Mon | Jul 13, 2020

Want a deal on a new car or truck? Buy an ‘old’ model that’s sold as a ‘new classic’

Published:Sunday | May 24, 2020 | 12:00 AM
Interior of the VW Tiguan.
Nissan Rogue
VW Tiguan
Dodge Ram
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Frustrated with the rising price of new cars but don’t want to buy used?

Now you just might be able to find the sweet spot: a new car that is cheaper because it is actually not that new.

Automakers are trying a different approach to the long-standing process of phasing out models and introducing new ones. As always, they are rolling out redesigned cars, trucks, and SUVs to showrooms with new technology and styling. But they are also continuing to make and sell the body style from the previous model year.

That means that customers have a couple of options: They can save thousands of dollars by choosing the previous design, getting a vehicle that might be free of the kinks that often need working out in redesigned models. Or, they can pick the redesigned vehicle with better safety systems and technology that might hold up in value for a longer period.

Case in point: the Ram pickup.

DODGE RAM PICKUP

Fiat Chrysler’s recent decision to continue making the previous Ram – and call it the Ram “Classic” – while also selling a redesigned model – has been a hit. The strategy helped propel the truck past the Chevrolet Silverado for the first time, making it the second-best-selling vehicle in America in 2019 behind the Ford F-series pickup.

The achievement might not have been possible without the strategy of selling an “old” vehicle as “new.”

The Classic Ram is the right choice “if you’re looking for a work truck and you’re less concerned about the bells and whistles”, said George Augustaitis, director of automotive industry and economic analysis for vehicle-shopping site CarGurus, noting that a Classic Ram buyer might “just need something that can tow, that has a strong payload, has a rear bench, and can seat five or six. This is how Ram was able to overtake Silverado in 2019,” Augustaitis said.

Fiat Chrysler, the parent company of Ram, declined to comment because its strategy is competitively sensitive.

The price difference between the older model and the newer model can be significant. In 2019, the average transaction price for the redesigned Ram crew-cab pickup was $50,199, according to car-valuation firm Kelley Blue Book. But the average transaction price of the Ram 1500 Classic crew-cab in 2019 was $43,649.

For shoppers looking for a new vehicle, there are reasons beyond price to consider when buying the previous generation of a new model. They might prefer the older design or prize a reliable track record over newness. Models that have been manufactured for several years typically have fewer bugs than newer models, which can take a while to eliminate, said Karl Brauer, executive publisher of Cox Automotive’s Kelley Blue Book and Autotrader.

While it might sound counterproductive for an automaker to sell the old body style at a discount to the latest model, there’s a good reason for it. The automaker has usually already paid off the factory and engineering investments required to make the original model.

“When you think about it, it makes total sense,” Brauer said. “The cost on the vehicle is much lower than the new one, so every time they sell one, it’s a huge profit margin for them.”

What is more, automakers sometimes like to extend the life of the previous model to sell off excess inventory or to catch a flock of consumers seeking a discount, said Jeff Dyke, president of Sonic Automotive, one of the largest auto dealer networks in the country.

“They’re getting the most out of a consumer that likes the old body style,” Dyke said. “So it actually enhances sales. They’re producing it to ride that wave.”

VOLKSWAGEN TIGUAN

Another recent example was the Volkswagen Tiguan. When VW redesigned the Tiguan in 2017, making it sleeker and larger, the company continued selling and making the previous model SUV for about two years at a significant discount.

The price gap between the two vehicles was more than $5,000 in 2018, according to Kelley Blue Book: an average of $28,068 for the new SUV compared with $22,975 for the Tiguan Limited, which was discontinued after the 2018 model year. The company sold 19,220 units of the Tiguan Limited in the time it was available.

“The thinking behind it was pretty simple: The new Tiguan was bigger and slightly more expensive, so we sold the Limited alongside the new car for anyone who wanted the smaller package,” VW spokesman Mark Gillies said in an email.

NISSAN ROGUE

Further back, Nissan continued making and selling the previous version of its most popular SUV, the Rogue, as the Rogue Select for at least two years while it launched the redesigned version in 2014. In 2015, the price gap between those vehicles was nearly more than $5,000.

“There is definitely that phenomenon where you’ve got a large audience that likes that old body style,” said David Smith, CEO of Sonic Automotive.“And generally speaking, there’s some incentive to buy that older model. Maybe they get zero per cent financing. Maybe the brand-new model doesn’t have that.”

Augustaitis of CarGurus said automakers may want to consider expanding the strategy due to the increasing price of vehicles, which averaged $38,377 in December, up 3 per cent from a year earlier, according to car-research site Edmunds.

“As affordability becomes a headwind, this is something that I think brands are going to have to start looking at” more often, he said.

To be sure, the previous model is often targeted largely at fleet buyers, which include rental car companies, other commercial buyers, and governments.

But savvy shoppers can probably track down the older model. Brauer said the previous-generation vehicles are typically available to retail buyers, too.

“I don’t know if it’s advertised as aggressively,” he said. “But I think if you went to a dealer and you knew and you say, ‘Hey, I know this one’s still for sale, can I get it?,’ they’d probably be like, ‘OK,’ and you’d, hopefully, get some kind of price break.”

–TNS