With hefty rebates and incentives on 2011 model cars, it may be very appealing to buy a new car that is essentially last year's model, but it may not actually be the best choice for your wallet in the long run. Part of the reason automakers offer great car deals on these autos is they are depreciating while they sit on the dealer's lot. Most people understand a brand-new car depreciates the moment it is driven off the lot, but a new car that is last year's model essentially depreciates faster initially because it is already considered to be one year old in terms of book value.
If you are someone who owns your cars for a very long time, the depreciation doesn't matter much to you. By the time you are ready for a new car your old car isn't going to be worth much anyway. However, if you are like the average American who buys a new car every three years, think carefully about buying a 2011 model. Your car will be valued at four model years old when you're ready to sell -- even though you will have only driven it for three years.
Two other factors that affect end-of-year car deals are whether the car has been recently redesigned and its overall rate of depreciation. Cars that have undergone a major redesign for the current model year are worth even less in the previous model year because they are considered less desirable and more difficult to sell. They're not the hot, new model with the latest upgrades. Some car brands and models hold their value better, and therefore depreciate more slowly than other brands. This rate of depreciation can be an advantage or disadvantage to your wallet, depending on your choice. The depreciation rates can be found in the cost of ownership section for any new model at a third-party automotive information website.
To determine if buying last year's model is financially smart, first check the depreciation rates for the cars you are considering by using a third-party automotive information website. That site also will note if the car has been redesigned for the 2012 model year. Next use Bankrate.com's car rebate versus low-interest calculator to compare all the cars you are considering to see which offer is the better deal. Don't forget to compare both the 2011 and 2012 models. Finally, use Bankrate.com's auto loan calculator to compare all the cars to see the best car deals.
Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use .
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