Do Discontinued Cars Make Used-Car Bargains?

2010 Mercury Milan;

If you're shopping for a used car, discontinued models could offer extra savings. A  handful of cars are canceled each year due to slow sales, regulatory hurdles or other complications. Two years ago, we predicted the casualties correctly in six out of 10 cases, at least eventually, as cars like the Honda Crosstour, Nissan Cube and Volkswagen Eos headed (or will head) to pasture.

Related: Prediction: 10 Cars We Think Won't See 2016

A cancellation can mean bigger savings on the used market for a car that fell out of vogue, but certain discontinued cars may actually hold their value better. Our analysis suggests that either trend is possible, depending on the car, but all other things being equal, discontinuation is more likely to signal faster depreciation.

What We Did

We looked at corporate platform siblings where one car was discontinued and the other lived on, either in its current generation or through a redesign. That gave the best possible scenario of how a given car "should" have depreciated had it not bit the dust.

We took the final model year of a discontinued car and compared 24-, 36-, 48- and 60-month residual values from data provider ALG to those of the model's sibling car from the same model year. So, for example, we looked at the discontinued Mercury Milan sedan for 2011, its final model year, and compared residuals to the Milan's corporate sibling, the Ford Fusion, across comparable equipment and trim levels for 2011. (Mercury was a Ford subsidiary until Ford shuttered the brand; the Fusion is still around today.)

For cars with enough used-car examples, we also observed Cars.com's average used-car listing prices from one to two years after discontinuation. In the Milan example, we analyzed the change in used-car prices from the beginning of 2013 to the end of 2013 for used 2011 Milans, and we compared those prices in the same time frame to the 2011 Fusion.

Data wasn't available from Cars.com and ALG for every car, but here's what we found.

  • The Milan (versus the Fusion) depreciated faster in both used-car listing prices and projected residual values.
  • The Mercury Milan Hybrid (versus the Ford Fusion Hybrid) depreciated faster in projected residual values.
  • The Mazda Tribute (versus the Ford Escape) depreciated faster in projected residual values.
  • The Pontiac G5 (versus the Chevrolet Cobalt coupe, later redesigned as the Cruze) depreciated faster in projected residual values.
  • The Pontiac Torrent (versus the Chevrolet Equinox) depreciated faster in both used-car listing prices and projected residual values.
  • The Saturn Outlook (versus the Chevrolet Traverse) depreciated faster in used-car listing prices.

How much faster those cars depreciate — and how much used-car shoppers can save — depends largely on the model year and when you shop. It's important to note that a large minority of discontinued cars in our analysis did not depreciate as fast:

  • The Buick Lucerne (versus the Cadillac DTS, later redesigned as the XTS) depreciated slower in used-car listing prices and projected residual values.
  • The Chrysler Aspen (versus the Dodge Durango) depreciated slower in projected residual values.
  • The Dodge Avenger (versus the Chrysler 200 sedan) depreciated slower in projected residual values.
  • The Mercury Sable (versus the Ford Taurus) depreciated slower in projected residual values.

More examples are hard to come by, because most recently discontinued cars don't have corporate siblings. That leaves little basis for comparison. Honda canceled the Insight hybrid after 2014, but there's no good sample to judge its depreciation against. Used Insights might present a better bargain, but against what? All Hondas? A Civic Hybrid? A Toyota Prius? Each alternative has other factors that affect its resale values differently than the Insight's. Corporate siblings aren't a perfect comparison, but they're as close as you can get.

Still, the savings can be very real. Take the discontinued Milan Hybrid, for example. Four-year projected residual values on the 2011 Milan Hybrid — its final model year — are just 31 percent, versus 37 percent for the 2011 Ford Fusion Hybrid. That difference, at 6 percentage points, can amount to $1,300 in savings if you shopped a used Milan Hybrid instead of a used Fusion Hybrid. Even if the Fusion Hybrid didn't exist, a used Milan Hybrid would represent a good deal.

What About Discontinued Brands?

The highest depreciation usually comes from cars whose brands were shuttered; think badges like Pontiac, Mercury and Saturn. Discontinued cars from stable brands, on the other hand, may not depreciate any faster than other used cars.

Perhaps that's because the best-case scenario, if you're shopping discontinued cars, is to buy from a brand that's still around, according to Stephanie Brinley, a senior analyst at IHS Automotive.

"It would be less painful for a consumer to buy a one-gen [discontinued] vehicle from a brand that's going to continue on, that's surviving, than one that's not," Brinley told us.

But even then, not all shuttered brands are the same. Many of them, like GM's Pontiac and Saturn or Ford's Mercury, belong to automakers that still exist.

"Mercury at least is related to Ford," Brinley noted. "The distribution network for parts and services still exist. ... If you go to a Chevrolet dealer instead of a Pontiac dealer, that network still exists."

By contrast, "orphaned" brands like Suzuki are a little more complicated. Legally, "Suzuki does have to supply [replacement] parts," Brinley said, but getting those parts requires finding a Suzuki dealership. Suzuki had 220 U.S. dealerships in late 2012 that could repair and service used Suzuki cars, but that number has likely dwindled. Still, if you live in a major city, you should still be able to find one. As of this writing, Suzuki's U.S. website says Chicago, Houston, Los Angeles and New York have multiple dealerships within 50 miles.

Another Option: Buy While It's Still New

You don't necessarily have to wait until a discontinued car shows up in used-car lots to save money on it. When an automaker pulls the plug, it often cranks up incentives to move the remaining inventory off dealer lots; that can mean savings for new-car shoppers.

Cars.com analyzed new-car incentives from Autodata Corp. for a range of discontinued models from the 2011 to 2014 model years, and most discontinued models have high or sharply rising incentives in the final months of their life cycle, relative to their respective brands.

There are exceptions to the rule. Discontinued models like the Chevrolet Avalanche and Toyota FJ Cruiser, for example, offered fewer deals in their final months. But for the most part, discontinued cars had higher discounts.

The Car Still Matters

Many discontinued cars were decent in their own right, but keep in mind that many others (see: Daewoo) met their end in part because they just plain stunk. And that means that even with steep discounts and high depreciation, you should think twice about buying them — new or used.

That said, if you think you've found a late-model gem, experts say you should be able to service and repair it for years to come.

It's unlikely you'll run out of replacement parts on a discontinued car "because most of the time a lot of the parts are from something else," said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. "Very rarely is there a car that is so significantly unique that you can't get parts for it. Engines are built in large volumes. Transmissions are built in large volumes."

Automotive News says (subscription required) factory replacement parts for any car begin to become hard to find about five years after production ends, but IHS' Brinley said you shouldn't run into much trouble if you service the car properly.

"Even if you do buy a discontinued car and, say, parts are a little more difficult to find, if you're buying it, say, brand new or recently used," it should last for a long time, she said. "From a consumer's perspective, if you get a little bit of a discount ... that doesn't mean you don't get a quality product that you can't depend on."

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