Auto makers trim their line-ups
The auto sector is experiencing continuing tough economic conditions. The auto industry will have to come out the other side with a new look, and a new approach to doing business. How cars are made and sold isn’t going to revert to older habits. In reaction to this, many auto makers like GM and Honda are cutting low margin or poor selling models and lines to better define and strengthen their market positions. GM snuffed Pontiac, for instance. Honda stopped making the S2000 roadster, and other automakers are following suit with similar models.
Clearance sales aren’t always great discounts
Normally, retail clearance sales of discontinued items can be great buys. The deep discounts create enough value to justify the purchase. However, cars are a bit more complex in how they fit into the sales model. Cars have to retain residual value, or how much they are worth for future resale, to be good investments. Discontinued car lines have a difficult time holding their residual market value because of a lack of demand and a lack of replacement parts and available service and warranty options. Once a discontinued model is out of the mainstream, few people are interested in buying an old model. Combine that with the other difficulties in parts and service and you end up with very little value in the market.
How to tell a good deal from a bad one
The key to determining which discontinued models are the best deals is good solid research. There are several places one can look to find out what the analysts see as the car’s future value. KBB.com, U.S. News’ car ranking site and Edmunds.com are a few good places to find out valuable information on how much the car is worth. These sites have valuable information about cars, such as quality and reliability, that affects resale value. Remember, residual value only matters if the car is going to be re-sold or traded in. If a person is planning on keeping the car for a long time, residual value might not be a factor. The car will not be worth much of a percentage of its original value anyway.
Reselling or no reselling
The buyer has to have a plan in place before making the decision to buy a discontinued car model. If the idea is to keep the car long term, residual value isn’t much of a bother, but warranty and service are. Ask the dealer if the warranty will be honored if the model is ever discontinued. Also, ask if the warranty can be extended afterward. Some parts are universal for many cars, but one must ask themselves if the parts will be available years down the road. If the buyer’s plan is to get a bargain price and then re-sell or trade in the vehicle, residual value comes back into play. Regardless of the plan, research plays a big part in providing reliable information the buyer can use to get a great deal.
