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I am using almost all time Mage:getModel. But surprisingly i found somewhere about Mage:getModelInstance.

Can you please tell me where to use Mage:getModelInstance and what is the difference between these two ?

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The main difference is that getModel can be called from Mage whereas getModelInstance is a method from the Config class only : https://github.com/OpenMage/magento-mirror/blob/d409dff20e992e97546568974399c456958299f9/app/code/core/Mage/Core/Model/Config.php#L1341

getModel actually calls getModelInstance so there is no reason for calling the second one

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