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Market Trends

Model-Year versus Calendar-Year

June 15, 2010, by Mike Antich - Also by this author

By Mike Antich

In the "good old days," the overwhelming majority of new models would be "officially" introduced Oct. 1 of the preceding calendar-year. Little by little, this practice has migrated to the realm of nostalgia as OEMs introduce new models throughout the calendar-year. This trend first started with mid-model year introductions in the January to March timeframe, but slowly proliferated to introductions throughout the calendar-year.

Year-round new-model introductions have complicated fleet planning and purchasing. Some fleet managers wonder aloud, perhaps wistfully, as to why the U.S. doesn't convert to a calendar-year format when classifying new models. "Should OEMs change to the same format as the rest of the world - a calendar-year for the vehicle model-year?" asked Gayle Pratt, director, global fleet for Ecolab. This sentiment was echoed by Keri Moran, fleet administrator for J.R. Simplot Company. "I'm tired of the staggered model-year production schedules. I used to be able to place all orders at the same time, now I seem to be placing orders throughout the calendar-year because of production schedules."

Model-Year is Not a Universal Practice

The practice of identifying automobiles by "model-year" started in the U.S. Alfred Sloan, the long-time president and chairman of GM, extended the idea of yearly fashion change from clothing to automobiles in the 1920s. The Great Depression prompted other U.S. OEMs to also start selling "next" year's vehicles in October of the preceding year. But this isn't a universal  practice. Vehicles sold in Japan are classified on a calendar-year basis. Similarly, the U.S. model-year concept was never universally adopted in Europe. One exception is VW, which switched in 1966, but chose Aug. 1 to start selling next model-year's vehicles.

In later decades, the model-year (October-September) became entrenched in the U.S. as new-model advertising was coordinated to the launch of the new television season in September. "This allowed for a stronger marketing program by placing more resources in a concentrated timeframe," said Brenda Perez, manager, national fleet operations for Mazda.

However, some say there are advantages to switching to a calendar-year cycle (January-December), which would facilitate fleet funding. "Many corporations operate on a calendar-year basis, so when it comes to capital budgeting and approval processes, companies who own vehicles, as opposed to lease, find themselves wanting to make their capital purchases early in the year, or run the risk of losing those capital dollars when budgets get tight," said Greg Corrigan, VP of strategic consulting for PHH Arval. "For businesses that lease, the time of year they acquire the vehicle is largely irrelevant from a budget cycle perspective."

A calendar-year cycle might also benefit government fleets since their budgets are typically on an annual basis, said Rick Shick, VP of purchasing for Donlen Corp. "This could make their budget process easier to manage. However, many commercial fleets have fiscal years that don't line up with calendar year."

Other business considerations also impact introduction dates. The term "new-model introduction" has almost become a misnomer in today's sales climate. "When a new model is 'introduced' has little to do with the calendar. A calendar-year timetable, or the notion of an autumn new-model introduction, seems irrelevant when determining when a new model should be introduced," said Charles Reed, fleet sales operations manager for Subaru of America. "What does seem relevant to new-model-year introduction is identifying: 1. Where does a vehicle reside in its lifecycle?; 2. Is a vehicle primarily a carryover version?;  and 3. How much unsold inventory of the vehicle is sitting at dealerships?" 

In addition, there would be major behind-the-scene ramifications to phase out the model-year concept. "A changeover to a calendar-year would require modification of countless systems and business practices if this were to occur," said Shick of Donlen.

Year-round new-model introductions are facilitated by the U.S. government (NHTSA), which allows vehicles to be designated the next model-year if manufactured by Jan. 1 of the preceding calendar-year. For instance, a vehicle produced Jan. 1, 2011 could be designated by the OEM as a 2012 model-year vehicle. "The advantage of mid-year vehicles for fleet is the benefit of 16-18 months of use, but the vehicle is depreciated for only 12 months," said Jan Freund, director of manufacturer relations for Wheels Inc. 

Sometimes there can be a detrimental impact to early introductions. "For instance, the residual benefit from an early intro can be dramatically diminished midstream as the production cycle for that model-year is longer than normal," said Perez. "Also, specific to commercial fleet, an early MY launch (Jan. 1, 2011 for 2012-MY) is not timed for the segment, and there is limited to no interest in the vehicle until the standard order cycle rolls around."

Although fleet is important to automakers, the retail market dictates new-model introductions. "Secretly, I think the manufacturers love staggered introductions. It gives them a window of time when they're the kid on the block with the newest toy," said Rick Nicoletti, general manager for the Napleton Fleet Group.

 Other reasons for early intros include CAFE averages, competitive leapfrogging, keeping the lineup fresh, maintaining year-round floor traffic at dealerships, and parts availability. "I don't think we'll see all the manufacturers line up and introduce new models at one specific time each year ever again," said Freund.

Let me know what you think.



  1. 1. Ricky Beggs [ June 21, 2010 @ 09:31AM ]

    Some interesting thoughts from several in the fleet industry.

    “We have often mentioned the excitement that used to exist within the industry regarding new model year introductions when there were ‘invited guests’ to see the new models in the September/October time frame each year. The windows of the dealership were covered with brown paper to hide the new models. The cars were parked out back and hidden from the public. I miss that excitement! In today’s world it is a matter of when the new model is ready to bring to market. It is important for the manufacturer and the dealer body to ‘get it to market’ and start creating revenue as soon as possible. I remember the first time we were asked the effect of bringing the GM X cars out early would have on residual values. Since then many vehicles have varied in their release dates. In today’s market the real effect on residual retention is driven by overall condition and mileage, not when it was put in service. A fresh lineup and beating the competition to market with better product and strong marketing plans gets the go ahead to market nod. As a guide and projector of residual values at Black Book, the product, overall market condition, competitors, life cycle position and volumes (just some of the factors) are more important than when a model is released. Just check the 10th digit of the VIN to determine the model year, check the overall condition and confirm the odometer reading as you start your appraisal process to place a value on the used vehicle.”

  2. 2. Adam Growald [ June 21, 2010 @ 03:20PM ]

    Really enjoyed your article on Model-Year versus Calendar-Year. I thought it provided a very thorough and valuable overview of the pros and cons of the two calendar practices.

    Reading your article brought a question to mind on a related subject—I wonder if you have any thoughts on this:

    · In the past, it seems as though car rental companies have been an important outlet for excess vehicle production capacity, which has probably resulted in favorable deals on major fleet purchases by those rental companies

    · With the Big Three cutting their capacity (and production, by extension) in the recent recession, do you think that will change the dynamic of fleet negotiations between manufacturers and rental companies?

  3. 3. Ricky Beggs [ June 25, 2010 @ 01:02PM ]

    Adam, That is good insight and from what I hear this has already happened in some cases. It is no longer "...we have this extra capacity. Can you take a few hundered more of these?..." The role is reversed and it may now be the need of the rental company asking for more. It seems that most manufacturers are focusing on residual value retention and doing this by managing volumes, build mixes and heavy incentives.

  4. 4. Al Cavalli [ June 28, 2010 @ 08:54AM ]

    Mike, your "op ed" makes an interesting point. However the one missing ingredient in all the comments listed is the used car market which, to me, should be a major factor, which always has been a major consideration in establishing replacement schedules. I haven't done the math on this but it certainly should be factored in. And, as far as what they do in the rest of the world...who cares!!!

  5. 5. Tom Kontos [ June 28, 2010 @ 08:56AM ]

    I really enjoyed your article, Mike. I was recently waxing nostalgic with my kids about the excitement that used to be generated by the coincidence of the new model year with the new television season -- which also happened to coincide with the Back-to-School timeframe. Perhaps this is a relic that cannot be exhumed in today's fast-paced business world. But I can't help thinking that, as the Detroit automakers look to capture some of the excitement of their heyday, there might be room for recreating a bit of this seasonal dynamic through targeted advertising and marketing campaigns in the fall. One factor that seems missing today, however, is the annual styling changes that used to take place. Nowadays, cosmetic changes to vehicles are typically much more evolutionary, with major changes taking place every three to five years. This complicates my scenario. Nevertheless, automakers should challenge themselves to revisit the fall-unveiling concept, especially on vehicles that have undergone significant updates, to see if there is a rendition of the old approach that might work today. Thanks again for your thought-provoking article.

  6. 6. Mark Radzely [ June 29, 2010 @ 07:32AM ]

    The esteemed Mr Cavalli raises some excellent points. In the fleet world, 2011 Toyota Camry going out today for three years/60K Miles will realistically have the same residual /resale value as a 2011 Camry going out a year from now for two years/60K miles. With cost control being a main priority this day and age, it would be to be in a fleet account's best interest to take advantage of the year "jump" in the title when considering vehicles for spring and, especially, summer replacement cycles.

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Author Bio

Mike Antich

Editor and Associate Publisher

Mike has covered fleet management and remarketing for more than 20 years and entered the Fleet Hall of Fame in 2010.

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