In the past, people tended to avoid buying year-end cars. The logic goes like this - a car registered in December 2015 is valued as a year 2015 car – with 11 months’ worth of depreciation factored in. The same model that's manufactured and registered in January 2016 however, is valued as a 2016 car, and has a much higher resale value, even though the two cars are registered just two months apart.
Others might tell you to avoid buying older models that are being phased out, and that it’s better to wait for an upcoming new model.
Those are not incorrect advice but the car market today is very different from 20 years ago, so the car buying habits of our fathers may not be so relevant today.
Competition has intensified, and higher prices of cars also meant that people are holding on to their cars longer. The advent of the Internet also means that dealers no longer have an exclusive hold over information on upcoming new models.
Buy Between The Months Of November And March
I myself for example, managed to haggle for a huge discount, for a brand that don’t usually give discounts (at that time at least) simply because I managed to locate a dealer who was getting a bit too jittery about keeping a November 2012 car in his lot when the calendar is already showing March 2013.
Considering that people are keeping their cars longer than before, it makes more sense to take advantage of immediate savings today rather than worrying about the differences in resale value seven or ten years down the road. Plus, differences in real terms are not that big once you factor in inflation, compounded over the years that you plan to keep the car.
Most car brands will start offering attractive promotions at year end, often using Christmas as an excuse. This is the time when dealers are competing with each other to hit their annual sales targets, and are willing to sacrifice a bit more of their margins in return for some attractive incentives for top performing dealers.
Typical offers include free maintenance for two or three years, low interest rate, and low downpayment. Of these, low interest rate, sometimes dropping below 1 percent, is usually the best option as it saves you a lot of money in the long-term. Promotions for free service and low downpayment don’t amount as much, usually totalling less than RM5,000.
If you are given a free maintenance package, do check what’s included in the package. Some companies cover both parts and labour while others cover only for parts. Consumables like wipers, brake pads, and batteries are usually not included.
But the biggest discounts are usually given between January and March, where some dealers might be desperate to unload whatever unsold stocks carried over from last year.
If a model can’t be sold during the Chinese New Year sales campaign – which usually happens in the first two months of the year, selling it in later months is going to be even more difficult. March, which is this month, is the best time to hunt for unsold stocks carried over from the previous year.
Buy Run-out Models
A run-out model refers to models that are being phased out in preparation for a new model. So why would you want to buy an older model when you can get a newer model? Well, it’s all about the money. Everything has a price.
There are pros and cons about buying run-out models. The most obvious downside is that your neighbours won’t be that impressed with your new ride.
On the upside, dealers usually throw huge discounts for run-out models. Run-out models, by virtue of them being in production for several years already, tend to have less problems than the newer models that are being phased in.
Over the years, the run-out model’s manufacturing processes would have been subjected to multiple improvement exercises to iron out most common complaints. Recalls would have been initiated, service campaigns would have been carried out to fix whatever that was not right.
Understandably, car companies usually don’t want to admit this but new models in the first year of their model life tend to have the most quality issues, and that’s just the way the manufacturing industry is. No matter how careful or meticulous a company’s quality control processes are, there will always be some hiccups in the initial stages.
A new model always involves new components, new assembly and manufacturing processes, and hiccups are to be expected.
No two models manufactured in two different years are exactly the same even though they might look identical. Every car company will introduce so-called ‘running changes’ on all their models from time to time, as part of their continuous improvement exercise.
An additional padding might be installed behind the dashboard because it reduces rattling, a wire harness’s clip might be changed because it resists heat better, the specifications of a brake rotor might have been upgraded because the previous one simply judders too much, etc. etc.
So a wise car-savvy person might sometimes chose an older but proven, heavily discounted model instead of the flashy new model that everyone is talking about and paying full price for.
If you regularly follow car websites like ours, you will have a rough idea of what’s coming this year and time your purchase accordingly. Here’s a list of new models that are launching in 2016.
It is not uncommon for some dealers to sell both new and old models side by side, as they might not be able to clear their stocks fast enough. Such units will usually have the highest discounts. Do a bit of homework, make some calls, check the listings on Carlist.my, and you might be lucky to come across a dealer desperate to clear his stock.
The down side to buying such cars is that you usually don’t have a choice in terms of colours or accessories package. It’s usually a case of “This is the discounted price, take it or leave it.”
Buy Run-out Models of Facelifted/Updated Models
Going one level up from the previous tip, the best models to buy are usually those which are due to be replaced by an all-new model soon.
In automotive lexicon, the lifecycle of a car goes like this. There is the launch model – the first in the all-new/new generation model, followed by a facelift model in 2.5 to 3 years later, before it is replaced by another all-new/new generation model in another 2.5 to 3 years time.
A facelift model is a model from the same generation, but has received some minor stylistic, and sometimes technical updates to refresh the car – the headlights and taillights might be changed, bumpers might be different, engine and transmission might have a better software that makes it more fuel-efficient, convenience features might have been upgraded, but beneath the metal panels it is still largely the same car.
Run-out models of these facelifted models usually benefit from the most improvements – combining technical updates added during the facelift/update timing, plus other improvements in manufacturing processes over the model’s five to six years lifecycle.
The highest discounts are usually given when a model is about to be replaced by an all-new model.
For some premium models, discounts may amount up to RM30k.
With the Internet democratising information, it is very easy to find out how the next model is going to look like and form a reasonable conclusion on whether do you like the upcoming all-new model or not, and weigh it against the discounts that are offered to you.
However do make sure that the website or article that you are reading refers to the same model that’s coming here. A Volkswagen Passat in the USA is not the same as Passat sold in Europe or Malaysia. So is a Japanese/European market Toyota Corolla. They might share the same name but are in fact, totally unrelated cars.
Buy Pre-Registered or Pre-Owned Cars
This is especially true for premium cars, which don’t retain their value as much as say a Perodua Myvi. So why buy new and lose so much money on the car when you can get an almost-new, 6-month old pre-registered, or an 18-month old pre-owned unit, at a much lower price, while retaining all the privileges of a new car – manufacturer’s warranty included.
Pre-registered cars are essentially brand-new cars except on paper. They usually have no more than 100 km on the odometer (some driving for pre-delivery testing and delivery is inevitable), and are registered under the dealer, but are not yet sold to anyone. Dealers do it for various reasons, but mainly to bump up their sales figures.
Pre-owned cars are usually ex-demo units, and sometimes company cars given to their staffs. These are usually no more than 18 months old, have about 10,000 to 20,000 km mileage on it. Some units are used cars traded-in by a customer, and naturally these will have the highest mileage (but also the lowest price).
Pre-registered/pre-owned cars, irrespective how old or how new they are, are classified as used cars (your name will appear as the second owner on the vehicle’s registration documents). As Malaysia’s auto financing structure slaps higher interest rates on used cars, this would mean higher interest rates for a pre-registered or pre-owned car.
However many reputable dealers are usually able to negotiate with the bank to offer you with a lower interest rate loan, comparable to rates offered to new cars, so long as the car is less than 6 months old.
Some premium brands side-step the issue altogether by offering their own financing plans – BMW Credit and Mercedes-Benz Financial are two of such examples.
In conclusion, your dream car is actually not as expensive as what you might think. Good bargains are available to those who know what they want, and are prepared to wait and do a bit of homework.
Time your purchase between November to March. If possible, buy a facelift model but not in the first year of its launch. If you don’t mind, buy a model that is being phased out, shortly before an all-new/new generation new model is launched.