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Is that 2005 car really a deal?
Sometimes buying an outgoing model year just doesn't pay.
September 29, 2005: 12:59 PM EDT
By Peter Valdes-Dapena, CNN/Money staff writer
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NEW YORK (CNN/Money) - You can still find 2005 models at many car dealerships even as 2006 models start rolling in -- and you'll be offered some great-sounding deals on those 2005 cars.

In many cases, though, you may actually be better off paying more for the 2006.

Those 2005 cars aren't always as great a deal as you might think.

The reason is that when the time comes to trade in that car or sell it, you'll be selling a 2005 instead of a 2006. That extra year will cost you real money.

If the car has been substantially redesigned for 2006, the financial hit will be even bigger since the car will look "out of date" at a glance.

If you're going to keep the car for more than five years, though -- about the length of time before there will likely be another major redesign -- that changes the equation.

That's because the difference between the used-car price of a 2005 and a 2006 model five years down the road will be negligible.

Generally speaking, the purchase price of an outgoing model-year car will drop 5 to 8 percent after a new model-year version comes out, if there are no major design changes, said Jesse Toprak, pricing director for automotive Website

If there's been a big redesign, the price drop will be more like 12 percent, he said. ( is a partner providing automotive data and tools for CNN/Money.)

But that steep price drop should tell you something. The outgoing model-year car really is worth less, at least in the relatively near term.


Scenario one:

You: Short-term owner -- you'll probably keep the car for less than five years.

Car: Redesigned for 2006: For example, Volkswagen Jetta, Hyundai Sonata.

Best Move: Take the 2006 version even if it costs more since you're likely to get more for it at trade-in time.

Scenario two:

You: Long-term owner -- you'll probably keep the car for more than five years.

Car: Redesigned for 2006: Volkswagen Jetta, Hyundai Sonata.

Best move: Buy whichever you like better, since the resale value difference will probably be minimal by that time. Be aware of improvements in the 2006 version that may actually make that car worth more, though.

Scenario three:

You: Short-term owner

Car: Not redesigned for 2006: For example: Chrysler 300, Honda Element.

Best move: Only a really huge discount on the 2005 model will make that car worth it to you. Otherwise, the fact that it's a year "older" will cost you more at trade-in time than you'll save on the purchase.

Scenario four:

You: Long-term owner

Car: Not redesigned for 2006: Chrysler 300, Honda Element.

Best move: Take the deal on the 2005 model. You're saving money.

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