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Should I Buy a New Car That's Two Years Old?

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author photo by Doug DeMuro January 2017

Hello, readers of Oversteer, and welcome to a new round of Ask Doug, where you "Ask Doug" various automotive-related questions, and Doug provides an intellectual, thoughtful reply stolen directly from Wikipedia [1].

If you'd like to participate in Ask Doug, you can! Just send me an email at OversteerDoug@gmail.com or send me a note on my Facebook page. I will be equally excited to read your remarks in either place -- though if you send me a Facebook message, there's some chance I will look at all your pictures and judge your political beliefs.

Anyway, today's letter comes from a reader I've named Peter. Peter writes:

Doug,

So it's 2017 now. And I curiously went on Autotrader today and found thousands, literally thousands, of NEW cars from the year 2014 and 2015. Like 11,955 matches of brand new vehicles that are already 3 years old in some cases. What are the pro's and con's of buying a car from this category?

Peter

This is an excellent question, Peter, and I'm happy to answer it to the best of my ability [2].

Here's the situation: Many of those cars were likely sold long ago, but they remain on Autotrader because they were offered by dealers who don't do a very good job of inventory management. This is just a reality of a site like Autotrader, where you have ten zillion listings from thousands of dealers: Some won't do so well at keeping it current. It's the same reason why your aunt's Facebook page still says she works for Big Jim's Scotch Tape and Legal Pads, even though Big Jim closed up shop several years ago to sell plush dolls of Donald Trump.

I'd say this probably accounts for at least a thousand or two of these listings. But what about the rest?

Well, Peter, hard as it is to believe, these are cars that are still completely unsold. Yes, there are cars out there that have celebrated a birthday in dealership inventory -- and they'll probably remain sitting there, for one reason or another, for a while still.

In many cases, these cars are probably "sold," according to automaker inventory listings. What happens is, automakers will give dealers huge financial incentives to mark a car "sold" at the end of a month, or a quarter, or a year, or whatever, so dealers will do it -- and automakers will mark these cars as "sold." But the dealer hasn't actually sold the car; they just told the automaker it was sold in order to get the bonus payout.

Considering that this is all on paper, it shouldn't really matter to the consumer -- except for one little issue: Once the dealer marks the car "sold," the warranty starts. This is usually no problem if the dealer actually sells the car to a retail customer the following month, or the month after, but the problem snowballs over time. If the car has been sitting on the dealer lot for six months with its warranty clock ticking, nobody's going to want to buy it. If the car has been sitting on the dealer lot for two years, the warranty is almost over -- and that means really nobody is going to want to buy it.

Now, a really good dealer will respond to the automaker's financial incentive with some incentives of its own. If the automaker gives a BMW dealer $10,000 per car to sell all 2015 6 Series Gran Coupes before December 31, 2015, for example, a smart dealer wouldn't just take the $10,000 per car and cackle a bit. Instead, they'd offer maybe $3,000 to any salesperson who manages to unload one of these aging Gran Coupes. The dealers with leftover 2014 and 2015 models probably didn't do enough of this.

Or maybe they did.

In some cases, there's just no way to sell a car, regardless of the warranty start date, or of how many incentives a dealer gives its sales staff, or how much the automaker pays the dealer. It's a bad car, or a bad color, or a bad equipment group, or whatever. It just won't sell.

And then, that brings us back to the title -- and back to Peter's question. Should you actually consider one of these things?

Here's the deal, Peter: These cars are absolutely perfect for car shoppers who like to keep their vehicles for a long time. If you're keeping your car for 12 years, or 15 years, why do you care if it's a year old? It's not like you're especially interested in getting the latest and greatest model anyway. Granted, they've been sitting a long time -- but assuming the warranty hasn't started yet (CHECK IT!), they can provide enormous cost savings. After all, the dealer's only other option once a car has been on the lot for a year or longer is wholesaling it. So if they can get even a penny more from you than they can from the wholesaler, they'll be happy.

For many shoppers -- the ones who trade cars every three years and want a brand-new design -- the forlorn car sitting in the corner of the lot for 10 months isn't the right choice. But for some drivers, it really can make for a great purchase -- and a great deal.

Doug DeMuro is an automotive journalist who has written for many online and magazine publications. He once owned a Nissan Cube and a Ferrari 360 Modena. At the same time.

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This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
Should I Buy a New Car That's Two Years Old? - Autotrader