ARTICLE: The Beauty of Lateral Upgrades (Getting MORE CAR for LESS $$$)
When I last created a thread on retaining your 5 year old car, most of you agreed on the sheer value of this proposition. After all, each additional year (after the 5th) that you hold on to your existing car results in huge monetary savings. Yet, some petrol-heads moaned “No GTO, we want to drive a bigger car. We want more power. We want safety features.” Then, some other BHPians went "But it’s been 5 - 6 years and we *want* to upgrade our car to something quicker. We are bored of our current drive.”
Well, I am not going to let you throw your money away just yet. Introducing the beauty of lateral upgrading! Lateral, by definition, means toward the side. On Team-BHP, the term lateral upgrading means to sell used and buy used. Its a fantastic way of getting substantially more car for not-so-much-more money; a transaction where the differential value is overwhelmingly positive in your favour. Net net, you get way more for way less. I want to show you how to upgrade your existing car, to a newer make, with lesser mileage, from a higher segment, with more power / features / safety....all at a fraction of the price.
Consider these real world examples:
• My OHC –> Civic upgrade : I sold my ’03 Honda City Vtec with 73,000 kms on the odo, put in another 4.5 lakh rupees (less than the cost of an Indica Turbo) and drove home in an ’07 Honda Civic. With only 7,400 kms on the odo! A sedan that’s merely 2.5 years old and a giant step ahead of the OHC in terms of safety (modern shell + all wheel discs + ABS + airbags), road behavior (especially at speed), space, amenities (including leather seats, electric mirrors, tilt + reach steering et al) and overall construction. A segment up at not so much more money. In fact, I could have easily settled for a 25,000 kms '06 Civic for 6.5 lakhs (net differential only 3.0 lakh rupees), but choose to stretch for this virgin car instead. Link to my ownership thread.
• Friendly Mod Aditya sold his ’96 Contessa and bought a 2000 year Lancer for a differential of Rs. 25,000. That’s right, merely 25K. For the additional money put, how much more value did he derive from the swap? A thoroughly modern Mitsubishi Lancer that’s infinitely more reliable, refined, safe and dynamically rich than the antique HM Contessa. His Lancer has only a third of the Contessa's odometer mileage.
• Humorous Moderator Ajmat sold his 5 year old Honda City, and bought a 2.xx year old Skoda Octavia RS. Difference = About 4 lakh rupees. Importantly, the “newer” car was twice as new, had 1/3rd the mileage (15,000 kms) as his outgoing Honda, with nearly 50% more power, all wheel disc brakes, ABS & Airbags and a long line of kit (xenon headlamps, sunroof etc.). Again, a full segment up for not so much more money. Link to Ajmat's RS ownership thread.
• My neighbour is in the process of selling his 4 year old Tata Indica Turbo for Rs. 2.3 lakhs. Family demands a sedan, his running doesn’t really dictate a diesel, hence he is buying an ‘09 Ford Fiesta 1.6S for Rs. 4.75 lakhs. The Fiesta is less than a year old, has 9,000 kms on the clock and is still within factory warranty. The reason its going so cheap is Ford’s new “Fiesta 1.6 @ 5.5 lakh rupee" offer. For only Rs. 2.4 lakh more, my neighbour ends up with a near-new fun to drive C-segment sedan. Considering that his Indica Turbo is now out of warranty, and the Fiesta within, the Ford will probably cost less to maintain too!
• A BHPian who was tired of his 6 year old Maruti 800 sold it for Rs. 1 lakh, added another Rs. 1.5 lakhs to the kitty and drove home in an '07 Hyundai Getz. The Getz has the space of C segment sedans, is refined, has great ride quality and a proper "big hatch" feel. Much unlike his bare basic Maruti 800. Not a bad upgrade for only a lakh and a half, wot?
• A friend wanted to upgrade his '05 Honda City (NHC). Though I did try convincing him to retain the car (only 45,000 kms on the odo), he / his family wanted a bigger car. Out went the NHC for Rs. 4.6 lakhs and in came an end '06 Honda Accord 2.4 AT that had run only 36,000 kms. Price = 8.0 lakhs. For only 3.5 lakhs more, he got a proper D segment car (two segments higher) that's roomier than the Mercedes E-Class. Plus, a whole lot more power, safety, a nice automatic transmission and within extended warranty coverage.
The right way to Lateral-Upgrading
Realize that a higher end model will have thinner manufacturing tolerances. Thus, you are guaranteed a better-built car of a higher quality grade. Some key points to discover the sheer beauty in lateral upgrading:
• Fun for less than 6 lakh rupees: Love to drive, yet on a tight budget? Look no further than our list of top Enthusiast cars within 6 lakh rupees.
• Keep upgrading from one “pre-worshipped” car to another: The final deal is even better when your existing car was bought used. You thus save depreciation on your 1st car, then at the time of lateral upgrading, on the second car as well. Think of the sheer SAVINGS! I’d gotten my 1 year old pre-owned OHC Vtec and saved 2.5 lakh rupees (off the new car price at the time). Then, after 6 years of usage, I sold it for 50% of the original purchase price, and upgraded to a Civic at about 45% lesser than the price of a new example. The net savings on both cars combined runs up to 9 lakh rupees!
• Sell high, buy low: Sounds clichéd, I know, yet its true. Obviously, to extract the maximum benefits out of lateral upgrading, you must sell your existing car for the best possible price, and buy your next car at the lowest possible price. For advice on the former, click here; for advice on the latter, click here.
• Choose a depreciation disaster to get most car for the money: This is great news if you are considering a car from the C+ segment (and higher). As they say, the higher you go, the harder you fall. Generally, any car that costs over 10 lakh rupees depreciates like stink. And in a short while too. It's easy to get 3 year old Civics and Corollas for 6.5 - 8 lakhs, 2 year old Honda Accords & Toyota Camrys at 10 – 12 lakh rupees, a 3 year old BMW 3 series for 18 lakh or even a 3 year old Mercedes S-Class for 35 lakh rupees. You can enjoy the benefits of lateral upgrading, no matter what the market segment.
• Avoid residual champions: The Innova is a classic case. This Toyota holds its value so well, that it doesn’t make sense to buy a sparingly used example. The Maruti Swift (diesel) is also known for strong residuals.
• Check the reliability ratings: Japanese & Korean cars provide the safest options to buy used. Generally, Europeans are best avoided (with few exceptions). Remember that an 8 lakh rupee Mercedes will still cost as much as a 40 lakh car when it goes to the garage for repairs. Do NOT buy any car with a poor track record in reliability. Generally, used Tatas, Mahindras, Fiats and Skodas are best avoided. Again, the Japs & Koreans make for the most sensible used purchases.
• The newer, the better: Buy the youngest specimen that your budget permits (in terms of model year and kms on the odo). This factor goes a long way in ensuring a satisfying ownership experience.
• Get the best car your budget allows: Chances are, the better the car (in terms of power, space, dynamics, equipment and segment), the longer you will retain it. Spend a little more at the time of acquisition & buy the car you really want.
• Patience is a virtue: Remember, to find the best deals, you will have to be patient. If things were so easy, everyone would be lateral-upgrading. No gain without pain certainly applies here. I took a little over a month to find the Civic, yet it involved screening the entire market consistently & thoroughly. Buying pre-worshipped can actually be fun, when you bring in all the test-driving & negotiating experiences into the picture. Go out, look around, test-drive some…..plenty of beautiful cars going for a song. It’s a buyers market; use this to your advantage.
• Another advantage of lateral upgrading: Since you are buying used, you don’t necessarily have to retain the car for 7 – 10 years to save on depreciation losses. By buying used, someone else (i.e. the original owner of the car) has already taken a massive initial depreciation hit. You can upgrade within as early as 4 - 5 years, without losing too much!
• STRICTLY adhere to the guidelines: Follow our How to buy a Used Car Article and you’ll be safe. All steps listed out in that article are mandatory.
• For First-timers: Click here to understand the pros & cons of buying used cars.
Some Lateral Upgrade options I've seen, liked & recommend:
If you are an entry level hatchback owner (Maruti 800 or Alto), you might consider an upgrade to a Hyundai Getz, Hyundai i10, Maruti Swift, Chevrolet UVA, Ford Ikon, Maruti Esteem, Hyundai Accent, Mahindra Logan or Chevrolet Aveo.
If you are a B segment hatchback owner, you might consider the Chevrolet Optra, Ford Fiesta, Honda City, Maruti SX4 or Mitsubishi Cedia. Clean Optras, Fiestas and Cedias go ridiculously cheap!
If you are a C segment sedan owner, you might consider the Honda Civic, Toyota Altis, Honda Accord, Toyota Camry or Hyundai Sonata (current gen). Maybe even a Grand Vitara / Ford Endeavour / Pajero / CRV if you are an SUV type?
If you are a C+ segment sedan owner, you might consider a Toyota Camry, Honda Accord, Ford Endeavour, Grand Vitara, Pajero or Honda CRV. Also seen a handful of Nissan Teanas and X-Trails going for 12 - 14 lakhs.
If you are a D segment sedan owner, you might consider a BMW 3 / 5 series or a Merc C / E Class. Within SUVs, there's the super reliable 3 year old Mitsubishi Montero for Rs. 20 lakh, or a 4 year old Toyota Landcruiser for 25 - 28 lakhs. If your budget permits, a Merc S Class’ for 35 lakh or a 1 year old (new shape) 7 series for 50 – 60 lakh. Be advised that all the Europeans in this list will break the bank in maintenance.
NOTE: Of course, and budget permitting, you can jump two segments above (example in the post below : From a Maruti 800 to a Mitsubishi Cedia).
amazing stuff GTO and very true too. couldn't agree more:thumbs up.
I bought a 2003 M800 in 2007 for 90k and sold it in 2010 for 75k. Added more money and got myself a scratchless 2007 July Cedia for 4.35 lakhs.
Your Civic is a strong testimony to what you've written.
GTO - excellent article. My 02 Palio is running strong. I was planning to replace it next year, but your article gives me a new plan for selling it and picking up a used Cedia.
The key is to make a guesstimate on the depreciation curve of the car you buy. And that requires some talent, which not everybody possesses. Any tips on this front?
For example, you bought an used OHC VTEC for Rs. 7 Lacs six years back. Now instead of that, if you had bought a Fiat Adventure (after falling in love with the 1.6 litre engine) or an Opel Astra (German build quality), your lateral upgrade plan wouldn't have worked out so well.
Very useful tips! I will refer back to these when it is time to upgrade from my Alto.
Another Great Thread GTO! Looks like you aint gonna stop till the time resale value of all the drivers cars go high..ehhhclap:.
Am I seeing a 5 in you Garage few years from now!:D
Great article GTO. All this when talk has begun at home about selling off our Santro that has 63,000 clicks on the odo and turned 5 this Feb. My dad is going to get a print out of this article this evening :D
EDIT: GTO, would really appreciate to have your inputs on a few points:
1. The car is in very good shape, I recently replaced all 5 tyres to tubeless and the battery, but the suspension needs a complete overhaul which is prompting my dad to sell it. Do you recommend keeping it?
2. The LHS doors need a rather big tinkering job - we have not had any claims in the past 5 years which is prompting my dad to sell it, transfer the NCB to the new car rather than spend ~Rs. 10,000 to fix it. What do you reckon on this?
Here's a request to fellow BHPians. Anyone knows a good sparingly used Cedia for sale, please PM me. please:
alright, sorry for that diversion, lets keep the discussion flowing.
How does a 2006 immaculately maintained Sonata Embera Automatic with leather seats from the factory used for 16000 odd kms for 6.5 lacs sound?
Great thread GTO. My family might be buying a new car soon to replace the Scorpio. It will be a another SUV. Will keep this thread in mind if and when we decide to replace. Thanks for sharing. :)
This will work if only us in TBHP start doing this. If everyone tries to do the same, the used car prices might go up. Just kidding.
Really good arguments for upgrading laterally.
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