When Is The Best Time To Buy A Car?
Don't Assume Every Clearance Sale Is A Good Deal
[Includes How To Calculate The Value Of A Model Year-End Sale]
by Peter Levy
It happens about this time every year. Television, newspaper, and web sites become saturated with ads to clear out the current car model year inventory, accompanied by festive balloons and reduced prices. But is a discounted old model a better deal than a non-discounted new model? Is year-end model clearance the best time to buy a car
“Model year-end clearance sales can be great for car buyers – but it’s a mistake to assume that every clearance sale is a good deal,” said Kristina de la Cuesta of IntelliChoice.
Like so much in the world of car-buying advice, the best time to buy a car depends on a few factors. There are some “decision rules” and questions you can rely on.
How We Studied The Best TIme To Buy A Car
To determine the best time to buy a car we looked at the 2009 and 2010 versions of nine popular vehicles.
We assumed that in September or October of 2009, a buyer could have purchased either the ‘09 or the ‘10 model. The new 2010 model was purchased at 1% below the MSRP – a reasonable assumption for early in the model year.
The purpose of this study is to determine what the purchase price on the 2009 model would need to be to make it the better deal.
We picked models whose features and styling had very minor changes from the ‘09 to the ‘10 model – so the vehicles were practically identical.
We assumed that we purchased the vehicles in September, 2009 and sold them in September 2014, driving each vehicle 60,000 miles in those five years. Each vehicle was maintained well and was in identical condition and sold to the same type of buyer in 2014. In other words, we assumed that each vehicle was treated not only identically, but similar to most people’s driving and ownership patterns.
The Best TIme To Buy A Car Calculation
The 2009 “outgoing” model was only a better deal than the 2010 model if what you saved in buying the 2009 vs. the 2010 exceeded what you lost by selling the 2009 model five years later at a lower price than the 2010 model.
As an example, the list price of a 2009 Nissan Versa SL Hatchback was $16,210, while the 2010 model purchase price was $16,364, a difference of $154. In 2014, the value of the 2009 was $8,912 while the 2010 was $9,601, a difference of $689. So the 2009 buyer would have saved $154 in 2009 but received $689 less in 2014, a net difference of $534. In other words, if the 2009 version was purchased at the list price, it would have been $534 smarter to have bought the 2010 model.
But the model-year-end 2009 would not have been purchased at the list price, it would been on sale. And from the above, we see that if the closeout discount was $534 or more, it would have been a better deal to buy the 2009 model.
Technically, we should also worry about interest on the money involved, but that is both minor and confusing.
The Best TIme To Buy A Car Decision Questions
Question 1: What is the Value of the New Car?
- For most low to middle priced vehicles, up through a list price of $30,000+, the discount that makes the old model more attractive is around $500 – $1,000. Certainly, if the discount is $1,000 – $1,500 or more you can safely conclude that you’re getting a better deal with the older model.
- With luxury cars, the number is much higher – in the $1,500 – $3,000+ range.
- The outlier in the data is the Mini-Cooper. It took a whopping $1,839 discount to make the 2009 model a better deal than the 2010 model.
Question 2: Are You Comparing Apples to Apples?
Question 3: What Are The Rebates & Discounts Of The New Model?
Over To You
And as so often occurs, it depends on the exact model you are buying. You could do the above analysis yourself, on the model you are considering, to see what numbers you come up with.
There is no perfect crystal ball to determine the best time to buy a car. But if you’re a typical buyer buying a mainstream vehicle, remember the range $1,000 – $1,500. If you can achieve that level of discount on a 2014 vs. a 2015 model that isn’t changing much, you’ve got yourself a deal.
(Thanks to Mr. Brad Taylor of IntelliChoice for the underlying data used above.)