Dear Driving for Dollars,
I’ve been thinking about buying a new car, and I keep seeing summer-clearance ads on TV for thousands of dollars marked off the price. How do I know if these deals are really good?
A carmaker’s summer clearance ad campaign is a marketing tool to sell cars from the 2013 model year that remain on dealers’ lots to make room for the 2014 models, most of which will be arriving in the coming weeks. Automakers offer bigger discounts on these cars because they are essentially 1 model year old and are essentially depreciating while they sit on dealers’ lots. As a result, a 2013 model-year car that is brand-new will be worth less than the same car that is a 2014 model when they are driven off a dealer’s lot.
This issue of car depreciation matters much more if you are likely to sell the car in a couple of years, since you will be able to get somewhat less than the same car of similar mileage and condition in the newer model year. If you plan to keep the car for a long time, it will matter very little, since the greatest depreciation occurs in the first few years of ownership.
To ensure you are getting the best deal, look for a discount that factors in that initial car depreciation. You can get an idea of this amount yourself by researching the value of the car model that is 1 model year old or using an ownership cost tool to see the car depreciation rate for the model you want to buy.
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