Silly car question #45: should I buy a 'runout' or pay more for the latest model?

Thursday, 4 October 2018

Is it really cheaper and/or less risky to buy the last of an old model car rather than be an early adopter?

Should you buy a 'runout' car or the new model?

Such a BIG question.

Runouts occur when the last stock of a superseded product line needs to be moved because an all-new replacement is imminent.

Plenty of money to be saved on a 'runout' car. But is it a prudent decision in the longer term?

Last-of-the-line specials look tasty. Enhanced specification, reduced price, maybe a finance deal and inflated warranty, perhaps a special edition name and some pretty stickers. Great bargain, right?

**READ MORE:

If you're weighing up one way or the other, know your cars. Model changes can sometimes be extreme.

* Toyota New Zealand's big retail revamp

* Honda delighted about Toyota Drive Happy

Toyota NZ's no-haggle Drive Happy project goes against the discount culture. But it's the exception, not the rule.

* Now you can buy your new Mazda at a mall**

An industry expert, requesting anonymity, suggests caution. At the very least, this person says, do your homework. Understand what's on offer … and what isn't. At the very least, get a clear idea of differences between the current new car and the next version.

Progress is rapid in the car industry and there are big leaps from one model to the next.

It's rare but not unknown for change to be extreme – old Commodore versus new is the best example by far. Yet the just enacted Corolla transition also stands out (fresh platform, more assists, a new engine).

Even with more modest progression, bear in mind this thought. No matter how much glam stuff is thrown at the outgoing model, the new will almost always be better, not least in respect to technology uptake, such is the pace of advancement in that area. A free tow bar is great, but potentially you're going to gain more benefit from active cruise control, lane keep or collision avoidance tech or even simply Apple CarPlay, not lest if these are being added for a small or no incremental price increase.

Argue modern utes are too big and we wouldn't disagree. But base weight for a double-cab Ranger is still under 2000kg.

No, really. It used to be true that brands would up the price significantly when they introduced a new model. No longer. Many are trying to keep the price rise as small as possible, if they raise it at all. Whatever you pay is almost always a lot less than the cumulative value of that extra gear.

Depreciation - the amount of value your vehicle loses each year - wallops regardless of which buying direction you take; the biggest hit coming in that first year of ownership pretty much regardless of what specification you've chosen, how far you drive and what care you take. From thereon, the curve tends to diminish, so if you plan a long length of ownership, it won't hurt as much.

BTW, if you want to minimise depreciation, buy a diesel doublecab one-tonne ute, preferably four-wheel-drive. These hold industry-best resale, not simply because they are hugely popular but also through being the one vehicle type pretty much unavailable as a used import.

If potential residual value is important, think about the initial transaction price. This flavours everything ongoing.

Don't ever confuse transaction price with retail price. We're talking actual cash across the counter. Toyota New Zealand has rocked the scene by introducing 'Drive Happy,' a regime that allows for no discounting – at least on individual sales (it acknowledges fleet deals achieve special treatment) – but every other brand plays the old way.

New vehicle sales are healthy, but does this mean they're commanding top dollar? Nah. Even (non-Toyota) sales kings can be bought for discount.

Our informant conjects there are still more new (and imported used) vehicles here than buyers for them. Record new vehicle registration counts have simply given distributors opportunity to raise sales targets.

So, the pressure is still on and as the end of the month nears, it increases. Sellers who succeed will be rewarded with incentives. Buyers can also get a bonus, in the form of greater chance of negotiating a sharper deal (though at any time assuredly canny buyers are treating stickers purely as conversation starters anyway). Same as it ever was.

The more premium the model and price point, the greater the profitability? The industry says that's over-simplistic. How much extra fat lays with a runout that in all probability is already being subject to a distributor-set special price is an interesting one. The seller is certainly unlikely to tell you, but logic suggests there probably will be some leeway. Anyway, that's their problem, not yours. Make an offer. They'll either accept, or they won't.

The dynamic, of course, changes again if an old model still remains in stock when the replacement has fully settled in. That's when true fire sales can happen. Sniffing out those models can be worthwhile, if you're not picky. Chances are the remnants will be in an unfavourable colour and grade.

Anyway, bear in mind that the discount price that has been publicly advised for the runout is the starting point for the depreciation; not the original RRP.

Turning to buying newest. The plus to being an early adopter is that you'll be first to play with the new toys; you'll look good in the street. But there is risk.

The age-old adage about letting someone else discover the faults remains good advice when it comes to cars. It's not unknown for the very first examples of a new model to be imperfect in quality. Almost certainly the brand will likely move swiftly to effect rectification, but who wants to be an unofficial member of their test team?

Anyway, whether you hold out for the new model or opt for the last of the old, think about what the exact changes will be and how much you absolutely need to have them. Think about long you plan to keep the vehicle.

Always remember to stay in control of the deal. For sure, most salespeople are truly trying to work with you: Don't treat them as an enemy. But neither do they have to be your new bestie. If you lose out, don't sweat it.

Finally, whatever you get, don't buy it in green.