Happy New Year – For New Vehicles

Yes, it really is the new year in the world of car manufacturers. They haven’t  built 2016s for months and, by now, over half of the 2017 have been delivered to dealers.

If you’re in the market for a new vehicle, you have to figure out if it’s deal or no deal in buying a 2016 between now and winter. If you keep your vehicles for a very long time, there may be deals to be had. If you trade more frequently, you could be shooting yourself in the foot – financially speaking.

Here are a few things you have to know:

A new vehicle is defined as one that has not been registered. If you’re buying a 2016, after you take possession, it is actually a one year old model the next day.

Dealers will focus most of their ads, energies, and bonuses on selling off the 2016 models from now until winter.

Dealers cannot return vehicles to the factory. They’re stuck with them to either sell them to customers, to another dealer, or trade with another dealer.

Because of that, in September, almost all manufacturers send dealers a check for around five percent of the invoice value for every 2016 in stock. That money is used to help with advertising, or to allow the dealer to sell it at a great deal and still make a profit.

That means, as late September comes, the deals will get better. But the selection will also get more limited. A deal is not “employee pricing,” or “factory clear out.” Those are advertising slogans. So you’ll need to do some homework.

Here’s why that matters so much: If you’re keeping your vehicle for 10 years, get a great deal on a 2016. Yes, it’ll be 11 years old when you sell it, but that’s pretty irrelevant at that point. If you buy a 2016 and want to (or need to) sell it next July, you essentially have a three year old vehicle: You purchased a 2016, the 2017s have gone a full year, and the 2018s will be out next July. That means you will take a massive loss in attempting to sell it, trying to trade it, or if you need to get it paid from an insurance claim. Yes, it’ll be really low mileage. Yes, you’ve only driven it for less than a year, but the calendar doesn’t lie. Be careful with your purchase decision, and don’t lie to yourself as to how long you’ll keep it!

And before you go car shopping, you HAVE to read the Money Tools (or in the US: Start Fighting Back!) book chapter: Choosing some shiny metal over debt freedom.

One more heads up as it may apply here, but certainly on every financial decision you make: Don’t base your decision on the advice of those who don’t have to deal with the outcome!

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