car dealer needs to clear physical room for the new models, which itself is a decent reason to hold a sale. However, it's also true that cars from the previous model year aren't as desirable as the newest models, so the dealer needs to sweeten the deal a bit to get them moving off the lot. 

Opting for last year's model can save you thousands on your next car purchase, but you should go into the experience with open eyes. Knowing what you really value in a car shopping experience is the single most important thing you can to do make sure you buy the right car. There's absolutely nothing wrong with buying leftover cars from previous model years, but you need to know the differences between the old and new versions of a car. 

Are the savings you see from buying an older model year worth the downsides of skipping the newest model? Let's take a closer look.

Depreciation

You may have heard the old saying that a car loses value the moment it's driven off the dealership lot. While there is some truth in that assessment, the decline in value happens at different rates for every car. High-end luxury cars and models packed with tech and features typically take the hardest hit in the early days of ownership because their values are so much higher. There's no way around depreciation, but only you can decide how much it actually means to you.

Dealers know that most people want the latest and greatest cars, and they also know that people are willing to pay for them. That's why last year's models are sometimes offered with discounted pricing or promotional financing options. Paying less for an older model is helpful for depreciation as well, since they will lose value fasater compared to the newest cars.

Depreciation can be important, but it matters a lot less if you plan to own and drive your new ecar for everal years. If you're going to drive the car well beyond the point of caring about its resale value, depreciation shouldn't be at the top of your shopping criteria. If, on the other hand, you swap cars on a regular basis, resale value should be on your mind. 

Photo by Mercedes-Benz

Certain Brands Hold Their Values

To help ensure you get the best deal, you need to get a feel for the depreciation rate of the car model you are considering. Some car brands, and even certain models in a brand, hold their values better than others. Therefore, they depreciate more slowly. A car that depreciates more slowly overall will have a smaller decline in value than a different model that doesn’t hold its value as well.

To find a car’s depreciation rate, check the cost of ownership section of any independent auto information website. Once you know the car’s depreciation rate, you can use it to help you negotiate a better deal. It’s not quite as simple as subtracting the value of the car after one year of ownership, though, since that price also factors in one year of mileage (12,000 to 15,000 miles on average), and the car you will be buying will have very few miles on the odometer. You’ll also need to be careful that there are no other significant changes (such as an entirely different engine or major feature changes) affecting the value of the one-year-old car compared to the new model. Still, knowing the value of the car at one year old is key information in helping you negotiate the best price on last year’s model.

If you don’t have a specific model in mind, an easy way to see the cars that depreciate the least is to look at the Residual Value Awards from ALG, a firm that specializes in calculating residual values of cars for auto lenders and insurance companies.

Significant Redesign

Automakers like to keep their vehicles fresh and top-of-mind for buyers. To do this, they periodically update their vehicles with new styling, refreshed technology, and better safety equipment. This can mean that a car's styling and look remain similar, the underlying tech and available features evolve. 

While it's not vital that you have the most up-to-date model to be happy with your car, recently made updates or an update that is expected to come in a near-future refresh should inform your buying decision. If saving a few dollars is a priority, shopping the previous model year is a good idea, but you'll need to spring for the newest model to get the latest features. Regardless of where you stand on the issue, take a moment to research a car's lifecycle before buying it. You never know when the feature or tech you want is just around the corner in a new model.

Photo by Nissan

Reliability Ratings

Take a look at a new car's predicted reliability ratings prior to making your final decision. Consumer Reports and other major online outlets offer insights into new car reliability, and give new owners a platform to discuss issues they're having or leave a review. Finally, review the initial quality and owner satisfaction reports for your potential new ride. This gives you an idea of the most common problems owners have with the car and could give you important insight on what the ownership experience will bring. 

Photo by Ford

Bottom Line

The number one factor that should most heavily impact your decision to buy a new model or one from a previous mdoel year is you. What are your priorities? Is saving money an important issue in your next purchase decision? Do you care about having the newest possible model? Head into your next car buying experience armed with the information you need, and everyone involved will walk away with less stress. Finally, the model year of a new car matters a whole lot less if you plan on owning it for a while, so keep that in mind when you're stressing over the bottom line.

Photo by Dusko - stock.adobe.com