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It's the time of year when car ads and commercials are filled with phrases like "year-end close-out'' and "model year blowout'' in an effort to get potential buyers excited about the "huge deals" on 2007 model cars and trucks because the 2008 models are soon to arrive.
Whether these promoted savings are any better than
a buyer could have received months ago is debatable, since this hasn't exactly
been a seller's market, especially for domestic manufacturers.
Buyers who prowl new car lots may
be surprised to find that at some stores there
are still unsold 2006 models and the incentives
to move what will soon be two-year-old new cars
can be considerable.
Consider this: There are more than
1,300 2006 Chevrolet Monte Carlos sitting on dealers'
lots around the country. Overall, Chevy has more
than 10,000 unsold 2006 vehicles in dealers' inventories,
including about 400 Corvettes and 16 of those
SSR convertible pickups.
To move all this metal, manufacturers
are offering rebates up to $7,000 and the usual
zero-percent financing for up to 60 months.
Find a 2006 Saab
9-5 on a dealer's lot and there's an $8,000 cash rebate attached. Over at Kia,
a 2006 Sedona minivan gets a $4,000 rebate. Even Toyota has a few 2006 vehicles
lying around. A 2006 Tundra pickup can come with a rebate of up to $3,000, depending
on how it's equipped. While some of these deals may seem tempting,
buyers still need to approach the purchase of a new 2006 vehicle with some common
sense. First, the depreciation on that 2006 car is going to
be significant once you take possession, perhaps as much as 40 percent on some
vehicles. If you're someone who keeps a car for seven or eight years, that big
hit at first may not be a worry. But if you think you may be trading that 2006
in on a newer model in three or four years, you may take a bigger hit when you
go to sell than if you initially bought a 2007 version.
Financing is also an issue. Even
with a zero-percent deal, you may find yourself
upside down on the loan -- meaning you owe more
that the car's worth for a longer period of time,
again due to the initial hit on depreciation.
Also, if you extend payments for five years, you'll
have a seven-year-old car at the end of the loan.
Lastly,
consider what changes were made to the 2007 or 2008 models of the vehicle you're
considering and how that will affect the desirability of that 2006 model when
you go to sell. For example, 2007 Chevrolets carry longer drive train warranties
than earlier models. Nonetheless, if you can drive a hard bargain
with a dealer desperate to get rid of a 2006 vehicle -- on top of any factory
rebate or finance deal -- and you'll keep the car long enough to overcome that
two-year depreciation hit, hunting around for a leftover 2006 may be the way to
go.
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