Indians generally trade / upgrade their cars after only 5 years of ownership. Here is a classic situation : Sell a 5 year old WagonR for that shiny new Swift / Getz / Vista. Or an '03 Honda City for a new Civic / Octavia / Corolla. Or an '03 Octavia for a new Laura / Accord.
Either you will buy a new car from the same segment, or upgrade to a higher segment. The latter seems to be the more popular option amongst BHPians. We were curious to know the absolute financial implications and ran some numbers on the excel. I have used a typical C Segment sedan as the basis of calculation. For segments lower or higher, simply equalize the appropriate numbers.
What actually makes financial sense? Should you retain your existing car for another 3 - 5 years or trade up toward a new car?
• Since we are assuming that a 5 year old car is already on hand, I am going to calculate the cost of ownership from the 6th year to the 10th.
• A 5 year old car in India would have typically covered about 60,000 – 80,000 kms. Translated, it still has a good amount of useful healthy life in it. A well-maintained modern C segment sedan will easily deliver reliable service of atleast 1,50,000 kms. An immaculately maintained C-segment will go upto 2,00,000 kms or over.
• The loan is entirely paid off (Don’t you just love the non-EMI times of your life!).