By Car Buying Tips

By Robert Hammer and Stefanie Kelly

Around August of each year, new-model-year vehicles begin trickling into the marketplace. Some do not arrive until the calendar actually changes, but for the most part, by November, last year’s models are no longer available.

Many car-buying consumers find themselves in a quandary during these model-year changeover months. With so many makes, models and options to choose from when buying or leasing a new vehicle, the dilemma of the past year’s vs. the new year’s models can complicate the decision-making process.

Here are some guidelines to help you along if you are debating between a 2001 and ‘02 model vehicle.

The first thing to consider is whether any design aspects of the car will change with the new model year. In many cases, the changes are so minor that last year’s model is virtually identical to this year’s. Buttons and cupholders may be moved or modified, key functionality upgraded, instruments rearranged, etc. But to consumers looking to save money, these factors are relatively insignificant.

Sometimes manufacturers reconfigure options and equipment packages. For example, heated seats and leather were standard in the ‘01 Volkswagen GTI VR6; for ‘02 such features are available only as options. On the other hand, 17-inch rims were optional for ‘01, but are standard for ‘02.

The most significant change for the new GTI VR6 (and the entire ‘02 Volkswagen line) is the factory warranty. Previously two years/24,000 miles, it has been extended to four years/50,000 miles. This change, though invisible, is a huge selling point for the ‘02 vehicle, which nonetheless looks and functions exactly as the ‘01 model did.

The new Honda Odyssey, on the other hand, has two important design changes: the engine, which previously offered 205 horsepower, now boasts 240 horsepower; and its formerly four-speed automatic transmission is now five.

A few other examples: the ‘02 Audi A4 will have a completely restyled body, as will the new BMW 7-series. In the latter case, there are now huge savings on ’01s; dealers need to clear out their inventories to make room for the ‘02 models, which will sell for $10,000-15,000 more than the current 7-series. Finally, Mercedes-Benz will release new E-class vehicles, and its SL-class will feature a retractable hardtop similar to the new Lexus SC430.

However, if the differences between the new and previous models are not significant enough to sway you one way or the other, ask yourself how long you plan to keep your new car. If it will become a family heirloom passed down from generation to generation until it turns to dust, depreciation and resale value won’t matter to you. In this case, you will benefit from manufacturer rebates and other incentives that make the previous year’s model a terrific deal.

The newer model will always have a better resale value, generally $2,000-3,000 higher than its predecessor. So if you expect to sell the car within a few years, consider this advantage against the higher initial price tag.

It is worth noting that if you will be leasing rather than buying, lease rates generally are significantly lower on last year’s models during late summer and early fall. For example, during the month of August, effective interest on BMW lease rates ranged from just under 5 percent to around 6 percent on ‘01 3-series sedans and coupes. Dollar-wise, total payments for consumers who lease ‘02 3-series vehicles will be thousands more.

Regardless of the factors that will affect your decision-making process, one way to ensure you make a smart decision is by enlisting the services of someone like an auto broker who sells every make and model vehicle and will give you unbiased guidance. This will guarantee you access to insider information such as dealer incentives (different from consumer incentives), also known as dealer cash or trunk money, which represent added dealer profit. If applied in your favor, these programs can save you even more money on your new vehicle.

Hammer and Kelly are associated with Hammer Auto, a new car auto broker in Palo Alto. For more information, call 813-6100 or visit the Web site at www.hammerauto.com.