Do you buy the newest model available or should you get the left-over?
It isn’t a tough question really. You will get advertisements offering a big discount or salespeople offering a “special deal” on the left-over or maybe the manager tries to switch you to the left-over. Ignore all of that and only look at the facts, just the facts.
If you are leasing, it’s simple. What difference does it make newest or left-over, in most cases. What ever lease has the best terms, wins. There are some special cases where the new model has some new option or other unique feature or you like the look of the new model a lot better.
If the lease payment is close to the same, new or left-over, the newest would be best because of the increased resale value at the end of your lease. (Check the lease post on here for more information)
If you are buying your next car then total dollars makes the difference.
I think a year represents about twenty to twenty-five percent, of the value, when you trade a vehicle in, after 4 or more years. If a 2010 is worth eight thousand after 5 years then a 2011 would be worth about ten thousand at the same time, five years after you purchase. If I am right about the trade value difference, and I am, it means that the price difference between a left-over and a new model are a wash at 20% difference in price.
If your budget can only afford the left-over then the choice is made but if you want real value you should consider the residual value (future trade or resale value) as part of the equation. If the left-over model is more than twenty percent less than the new model it starts becoming a smart choice. That is of course assuming that the left-over is equipped the same as the new model. It’s that apples to apples thing.
Using a twenty thousand dollar vehicle as an example, if your bank charges a three percent interest rate and the manufacturers incentive is zero interest, the difference in interest charge over five years is fifteen hundred dollars. That means that if the two vehicle’s prices are three thousand dollars apart and the newer one has a future residual difference of about two thousand dollars more and the left-over has an interest advantage of fifteen hundred dollars, it would compare like this. You would add two thousand to the difference in price for the newer vehicle’s resale advantage and deduct fifteen hundred from the price for the lower interest difference on the left-over. The effective total difference in price is thirty-five hundred dollars. In this example, the total cost of the left-over would be about one thousand less than the newer model, all things considered.
Like I mentioned about budget, the payment on the left-over would be about sixty dollars a month less than the new model based on a twenty thousand dollar car. Budget per month might be more important than total value but this is just one example.
My experience has been that the left-over usually is not as good of a value as the new model year but the monthly payment is often a little less.