I spent a lot of time during last Saturday's (August 17th, 2019) opening segment of the second hour of the national CarPro radio show about the fact that all used cars will begin to drop in value towards the end of this month and the beginning of September.
You can listen here:
Many people don't realize that your vehicle's anniversary and its birthday are different. I will explain the difference, but more importantly, how it affects you and your pocketbook.
Anniversary vs. Birthday
The anniversary part is simple. Just like all anniversaries, it is the month and day the car became yours, that magic moment when you were handed the keys. Odds are, you won't have the same car anniversary as your friends and relatives, so it will be a unique date to you.
However, everybody shares his or her car's birthday. In fact, I am thinking it should be a national holiday! Seriously, in mid-August through mid-September, every car in America will have a birthday and turn a year older, and it has nothing to do when it was purchased or acquired. It is not an overnight thing, auction prices will start to drop this week and continue to drop until the market adjusts itself by the middle of September.
August Marks Model-Year Turnover
For as long as I have been in the auto industry, mid-August is the model-year changeover. It is true that every single car in America turns a year older all at the same time. As an example, today a 2017 model car is two years old because as of now, it is still considered to be model-year 2019, but very soon, that 2017 car will suddenly become three years old. Again, when it was bought is not relevant.
As you might suspect, when your car does become a year older, it depreciates and loses value. In about a month, auction values will have fallen, the online sites' values will drop, and dealers will lower prices on the cars on their lots for sale. By the middle of September, the used car market will have adjusted itself down to account for every car being a year older.
If you happen to be in the market now for a new car and have a late-model trade-in, it can cost you hundreds or thousands of dollars to wait until the fall season to buy. I talk to people about this time every year who wait, and they just can't understand why their vehicle is worth so much less in late August than it was in late July. Unless you have inside information like this, it would be hard to comprehend the big drop in value that occurs virtually overnight.
A lot of people, too, are used to buying a new vehicle in the fall due to larger incentives on new vehicles, but I can tell you now, that may not be the case. Incentives are larger already this year than in the past five years, so they may not increase in September, even on the 2019s.
The newer your trade-in, the higher the depreciation this time of year. With that said, if your vehicle is five years old or more, the drop in values starting in mid-August is minimal.
Timing is everything when making a major purchase and these factors should be considered when you are thinking about a new vehicle.