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Re: Cost difference new versus demo/used? Posted by Mike Lynch [Email]  (#81) [Profile/Gallery]
(more from Mike Lynch) on Tue, 13 Jan 2009 15:34:22
In Reply to: Cost difference new versus demo/used?, steve, Tue, 13 Jan 2009 12:38:35 Members do not see ads below this line. - Help Keep This Site Online - Signup |
Normally a stealership doesn't depreciate a demo. That as you'd think they'd write the cost down to reflect the use, but they don't. So on a cost basis a demo cost the same as a brand new one. They'll steer a skinny deal towards the demo, but will likely take similar money for a brand new one. Most demos are well treated by admin and executive folks.
So a demo isn't usually any kind of a steal or anything for the wise shopper. For leasing demos are usually worse than brand new cars as you have to deduct from the residual for the existing mileage.
Leftovers are another interesting scenario. Often end of year or 4th quarter incentives are way greater than the January leftover incentive. Often a cars warranty clock will be started and the car declared sold to reap an especially large 4th quarter incentive that expires, even though the car is quite new and un-driven.
Leasing a current model is always a lower payment than a leftover because of the stronger residual values and normally leasing last years car is just flat cut off after Dec 31st.
As for purchasing, it's surprising how close you can get a current model pricing compared to leftover pricing. Certainly greater than the first year depreciation, that is by the Blue Book it always pays to get the newer car, even for somewhat more and certainly for only a little more. Leftovers, like demos, aren't necessarily cheaper, but the dealer markets them as if they were and steers the price challenged customers that way.
Buying a leftover/demo can make sense sometimes when total cash outlay or budget make the lefto/over or demo the only alternative.
And new versus used? I would note that a car depreciates almost as much in real dollars in the second three years, years 4,5 and 6 as it does the first three years, 1,2 and 3. A 3 year old car goes from $30k retail to 15k wholesale, is resold for $18k as a CPO and is worth only $4k when it's six years old and has 100k, and is tough to sell. $15k for the first three years and $14k for the next thee years. It shouldn't be that comparable. A car that costs half as much should only depreciate half as much, but it ain't so in my experience.
Just my 2 cents.
, Tue, 13 Jan 2009 15:34:22 <-- Viewing This Message
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