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Money Saved on End-of-the-Model-Year Deal Could Vanish at Trade-in Time

March 22, 2000|RALPH VARTABEDIAN | TIMES STAFF WRITER

A lot of buyers wonder whether it makes sense to delay buying a new car or truck in the spring or summer and instead wait for those fall bargains, when dealers are clearing out for the model-year changeover.

Without question, dealers mark down their end-of-the-year inventories and it's possible to pick up a vehicle cheaper at that time than any other.

But that doesn't mean that year-end discounts are the right choice for every consumer, and you'd be foolish to think you are outsmarting the dealer. In this column, I'll walk you through some of the pros and cons of buying at various times of the year.

Sure, you can pick up an end-of-the-model-year discount by buying in September or October. But what you're left with is a car that is 12 months older in model-year terms when you eventually sell it. If you buy in September, then maybe in two years you'll be selling a 2000 model car with 24,000 miles on it. But if you get the 2001 model, you'd be selling a 1-year-old car with the same 24,000 miles on it.

What's the difference? Anywhere from $500 to $1,000 in lower trade-in value because of depreciation, experts say.

Let's use the example of a Buick LeSabre, based on Kelley Blue Book wholesale prices. A 1998 model with 24,000 miles on it is worth $14,740--or $1,050 less than a 1999 model with the same mileage. The two cars could have been bought new anywhere from zero to 24 months apart, but the used-car market doesn't account for that.

"Maybe you'll get a little savings, but the incremental savings won't surpass the cost that you have with a year-older model year," says Charlie Vogelheim, editor of Kelley Blue Book. "There is way more to look at than the year-end savings."

In recent years, some auto makers have moved away from introducing all their new models in the fall and that blurs some of the issues in determining a car's model-year age, according to Dave Power, chairman of marketing research firm J.D. Power & Associates.

Nonetheless, consumers should always be careful about buying marked-down merchandise. Sometimes those bargains aren't as great as they look. You may save at the front end, but you may wind up paying more at the back end.

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None of this advice applies to those thrifty motorists who buy new vehicles and then drive them into the ground over the next 10 to 15 years. They'll pocket the discount and still get the same salvage value when their car or truck goes to the junkyard. But few motorists who can afford to buy a new car will want to be driving it 15 years later.

"If I were giving advice, I would say get the newest car and enjoy it for five or six more months and not wait for the end of the year," Power said. "If you are keeping a car for five or six years, maybe it doesn't make that much difference."

Indeed, the longer you keep a vehicle, the less its value will be affected by the extra year of age. After 10 or 12 years, a car's value is more likely to be determined by make, model, mileage and overall condition.

Take, for example, a 12-year-old Cadillac versus a 12-year-old Honda. That Caddy has lost a huge percentage of its original value relative to the cheaper Honda, which in many cases can retain 25% of its original value well into its advanced years. If you look in the classified ads, it's not unusual to see old Honda Accords selling for more than old Fleetwoods.

There are other problems with getting a car or truck at the end of the model year. Often, these are vehicles that dealers haven't been able to unload for months, maybe because of an unpopular color or equipment package.

Of course, if you had picked up a $500 or $1,000 discount on a model-clearance car four years ago and invested the savings in Yahoo stock, you'd probably have enough money to buy a new car outright. But that's another story.

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Ralph Vartabedian cannot answer mail personally but responds in this column to automotive questions of general interest. Please do not telephone. Write to Your Wheels, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. E-mail: ralph.vartabedian@latimes.com.

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