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Old 23rd May 2011, 09:07   #1
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Default BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

The biggest advantage of buying a pre-owned expensive car is that the first owner takes a big depreciation hit. The same applies to BMW cars too, but in this case, the first owner does not need to pay much (or anything at all) for maintenance if he opts the one of those "BS" maintenance packages. The second owner of BMW might not take a large depreciation hit, but his maintenance costs could more than equal the depreciation cost difference of the first owner. So does it make sense financially to buy a new BMW rather than an used one?

Let's take the example of BMW 320d Corporate Edition (the prices mentioned in this example might not be accurate, but is close) -

The first owner pays Rs. 30 Lacs OTR for the car. At the end of 5 years, let's say the car depreciates by 40%. That is, he gets Rs. 18 Lacs when he sells the car.

Depreciation cost - Rs. 12 Lacs
Comprehensive maintenance package cost (5 yrs) - Rs. 3 Lacs
Loss of Interest over a 5 year period because you are paying for maintenance in advance - Rs. 0.5 Lac

Total Cost of Ownership for the first owner = Rs. 15.5 Lacs (excluding tyres, insurance, fuel costs, accident repair etc)


Now, let's say an used car buyer buys the 5 year old used BMW 320d Corp Edition.

His purchase price = Rs. 18 Lacs.

He sells it after using it for 5 years. I'm assuming 50% depreciation for the next 5 years - because it is a 2 owner car and is already 10 years old now.

Depreciation cost = Rs. 9 Lacs.

Now how likely is it that the maintenance cost of a 5 year old BMW does not cross Rs. 6.5 Lacs over the next 5 years (Rs. 1.3 lacs per year)? Expect the AC compressor to conk out atleast once - that alone is Rs. 1.5 Lacs. If luck is not on your side, expect the turbo to go boom too. That's another Rs. 1.5 Lacs. Add brake pads, suspension, one of those Rs. 80,000 electronic thingies - and then soon, your maintenance cost over a 5 year period should exceed Rs. 6.5 Lacs.

The Cost of ownership for the second owner has a high probability of exceeding that of the first owner. Even if it doesn't, Total cost of Ownership for the second owner might come close to Rs. 12 - 13 Lacs. And the savings of just a couple of lacs for the second owner might just not be worth it

Anything wrong with my assumptions and calculations here?

Last edited by smartcat : 23rd May 2011 at 09:12.
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Old 23rd May 2011, 09:38   #2
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

Dream figures i must say.
1) Depriciation of just 40% in 5 years is a dream figure which is realistically achievalble with only few A segement cars. BMW or likes should depricate by 60% considering that we are calculating on the on road price. This percentage is bound to increase keeping in mind the ever increasing inclination of buying new cars shown by the masses.
2) Prepayment of Rs 3L has a hidden interest benefit of definitely more than Rs 50k over a period of 5 years (@ car loan rate).
3) Keeping the car insured with BMW secure and insurance sets you back by Rs1.1L every year which should be considered.

But yes when i know what it costs to maintain a used BMW i would never dare buy an oldie.

I am X1 owner
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Old 23rd May 2011, 10:51   #3
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

@smartcat- while I appreciate the sentiment, I do think 5 years is too long a span to consider. Probably a 2-3 year horizon would be more realistic. After 5/10 years, the car is probably too obviously "old" and its cost of ownership would get too high (add to that non-availability of spares etc.)- have you any numbers for the 2-3 year horizon?
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Old 23rd May 2011, 11:02   #4
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

Smarcat, what if you also consider interest cost (or opportunity cost of capital if you are using own funds), which is actually the biggest benefit in buying used cars?

Still, have to agree that for the remaining part, your logic is quite good.
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Old 23rd May 2011, 11:12   #5
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

Quote:
Originally Posted by smartcat View Post
The first owner pays Rs. 30 Lacs OTR for the car. At the end of 5 years, let's say the car depreciates by 40%. That is, he gets Rs. 18 Lacs when he sells the car.

Depreciation cost - Rs. 12 Lacs
Comprehensive maintenance package cost (5 yrs) - Rs. 3 Lacs
Loss of Interest over a 5 year period because you are paying for maintenance in advance - Rs. 0.5 Lac

Total Cost of Ownership for the first owner = Rs. 15.5 Lacs (excluding tyres, insurance, fuel costs, accident repair etc)
1. Exclude the BSI from the OTR cost. Its likse asking the second owner to pay part of the maintenance you have done on the car.
2. 40% depriciation is less. It would be from 50-60% - remember anything above 10L depreciates at a higher rate.
3. loss of interest at 8% returns ~ 1.4L
4. Loss of interest for the cost one paid for the car

Depreciation cost (30-3)*.5 - Rs. 13.5 Lacs
Loss of interest on cost of car at 8% for 5yrs= 6.3L
Comprehensive maintenance package cost (5 yrs) - Rs. 3 Lacs
Loss of Interest over a 5 year period because you are paying for maintenance in advance - Rs. 1.4 Lac
Total Cost of Ownership for the first owner = Rs. 24.2 Lacs (excluding tyres, insurance, fuel costs, accident repair etc)


Now, let's say an used car buyer buys the 5 year old used BMW 320d Corp Edition.
His purchase price = Rs. 13.5 Lacs.
He sells it after using it for 5 years. I'm assuming 50% depreciation for the next 5 years - because it is a 2 owner car and is already 10 years old now.
Depreciation cost = Rs. 6.7 Lacs.
Loss of interest on cost of car at 8% for 5yrs= 3L
maintenance cost = 5L (asuming 1L per year).
total cost = 14.7L

Last edited by alto99 : 23rd May 2011 at 11:17. Reason: incorrect figures for Loss of interest on total cost of car at 8% for 5yrs
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Old 23rd May 2011, 11:21   #6
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

Going by the prices I have seen in Mumbai, this is how it would play out for say a car like a 5 series.
Owner buys it for 50L with BSI. After 5 years, he would sell it for 20L. Maintainance would be zero, barring tyres. So that is 1L in itself for a set or two of tyres.

So his total depreciation hit is 31L over 5 years.

However, the second owner would pay 20L for the car, plus 1.5L (Assuming reliability it as poor as a Merc) for maintainance a year. This comes to 7.5L.
So his total expenditure is 27.5L at this point. Now after 5 years, when he sells the car, he would get 8L atleast. So his total expenditure on the car is now reduced to 20L, thus saving him a net total of 10L.
As you go higher up the segment, the deals become sweeter.
A 5 year old 7 series at half price? Take maintainance into consideration, the second owner potentially saves 20L!
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Old 23rd May 2011, 22:08   #7
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

Nice thread. Thinking of a pre-worshipped BMW after the Civic, eh?

Quote:
Originally Posted by smartcat View Post
The first owner pays Rs. 30 Lacs OTR for the car. At the end of 5 years, let's say the car depreciates by 40%. That is, he gets Rs. 18 Lacs when he sells the car.
The higher you go, the harder you fall. This is especially true of any car costing over 10 lakhs in India. 12 - 13 lakhs is more like it for a 5 year old 320d.

I'd rate BMW's reliability better than Mercedes, but its still no Toyota. Bank on 1 lakh per year in maintenance (averaged). The high maintenance is actually one of the reasons these cars go cheap in the used market.

Quote:
Expect the AC compressor to conk out atleast once - that alone is Rs. 1.5 Lacs.
50 grand from the after-market, which is the only option on a 5+ year old German.
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Old 24th May 2011, 00:05   #8
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

Nice thread Smart cat.

Most pre-owned are best bought within 3 years of its date of manufacture. And then its the first three years itself where the car loses its maximum bucks. A 320D normal/highline with average 20-30k kms will be easily available for 16-18 lac rupees here in delhi. Damage 15lac rupees plus, as the new ones costed 31-33 lacs. If the first owner has got the bsi package of 5 years, you pay another lac for the same and get it transfered. If not save that another lac and you should do fine with next two year's maintenance, especially if you stick to aftermarket for expensive spare replacement. Drive it for another 2-3 years and you spend another 2-3 lac rupees of ownership. Sell an 8 year old 320 for 8-10 lac rupees and your total expense is 9-12 lacs. Now, you drove the car for 5 years and spent 12 lacs max compared to new car owner who lost 15-16 lacs on depreciation and 1.5-3 lac rupees on BSI.


Lamborghini explained the case with 5s and then in delhi the difference will be even more.

In between, a trip to europe and you sponser your trip with the savings you make on spare spares; pads, suspension etc. And then, when will ebay/ online spare parts stores come to rescue.

When people ask me, cedia ka major part fail ho gaya to kya karega. I reply "tickets to dubai/singapore are cheap enough to sponser my trip and save me some cash after buying major part and suspension and lot . Just a thought.

Quote:
Originally Posted by GTO View Post
50 grand from the after-market, which is the only option on a 5+ year old German.

Well, those who stick to this basic norm can make their ownership delightful. The savings are HUGE. I remember seeing an S-Class of Paras Milk Products in Khan Market in Delhi in 2003-2004. Merc quoted them over 4 lac rupees for two front head lamps and Bumper. The same was sourced from Khan Market for under 1.5 lac rupees. The shopkeeper said, we send across guys to singapore and source them, no issues. So, if one is ready to go on their own, the trip is freeee....

Last edited by gaurav_chopra04 : 24th May 2011 at 00:14.
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Old 24th May 2011, 00:28   #9
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

My Bmw X1 has clocked over 4000 miles in 45 days. Thats when i am not driving it regularly because it has not got permanent registeration yet hence insurance and secure are not valid. Considering my usage I have taken a 3 yr or 90k maintence package.
Now once a white X1 driven 90k in less than 3 yrs hits the resale market what could be the value it can fetch?
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Old 24th May 2011, 00:55   #10
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

@smartcat

What you did not mention in your post is you are referring to Bangalore market :-) Fellow BHPians from Mumbai and Delhi have a much better used-car scene.
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Old 24th May 2011, 03:33   #11
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

Add in another point of financing, and the used car deal becomes sweeter. Irrespective of the higher interest rates in used, it is still cheaper to take a 15L loan at higher interest rates than a 30L loan.
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Old 24th May 2011, 06:30   #12
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

this is more or less true of the germans - recently I saw a 5-6 year old merc C200K which had done 26K Kms going for 13.5 lacs. If one pushes it one can get it for 12.5 or so.

Quote:
Originally Posted by GTO View Post
The higher you go, the harder you fall. This is especially true of any car costing over 10 lakhs in India. 12 - 13 lakhs is more like it for a 5 year old 320d.
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Old 24th May 2011, 11:05   #13
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

Re: Depreciation

You should all see the prices of used Germans in Bangalore - 7 year old Merc C Class petrol with an asking price of Rs. 14 Lacs (Gaadi.com), 3 year old 320d? Rs. 22.5 Lacs (Carwale.com), 6 year old Octavia rider with an asking price of Rs. 7.5 Lacs (Carazoo.com). Why just the Germans? It hurts (a bit) when I buy a pre-owned Civic for Rs. 9 Lacs here in Bangalore and somebody else in New Delhi buys the similar Civic 6 months later for Rs. 6.5 Lacs. But I guess I'll have my revenge (to some extent) when its time to SELL my car!

By the way, inflation too helps in improving resale values. If a new 320d costs Rs. 30 Lacs in 2011, it will cost Rs. 31 Lacs in 2012, Rs. 33 Lacs in 2013 and so on. So, a Rs. 30 Lac 2011 BMW might go for Rs. 18 Lacs in 2016 - but only in Bangalore though!


Quote:
Originally Posted by .Albatross. View Post
3) Keeping the car insured with BMW secure and insurance sets you back by Rs1.1L every year which should be considered.
You are right! Insurance costs of a new car for 5 years will be a lot more than that of an old depreciated car

Quote:
Originally Posted by noopster View Post
@smartcat- while I appreciate the sentiment, I do think 5 years is too long a span to consider. Probably a 2-3 year horizon would be more realistic.
When I do a search online for used entry level Audis & BMWs, it is very rare to see any listings. These two brands were launched around 2 or 3 years back. So this means most owners keep their cars for more than 3 years. Mercedes has been around for a long time, and one can see lots of listings.

Quote:
Originally Posted by CoolFire View Post
Smarcat, what if you also consider interest cost (or opportunity cost of capital if you are using own funds), which is actually the biggest benefit in buying used cars?
Quote:
Originally Posted by lamborghini View Post
Add in another point of financing, and the used car deal becomes sweeter. Irrespective of the higher interest rates in used, it is still cheaper to take a 15L loan at higher interest rates than a 30L loan.
Good points there! I should have thought about it before.

Quote:
Originally Posted by lamborghini View Post
However, the second owner would pay 20L for the car, plus 1.5L (Assuming reliability it as poor as a Merc) for maintainance a year. This comes to 7.5L.
Quote:
Originally Posted by GTO View Post
Bank on 1 lakh per year in maintenance (averaged). .
Maintenance costs of Rs. 1.5 lacs per year for 5 series & Rs. 1 Lac per year for a 3 series - are these estimates for a cranky BMW/Merc, and at an authorized service center? If I happen to stumble on a well-behaved BMW/Merc, will my average maintenance costs be lower?

In isolation, the number (1 Lac for 3 series or 1.5 lac for 5 series) seems to be large - but actually, it is quite reasonable. Because maintenance costs would only be 3% per year on the OTR price (30 lacs & 50 lacs respectively). This is like expecting a 5 year VW Vento TDi (Rs. 10 Lacs OTR) to cost just Rs. 30,000 per year to maintain.

Quote:
Originally Posted by GTO View Post
. Thinking of a pre-worshipped BMW after the Civic, eh?
Not until I figure out what to do about the missing spare wheel!

Quote:
Originally Posted by GTO View Post

50 grand from the after-market, which is the only option on a 5+ year old German.
One needs to find a good private garage then. Seems to be a hassle - a big enough hassle to drop the idea of buying 5+ year old German.

Quote:
Originally Posted by gaurav_chopra04 View Post
If the first owner has got the bsi package of 5 years, you pay another lac for the same and get it transfered. .
What's their logic for charging Rs. 1 Lac for the transfer of maintenance package?
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Old 24th May 2011, 11:53   #14
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

Quote:
Originally Posted by smartcat View Post
Maintenance costs of Rs. 1.5 lacs per year for 5 series & Rs. 1 Lac per year for a 3 series - are these estimates for a cranky BMW/Merc, and at an authorized service center? If I happen to stumble on a well-behaved BMW/Merc, will my average maintenance costs be lower?

In isolation, the number (1 Lac for 3 series or 1.5 lac for 5 series) seems to be large - but actually, it is quite reasonable. Because maintenance costs would only be 3% per year on the OTR price (30 lacs & 50 lacs respectively). This is like expecting a 5 year VW Vento TDi (Rs. 10 Lacs OTR) to cost just Rs. 30,000 per year to maintain.

One needs to find a good private garage then. Seems to be a hassle - a big enough hassle to drop the idea of buying 5+ year old German.
Well, in bigger cities, finding a good mechanic is not that difficult a situation. Google and team bhp would be assets in such a scenario.
About the maintainance, at an A.S.S, a regular service costs 40K in itself. If you add in the rest, it should come to such figures for a well maintained car. If it is a poor example, the best bet would be to AVOID!
Also, if you find a good S.S., the maintainance comes down a lot. In the past two years of our 2004 E270, we have not paid as much for maintainance as we used to thanks to the mechanic we have found. I believe we pay around 1L a year tops for everything, but the car has not given much issues.
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Old 24th May 2011, 12:11   #15
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Default Re: BMW Maintenance Packages - Buying New BMW Cheaper Than Buying Used?

A slightly different perspective. Is owning a car only about money? The tagline of a BMW is JOY. I wonder how much of it is left when you need to shell out 1 lakh ever year for its servicing. Add to it the times when it might suddenly show a problem while you are on the road or planning a trip with your beauty. Plus an old used car stays a USED car no matter how well its kept.

On the other hand when you buy the car new you get to experience JOY as you drive it out of the showroom. You get to even SMELL JOY if I can say so. Also given that you opt for one of the Secure packs, you don't need to shell out a single rupee extra for the next 5 years. The chances of it breaking down untimely are also very remote compared to the 5 year old machine.

Hence I repeat my question. Is experiencing JOY only about the Money?
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