Are you going to buy a car? Find some useful tips and information below.
Buying for less does not always produce the best results. There are some bargain cars on the market, usually originating in what used to be known as the Eastern Bloc. While bargain cars may seem like an inexpensive way to get a new car, the savings stop there because depreciation is pretty catastrophic.
It’s best to stick with ‘tried-and-true’ car brands which enjoy decent reputations.
Next year’s new car versus last year’s:
Our old friend ‘conventional wisdom’ teaches us that buying a new car at the end of the model year (at some time in late summer or early fall) can yield hundreds if not thousands of dollars in savings on the list price- but there is a penalty to be paid in additional depreciation.
As soon as the next year’s models come out, the previous year’s cars suddenly take a proportionately larger drop in value. In the eyes of the marketplace, a car suddenly goes from being ‘new’ to a year-old when its successor arrives, regardless of the actual date of manufacture or the date at which you began driving it.
The problem is exacerbated in cases where a redesigned or otherwise substantially improved model is released. In a case like this, all models of the previous design ‘generation’ lose resale value another little notch.
This doesn’t mean that one should avoid buying end-of-season cars. It just means that the savings on the list price should be pretty hefty, and you should keep the car for at least three or four years to avoid feeling the financial pinch from its sudden aging by one year at the beginning of its working life.
Buying remnant carpets or discontinued brands of home appliances can be a real money saver. This thrifty tactic applies less handily to cars. Discontinued car models, which come in a variety of situations, are often sold at substantial discounts, but, as was the case with last year’s models, these cars will also depreciate more quickly, reducing the initial savings. If an entire brand of car is discontinued, or if importation has stopped, the depreciation is accentuated further.
Some options help a car depreciate less quickly, making them a sensible choice when buying. Other
options, some of which can be expensive, do little to add value to a car as it ages.
Here are some options which make a car easier to resell, thereby bending the depreciation rules in your favour: an automatic transmission on a family or commercial-type vehicle; air conditioning; a good mid-price sound system; and power steering.
Extras which have no effect on resale value include: larger or fancier wheels and tires; power locks and windows; deluxe trim; vinyl roof; digital dashboard, and other ‘frilly’ things. The proportionately higher price one pays for a top-of-the-line version of a car is also rarely recouped at resale time, unless this model is particularly impressive in style or performance.
While absolutely basic, no-frills models may seem like they would be difficult to resell their depreciation is inevitably less than for a more fully-equipped model.
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