Today after a long break i an my brother decided to do some car hunting. Well the initial thinking was that we would like to look at an old 2nd hand vehicle and then resell / trash it after 2 years of usage.
Following the thought we visited several 2nd hand car vendors around the indiranagar area. Visited 1 in CMH road, 1 in 100ft road , 1 in Old madras road and 1 in Double road. We found that the bangalore market has a thriving 2nd hand car market base, if you have 4-5 prospering vendors in a 2 kms radius then the scene for the new car market should be really good.
Comming back to the car itself. I had test driven a Honda city a few days earlier was good but done quite a few kilometers. Then yesterday i had a look in at a Cielo . The cielo was in great shpe looks wise and the ride was also reasonably comfortable but the thought that it may crash anytime was in our minds. The greatest motivator was the cost of the vehicle, at sub-1 lakh unbelievable. This apart from the numerous indicas and santros we rejected. Didnt even look at the smaller varieties of Santro.
We then were by then quite exhausted by the older cars. We then went to the Maruthi showroom and Test drove both the New Zen Estilo and the Wagon R . The drive quality and ambience of the Estillo was far greater , but it seemed that the Wagon-R may have more space in-car. We the most negative aspect of both the offerings was the on-road cost, at greater than 4 Lakhs for the LXi they were pretty expensive. But i guess that is the market premium for a trouble free vehicle for atleast 5 years.
Depreciation. The greatest enemy of a new car is the depreciation. You tend to loose upward of a lakh in a year and after 2 years babout 1.3 lakh for a 4 lakh car i.e 35 % of its value. The cost of the music system and other accessories aspect of the car have not even come in.
Cost of ownership of a new car (not considering Interest of any loan that you might take).
1.3 lakhs - depreciation
0.1 lakhs - Maintainance
0.1 Lakhs - 2nd year insurance
0.1 lakh - loss in value of accessories
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1.6 lakhs - for a 24 month period
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i.e 6700 rs / - per month apart from the petrol cost. i.e. a high percent of your monthly salary. Will need to throw in an additional 3000rs for the petrol that you will use.
So a 10,000/- per month of usage of car is a relistic estimate.
Well not lets look at getting a beat up Cielo (hoping it works)
Cost 100,000 rs. + 20,000 Maintainance + 10,000 sundry expence (old car na)
resale value - locky if you get a buyer. ha ha. But junk value at least say 30000rs. So you spend nearly 4000/- p.m. if you scrap it after 2 years. Well might as well use it till it lasts.
Cost of fuel may work out to a little more , but if you have gas the same.
so you are capping your expense at arond 7000/- Rs p.m. considering decent driving.
Quality of ride and other aspects:
- The new car being new will feel great.
- But the space is lesser and cannot have an option of a driver in the future.
- The accelaration and feel of a new car will definately be good. The old car will be a little sluggish
- The boot of an old big car cannot be reached.
- Manuverability of the smaller car is much better but the Power stearing (ps) of the old car will compensate for it in some measure.
- finally the peace and assurity of working of a new car. The main reason for paying the premium.
There is another interesting twist to the whole cost and pricing aspect of the vehichle that can change the dynamics on the head. The "depreciation" benifits of a self employed person. If you can charge of 40% of the value of the vehicle as expense and in a5 year period get backthe entire cost of the vehicle as expence including the cost of running it. Then you get a 30.2% benifit on the entire cost by way of saving s on tax. Hence a 4 lakh car will cost 2.7 laks. That change the entire cost landscape.
now:
cost of new vehicle Rs 7000 / -(effective) = cost of old vehicle rs 7000/- (assuming nbo depreciation allowed as the vehicle is already 7 years of old. , will have to look into the IT rile book for the same.)
Well the decition is finally at the same place.
i.e. Cost (downpayment + ownership) VS Comfort (size + ease of use)
Am yet to decide if you can get closer to yours that will be great.
