Is That 2005 Vehicle Really A Deal?

[Lexusfreak]

Got this from CNN....

Is that 2005 car really a deal?

Sometimes buying an outgoing model year just doesn't pay.

NEW YORK (CNN/Money) - You can still find 2005 models at many car dealerships even as 2006 models start rolling in -- and you'll be offered some great-sounding deals on those 2005 cars.

In many cases, though, you may actually be better off paying more for the 2006.

Those 2005 cars aren't always as great a deal as you might think, especially when you look at the long term.

The reason is that when the time comes to trade in that car or sell it, you'll be selling a 2005 instead of a 2006. That extra year will cost you real money.

If the car has been substantially redesigned for 2006, the financial hit will be even bigger since the car will look "out of date" at a glance.

If you're going to keep the car for more than five years, though -- about the length of time before there will likely be another major redesign -- that changes the equation.

That's because the difference between the used-car price of a 2005 and a 2006 model five years down the road will be negligible.

Generally speaking, the purchase price of an outgoing model-year car will drop 5 to 8 percent after a new model-year version comes out, if there are no major design changes, said Jesse Toprak, pricing director for automotive Website Edmunds.com.

If there's been a big redesign, the price drop will be more like 12 percent, he said. (Edmunds.com is a partner providing automotive data and tools for CNN/Money.)

But that steep price drop should tell you something. The outgoing model-year car really is worth less, at least in the relatively near term.

Guidelines

Scenario one:

You: Short-term owner -- you'll probably keep the car for less than five years.

Car: Redesigned for 2006: For example, Volkswagen Jetta, Hyundai Sonata.

Best Move: Take the 2006 version even if it costs more since you're likely to get more for it at trade-in time.

Scenario two:

You: Long-term owner -- you'll probably keep the car for more than five years.

Car: Redesigned for 2006: Volkswagen Jetta, Hyundai Sonata.

Best move: Buy whichever you like better, since the resale value difference will probably be minimal by that time. Be aware of improvements in the 2006 version that may actually make that car worth more, though.

Scenario three:

You: Short-term owner

Car: Not redesigned for 2006: For example: Chrysler 300, Honda Element.

Best move: Only a really huge discount on the 2005 model will make that car worth it to you. Otherwise, the fact that it's a year "older" will cost you more at trade-in time than you'll save on the purchase.

Scenario four:

You: Long-term owner

Car: Not redesigned for 2006: Chrysler 300, Honda Element.

Best move: Take the deal on the 2005 model. You're saving money.

[lexus411]

If you were buying a used ES and there was a 2002 with 36,000 miles and a 2003 with 36,000 miles everything else is equal, The resale value is pretty close because of the left over car has a years less miles.

[JeffR]

The ES hasnt changed its body design. The bummer for me is up until this year, my 2001 GS300 could have been mistaken for a 2005. But now they have totally redesigned the GS, instantly making my 2001 look old and outdated. Its a pitty too, a more subtle evolution might have spared my resale value a little, not that I plan on selling. The GS is now radically redesigned, enough so that the 2nd generation is barely recognizable as the 06's predecessor. If I was looking to buy a GS right now, there's simply no way I would pass on the new design.