With the summer months well under way, car advertisements are filled with “year-end clearance” to clear out the 2010 models in time for the September arrival of most 2011 models. But these deals may not really be a “steal” for some new car shoppers. While the rebates and incentives are certainly appealing, it may still make more sense to buy the 2011 model or even a slightly used model.
The most important thing to remember if you opt to buy a 2010 model at a year-end clearance is that it is essentially one model-year old, which means it will depreciate more quickly than if you buy the same car as a 2011 model when it becomes available.
If you are considering two entirely different cars of two different brands but one is a 2010 model and the other is a 2011 model, use a third-party information source to see how quickly each model depreciates. Most vehicle research websites have this information listed as “cost of ownership” data that shows a chart with depreciation as well as estimates for maintenance, insurance and other ownership costs.
If you are comparing a 2010 model with a big rebate and low depreciation — sometimes referred to as a high residual value — to a 2011 model with no incentive and a faster depreciation rate, you may be surprised at which car is the better value.
Of course, depreciation is only one factor when you decide to sell your car, so think about how long you expect to keep this car. Do you plan to drive it until the wheels fall off? If yes, then depreciation matters very little since you won’t get much for your car when you are ready to get rid of it.
However, if you are like the average American who buys a new car every three years, then exercise some caution in buying a 2010 model at a year-end clearance. Look at the car’s projected value when you might be ready to sell it and compare that to the 2011 model as well as perhaps the 2009 model of the same car. Next use Bankrate’s car rebate vs. low-interest calculator to see which offer is the better deal. Finally, use Bankrate’s new auto loan calculator to compare the three models and see which car is the best financial choice.
While summer is traditionally the time of year that incentives are the highest, this year automakers, led by Toyota after its recall issues, piled on incentives in the spring, making automakers reluctant to up the ante and increase deals in recent weeks. According to the auto research website Edmunds.com, the industry on average kept incentives steady throughout the months of May and June, though the firm said it expected automakers to at least modestly increase incentives this month.
Several automakers already have jumped in with increased deals just recently, hoping to attract shoppers. Among the sweetened deals are increases in cash rebates from General Motors, Hyundai and Mitsubishi, among others, while BMW, Chrysler, Porsche, Subaru and Toyota were among the automakers offering lower interest rates than last month.
So if you’ve had your eye on a certain car for a while now and the automaker is offering a sweet deal and you are planning to keep it for a long time, this summer is likely to be a great time to get yourself a new set of wheels.
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