This Week in Car Buying: End of the Model Year Closeouts

Although it doesn’t attract the same level of attention it had once when dealerships would paper over their windows in advance of new model debuts, the 2015 model year officially got underway Oct. 1. Though there was little hoopla, the date is significant in that the first 9 months sales are tallied and the start of the new model year means that closeouts of 2014 cars and trucks begin in earnest…especially for those models about to be replaced by all-new or significantly facelifted versions.

Through the first three quarters of 2014, the U.S. industry retailed 12,436,885 vehicles, according to Automotive News, up from 11,790,337 a year earlier. Analysts have automakers on track to crack more than 16 million new vehicle sales this year, a level not seen since the industry meltdown in 2008 as a result of the financial crisis. As demand heats up and manufacturers continue to ramp up capacity, there is a growing concern that there could be an oversupply in the new car market, which could lead to costly incentives. However, most programs in place are being used more for clearing out the 2014s rather than trying to pump up volumes of the new 2015 models.

What to shop

If you’re looking to find a deal, there’s a number of outgoing 2014 models that are carrying cash incentives ranging from $3,500 to as much as $6,000. Chief among them is the 2014 Ford Expedition, which has that $6,000 cash payment. A facelifted version of the truck is now just beginning to make its way to dealerships. The appearance changes and product upgrades are not as major an overhaul as say the new 2015 Mustang over the 2014 model, so this deal is pretty attractive. KBB’s Fair Purchase Price for a 2014 Ford Expedition XLT is $40,424.

Speaking of Mustang, if you can live with the old car’s look, the 2014 V-6 model is being cleared out with a $3,000 cash back program. The only problem is that the car will look dated once the sharply styled 2015 models make it into customer hands in significant numbers. For those interested in the Nissan Maxima and Murano, both vehicles will soon have major redesigned bowing, so the older models are pretty much in the same boat as the Mustang. Nissan is offering up respective cash back deals of $3,500 and $4,500 on Murano S AWD and Maxima S models. Chrysler will show a facelifted version of its 300 full-size sedan at the Los Angeles Auto Show in November. The automaker has a $4,250 rebate going, along with a $3,500 spiff on the 2014 Dodge Challenger SXT, which doesn’t look that much different than the updated 2015 model. A bigger facelift was adopted on the Charger 4-door sedan.

Also: The Class of 2015 — New Vehicles Ready to Roll

Used Teslas on Tap

Tesla has become the latest manufacturer to jump on the Certified Pre-Owned (CPO) bandwagon, expanding its business model to include the remarketing of trade-in and off-lease Tesla EVs. With the Model S nearing the end of its third year in the market and new entries like the Model X and Model 3 coming, the automaker is expecting to see some vehicles coming onto the second-hand market and is looking to use these vehicles as a way of bolstering sales at its factory-owned outlets. 

While the actual workings of the program are still being ironed out, other questions remain. A big one is whether the upstart EV maker, which is challenging franchised dealer laws in several states to support its factory-owned dealership model, can get licensed in states to sell used cars. Still, just like its competition, off-lease and trade-in vehicles can provide a reliable supply of high quality used cars that may be used to introduce new buyers to the brand.

Would you buy a new car from this man? 

Even as Elon Musk is challenging the traditional franchise dealer system, another well-known businessman, Warren Buffett, figures if you can’t beat them, join them. The so-called "Sage of Omaha" recently purchased the family-owned Van Tuyl Group of new car dealerships for an estimated price of $4 billion. 

The group, rechristened Berkshire Hathaway Automotive, will have 78 stores representing some 28 brands throughout the Midwest and Sun Belt. According to Automotive News, last year Van Tuyl sold 130,447, making it the nation’s fifth largest dealer group. The top retailer, AutoNation, sold nearly 300,000.

Interest rates tick up

After several stable weeks, the interest rates on new car loans increased slightly by 2 basis points to 4.04 percent on 60-month loans, 3.99 on 48-month contracts and 3.96 on three-year deals, according to www.bankrate.com. The website added that rates went up more dramatically on used car loans, with 36-month contracts increasing .14 percent to 4.87 and .15 percent to 4.94 for 48 months.