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The number of car ads accelerates to a frenzy as summer fades into fall because dealerships need to make room for the newest model year vehicles. Big rebates and low-interest financing offers can tempt shoppers to make a quick deal for a leftover 2020 car, but there are a few key points that shoppers should consider before buying one.
“The fall is always an exciting time in the automotive world, with brand-new models arriving at dealerships and outgoing cars on big discount,” says Todd Young, automotive pricing analyst at Consumer Reports. “This is an unusual year, with prices all over the map. It is key to study the offers and base purchase decisions on a long-term view."
The easy savings on marked-down 2020 models may seem tempting, but the cars are technically already a year old once 2021 models hit the showroom. Those deals can mean dramatic savings off of the original sticker price, but remember: Every new car loses value significantly the moment it's driven off the lot.
“Vehicles depreciate more in their first year of use than in any other year of their service lives,” says Michael Calkins, manager of technical services at AAA. “Year-one depreciation ranges from a low of approximately 18 percent for SUVs and pickups to a high of 35 and 45 percent for large sedans and electric vehicles, respectively.”
Generally, the model-year-end deals make sense mostly for shoppers who plan to hold on to a car for a long time or who put a lot of miles on the car (driving it more than 15,000 miles a year).
For other shoppers, saving an extra $1,000 or $2,000 on a leftover car will be offset by the depreciation and potential to miss out on advances and added features for the new model year.
Reasons to Buy Now
Most models tend to have the highest reliability in their last production year, CR's survey results have shown. This adds some appeal to buying a leftover car, especially for consumers who expect to hold on to the vehicle for many years.
Shoppers may find huge incentives but will need to decide quickly, because the best inventory will rapidly disappear, leaving behind less desirable colors, options, or trims.
Among the deals, shoppers may find low-mileage “program cars” that were used as demo vehicles or as executive cars, meaning they've been used by dealership officials. These typically have from just a few hundred to a few thousand miles on them. The warranty on such cars begins when they are bought, despite being slightly used and marked down. This has the benefit of a new-car warranty on a model discounted as a lightly used car.
Road warriors who rack up more than typical annual miles would benefit from a closeout car because it provides one more year to spread out those miles, which allows them to preserve some trade-in value. If you don't want to drive the same car for so long or don't drive as much, this may not be the time to buy.
Reasons to Wait
Shoppers have plenty of factors to consider when deciding whether to buy now or wait. For instance, an outgoing model will show its age as the freshly styled new model hits the streets. Sometimes the depreciation hit can be greater on the outgoing model because it instantly looks old in contrast to a flashy, redesigned 2020 model.
Historically, the fall season tends to have the highest prices, because new cars are just arriving and they tend to be a little more expensive than the outgoing version. Deals on 2020 models will become more prevalent through the months ahead.
Looking for a lease? Shoppers should be aware that some banks won't lease leftover cars after the model year has changed.
Remember the Big Picture
“Buyers also need to keep in mind that purchase price/depreciation is only one aspect of their overall driving costs,” says Calkins. “For example, while pickup trucks hold their value better [than] almost all other vehicles, they are also more expensive to operate on a per-mile basis. Buying more vehicle than you need in an effort to maximize retained value at trade-in time can cost more over the life of the vehicle than one that is ‘right-sized’ for their needs.”
Cars are not an investment. They are a depreciating asset. It pays to have a realistic, long-term view when purchasing a car, factoring more than the initial cost.
Driving a Bargain
Getting a great deal starts with shoppers identifying the best car for their needs, then getting that car for a good price.
The Consumer Reports car model pages contain a wealth of information to empower shoppers to make a smart choice. We provide detailed pricing information that factors in all of the customer rebates and hidden direct-to-dealer incentives.
Our car-price analysts have studied the latest offers and found significant discounts on many CR recommended models—those that meet our high standard for test performance, safety, and reliability. The most dramatic savings tend to be on models in their last year before a redesign, such as the Kia Sorento, but given all the strains on supply and demand this year, there are many good models that will continue on and yet have great deals, like the Toyota Avalon. The model with the biggest savings is the Chevrolet Bolt, with the potential for 24 percent off.
We recommend creating a list of models to consider, focusing on good, safe, reliable cars that suit your needs and budget. (Start with our Best New Car Deals.) Take test drives and compare notes on all of those vehicles. Ultimately, let the deals be the tie-breaker rather than the primary motivating factor.
Remember, there may be extra room to negotiate on top of advertised prices at the end of the summer, when dealerships are eager to sell their leftovers. There may even be hidden incentives from the automaker that will pad the dealership's bottom line, giving sales managers a little more pricing flexibility.
Shop CR's Car Buying Service From Home
The Consumer Reports Build & Buy Car Buying Service is evolving to face the challenges during the pandemic. Our service allows you to access a nationwide network of more than 16,000 dealers to provide up-front pricing information and a certificate to receive guaranteed savings off MSRP.
A growing number of dealerships in the network are part of a Buy From Home program, which allows buyers to complete the buying process without going to a dealership. Participating dealerships take you through the paperwork remotely and deliver a sanitized vehicle right to your home, all at a fair price. Those dealers have a special banner on the site that says “Buy from Home: Have your vehicle delivered to you and complete your paperwork at home.”
Consumer Reports is an independent, nonprofit organization that works side by side with consumers to create a fairer, safer, and healthier world. CR does not endorse products or services, and does not accept advertising. Copyright © 2020, Consumer Reports, Inc.
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