When new cars are unveiled, prices can fall on old models

By Tom Krisher
AP Auto Writer

DETROIT (AP) - When auto companies roll out exciting new models like they did at last week's New York auto show, the unveilings can sometimes push down the price of cars already on sale.

Usually the immediate impact is small, according to industry analysts, but the deals can get a whole lot better once the new models hit the showrooms and the automakers try to clear the old models from dealer lots. And the extent of the impact depends on whether the latest models are significantly more appealing than the old ones because of new features or styling changes.

Last week in New York, Honda unveiled a new Civic compact that looks like a European sports car, and Chevrolet showed off a new Malibu midsize car that looks like a coupe, with more legroom better gas mileage and other features that one-up the current model. Analysts say it's too early to tell if prices will drop on the current Civics and Malibus.

Car buyers recognize the value when there's a major redesign if it's feature-rich, said Alec Gutierrez, senior analyst with Kelley Blue Book.

Here are some questions and answers about what to expect when new models are introduced:

WHEN NEW CARS ARE UNVEILED, DO PRICES IMMEDIATELY FALL ON EXISTING MODELS?

This varies by whether media coverage of the new model is unexpectedly positive or negative, and by how well automakers manage their inventories during the year, says David Wagner, senior manager for analytics with the NADA Used Car Guide. If publicity is good and customers are excited, then values on outgoing models can fall. But the decline usually is small, around 2 or 3 percent in the first several weeks of media coverage. Higher inventories also can reduce prices.

Wagner saw prices fall a small amount after recent redesigns of the Honda Accord, Ford Mustang and Ford F-150 pickup truck, all of which made great improvements or added features to the vehicles.

Hyundai's Elantra compact was dramatically improved in 2011 with sleeker looks and far better performance, said Gutierrez. With such a big change, he watched the values to see if the old model would plummet. But the price decline was very small, far less than he expected, he said.

WHAT ABOUT LATER, WHEN NEW MODELS GET TO SHOWROOMS?

All automakers discount outgoing models in late summer and early fall to clear room on dealer lots for new models. Typically, those discounts run 2 to 4 percent off the sticker price as the new cars arrive. But the big deals come later in the fall, especially if the automakers are having trouble getting rid of the year-old models. Then the discounts can go as high as 5 or even 10 percent if new models are significantly better than the old ones, according to analysts.

The lower prices can often entice people to buy the outgoing model even if the new one is much better.

"In the fourth quarter, that's where you're going to see that 5 to 7, upwards of 10 percent that we typically see," Gutierrez said.

Wagner says the price cuts late in the fall often come on vehicles that have "uncommon colors and configurations" that remain on dealer lots.

WHAT ABOUT MALIBU AND CIVIC, WITH NEW GENERATIONS THAT APPEAR TO BE GREATLY IMPROVED?

It's too early to tell if the debuts in New York last week had an impact on values of the current models. The Malibu already was being deeply discounted to keep it affordable against heavy competition from other midsize cars, Gutierrez said.

"It's unlikely we will see a dramatic impact for either vehicle," said Wagner. "We may see a small drop in prices for the 2015 model year over the next few months, but in general, the excitement or lack of excitement for these outgoing models is already built into their prices."

HOW CAN I CHECK TO SEE IF PRICES ARE DROPPING?

Websites such as www.kbb.com , www.nadaguides.com or www.truecar.com and www.edmunds.com show invoice and sticker prices for new vehicles, and some calculate true market prices. Go to each of the sites for details.

Published: Fri, Apr 10, 2015