Most consumers associate the end of the year with New Year’s Eve; champagne; parties; and watching the ball drop in Times Square.

In the automobile world - the year changes in August - not December.  New models are introduced - requiring all of last year’s models to be sold.  Virtually every manufacturer will be clearing out their remaining 2008 models and offering large incentives and low interest rates.  Then they will be introducing its new models.

From the consumer’s point of view, it is one of the two best times of the year to purchase or lease a vehicle. If you want to purchase, you’ll have the opportunity to take advantage of large discounts and aggressive interest rates on 2008 models and low lease payments on the new 2009 models.  And that is one of the keys to understanding how to best take advantage of this event.

The deals when buying are on the leftovers. You’ll find 0% for 72 months. You’ll find $5,000 rebates; $10,000 in savings (discounts plus rebates); guaranteed trade amounts; claims relating to gas savings; anything to push out the remaining 2008 models.

But if you were looking for the new 2009 models to buy, the discounts, rebates, and low interest savings will not be there.   Typically there should be a savings of 20% or more between the leftover model and the new model.

If you are planning on leasing, however, strongly consider looking at the new 2009 models. In many cases, especially when looking at a luxury vehicle - the newer model will have a lower monthly payment than the leftover. Why? Because the leftover will have a lower residual and there will not be enough discounts and rebates to make up the disparity of the new 2009 residual.  Interestingly, you can typically get a lower payment even though the newer vehicle is more expensive.

Finally, if you are looking for a used vehicle - look for a 2007 or 2008 model. This will be the only time when you can purchase or lease one of these vehicles and get the financing available on new vehicles.  This is a tremendous advantage if you have significant negative equity. The used vehicle will be thousands less than the new vehicle; however, you can still borrow the same amount of money as if the vehicle was new - so carrying over negative equity can be solved without resulting in unbearable monthly payments.