Is Model Year-End 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 pricesBut 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.

Best Time to Buy a Car - Is it model year end?

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 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.

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.

Looking at all nine vehicles, the discount amount that made the 2009 a better deal than the 2010 ranged from a low of $262 for a Honda Accord LX Sedan to a high of $3,092 for a BMW 650i Coupe.

Technically, we should also worry about interest on the money involved, but that is both minor and confusing.

Best TIme to Buy A Car - Car Price Discount Chart

The Best TIme To Buy A Car Decision Questions

Question 1: What is the Value of the New Car?

The best time to buy a car that is mid-priced, 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.

  • 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?

Our analysis assumes that the new model is almost identical to the old. In those instances where the new model is significantly different from the old (new styling, powertrain, key features, etc), the discount would have to be larger than the above to make the older model more attractive, because the newer model is both a better vehicle, and will also better hold its value.

Question 3: What Are The Rebates & Discounts Of The New Model?

Occasionally, manufacturers will reduce the price of the vehicle for a new model year. There have been cases of this happening in the thousands of dollars – so customers shouldn’t be surprised if they see a new model with a lower list price. If this is the case, the discount on the old model year has to be that much greater to make the old model year the better deal.

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.)