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Old 6th August 2011, 11:45   #391
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

Highnoon/Sridhar-V, absolutely right! I came across a 3K done I10 Sportz AT with an asking price of 4.7 - could be brought down to 4.5 but I was getting a new one effectively for ~ 90K more. Just didn't make sense to buy a used car here.

So, just booked a I10 Sportz AT for my better half!


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Originally Posted by HIGHNOON View Post
I thought the second hand AT cars depreciate very fast. I am surprised that they are being charged a premium in Pune for being AT.
If you try to gauge the market by trying to sell your AT in the market , you'll be shocked what you are offered.
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Originally Posted by sridhar-v View Post
When a second hand Santro AT comes into the market the seller always wants a very high price for it & it makes more sense to buy a new one & keep it for 6-7 yrs(or 1,00,000 kms). The same case applies for I10 also.

This same thing happened to me when I was shopping around for my Santro. Price difference between a 5 years old car & the new car was only 1.5 lakhs. So decided to cover the difference by paying higher emi. It was a worthwile decision as I have been able to do over 32000 kms in 3 years without any problems.

Go for the Astar AT if it is going to be used primarily as a single person car. Its rear seats are a joke. If you can wait for some time - Hyundai is coming out with a 800cc car & the AGM of my service centre said that AT version of the same is expected. Likely launch sometime after Diwali. (was sept. end. /oct. initially but seems to have been delayed).

Sridhar
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Old 6th August 2011, 12:18   #392
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

Here Iam owning a Hyundai Santro bought in 2001 Nov.
Now run 110000Km. still my daily ride, my zooming highway machine.
Serviced and spent on all needed changes on time.
According to be its as good as new.
But you know peer pressure, status pressure and yeah the changing times where i don't want to look an old timer with no scope of improvement in life.

Was all set to give this car away 3 times in the past 2 years, but the moment i almost get there, i am forced to retain it for the memories i have with it and its been my most reliable companion.

I need a new car. No second thoughts.
But should i hold on to this car is a big question.

Wonder how much i will get on it if i give away?
Will never be worth selling it for nothing cause i have enough space to hold on to it for ever in my garage.
But what will be the cost of holding on to such an old car forever ?

Is there a thread on how to hold on to your OLD UNUSED car ? if not, its time for the MODS to start rattling their brain to pen down.
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Old 6th September 2011, 14:36   #393
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

Hello all mates
I am writing this piece to get the suggestions although I know that these questions can never be answered in black or white, very subjective sometimes through head sometimes by heart.
Well I have an OHC Nov'02 model run just below 1Lac Km, the car is a beast not to mention but recently the aging has become apparent.
Things needed to be changed are radiator, wheel hub, Head lamps, light control switch handle (cant put on high beam). Steering has also got pretty tight, tie rod end needs to be replaced with possible steering assembly overhauling. RPM drop is also an issue and a/c blower need overhaul too. Rattles also need to be addressed.
Can somebody please give a hint how much will all this cost? (Yess I will go to workshop for a diagnose but asking to have an idea)
Also I will go for a paint job (if I have to keep the car), so add 20K more.

So guys will it be a good proposition to keep the car for another 2 years (Engine still roars as I push the pedal) or should I shun it for a new diesel kid.

Replies awaited!
Thanks!
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Old 6th September 2011, 16:36   #394
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

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Originally Posted by Honda Monk View Post
Hello all mates
I am writing this piece to get the suggestions although I know that these questions can never be answered in black or white, very subjective sometimes through head sometimes by heart.
Well I have an OHC Nov'02 model run just below 1Lac Km, the car is a beast not to mention but recently the aging has become apparent.
Things needed to be changed are radiator, wheel hub, Head lamps, light control switch handle (cant put on high beam). Steering has also got pretty tight, tie rod end needs to be replaced with possible steering assembly overhauling. RPM drop is also an issue and a/c blower need overhaul too. Rattles also need to be addressed.
Can somebody please give a hint how much will all this cost? (Yess I will go to workshop for a diagnose but asking to have an idea)
Also I will go for a paint job (if I have to keep the car), so add 20K more.

So guys will it be a good proposition to keep the car for another 2 years (Engine still roars as I push the pedal) or should I shun it for a new diesel kid.

Replies awaited!
Thanks!

Hi Honda Monk,

Based on what you've written, I have the following points for you:
  1. A 2002 Honda with the issues mentioned in your post are pretty much normal.
  2. If the engine is rev happy till date, its a strong point for retaining the car.
  3. If you are the first owner of the car and the repairs cost about 50K (including a 20K paint job), go for it. Also, if the general paint seems fine, skip the painting part. The car will surely care for you for some more time to come.
  4. Since you have had the car for long and are maybe looking at reducing your fuel bills, evaluate the CNG option for the Honda.

Regards,
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Old 12th September 2011, 12:26   #395
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

Hi,

The cost is likely going to be more than 50K. Maybe between 50K and 100K. However, so long as the body does not have extensive corrosion and repair required and the engine is okay suggest you get it repaired and keep it. Just consider that if you buy a new car worth 8 lacs it will cost you Rs 2 lacs in depreciation in year one itself apart from the obvious tension of someone banging into your car without any invitation. I would say get a good person to do the paint and body job. You will get a lot of pride in retaining your old car.

Regards,
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Old 11th October 2011, 10:59   #396
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

Hello Friends,

I would like to thank GTO for starting this wonderful thread & all other TBHPians who made me stick with my car, though it is 7+ years old now (or should I say young).

Gives me immense pleasure to share with the group that yesterday I crossed the 1 lakh km milestone. Yes while coming to office I could see the magical 6 digit figure on my odo (100000).

It is exactly 7 years & 3 months ago that I bought my Indica (10th July 2004 was the delivery date). The car has been nearly trouble free all this while & not even once I was stranded on the road (due to any failure or breakdown, touch-wood).

The first 50K kms were covered in 57 months, while the balance 50 is just under 30 months

Will be getting the 1 lakh km service done on the coming Saturday. I intend to keep the for another year or so (roughly @ 20K kms more). I am on the look out for an upgrade for more than 2 years now & can extend it for one more year . Hopefully the TBHP Official Review & Test Drive section would help me find out that perfect upgrade for my Indica.

Last edited by AutoIndian : 11th October 2011 at 11:00.
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Old 20th October 2011, 13:44   #397
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

Quote:
Originally Posted by Visaster View Post
But you know peer pressure, status pressure and yeah the changing times where i don't want to look an old timer with no scope of improvement in life.
...
But what will be the cost of holding on to such an old car forever ?
If you are going to keep the car but not use it, why keep it at all? Going for a new car just for the status of having a newer/better car is, I am afraid, not the most logical reason, and if that's the sole reason you are thinking of buying a new car, I suggest you reconsider.

The reliability of your car will never be matched in the price you get for it.
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Old 2nd November 2011, 07:18   #398
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

We sometimes are overblown by the thought of driving that new car - but as GTO has correctly said - we are really blowing away money - the maths just doesnt work out (obviously if the car is falling apart in 5 years, that's another story). I sold my Swift at 12,000KM - at 3 years. But, because the cars had been maintained so well, I got 4.8 Lakhs for a car that I bought at 6 lakhs. With my 40 km a week driving to the supermarket, and the rest of the week's driving in a Honda Activa - I will definitely keep my current i10 and think twice of selling it when that new car bug bites in about 3 years.
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Old 2nd December 2011, 16:01   #399
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

I must agree all that is quoted in the article is true. I am a guy "suffering" new big car; the car is actually a step ahead of my capability.

But ultimately there is a fun part in it which is priceless.

If the requirement is just 4 wheels to move on, from place to place, we can opt for alto or nano than a C segment car in the first place. That also saves a lot of money
Cheerzzz...
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Old 7th December 2011, 14:11   #400
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

Yet another timeless article by GTO. Agreed, a lot of the maths in the upgrade calculations is actually common sense, but there is a significant "opportunity cost" that goes unnoticed.

I hit upon this article as I debate between upgrading my tyres (and leather seat covers) and a swap for my 5+ year old Esteem Vxi, which has 54k on the ODO and delivers the same sheer pleasure it did 5 years ago.

However, I guess it turns the tables slightly - not entirely - in case of a leased car option, which is very popular incentive offered to employees by many large corporations.

In summary, the leasing company bears the taxes, registration, insurance premia for 3 years, while the employee foots the EMIs over an agreed tenure and interest, on the ex-factory price. The employee gets the benefit of income tax on the EMI component, as the pay-out is directly deducted from the salaries. However, the fringe benefit taxes of 7-8% apply and a value of 20% of the price of the car is payable to the leasing company after completion of the loan tenure.

Calculations have revealed that leasing provides a very low cost of ownership as compared to traditional ownership.

IMHO, leasing will probably turn into a popular option sooner than later.

ciao,
Pannags
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Old 26th January 2012, 16:30   #401
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

Quote:
Originally Posted by GTO View Post
[b][u]

Option TWO : Upgrade to a C+ segment car

• Rs. 12,50,000 : Cost of a new Honda Civic or equivalent sedan.
Rs. 4,25,000 : Proceeds from the sale of your existing sedan used as down-payment toward the new car.
• Rs. 20,000 : Approximate EMI per month for 8.25 lacs on a 5 year term.
• Rs. 6,000 : Averaged maintenance cost per year.
• Rs. 1,20,000 : Total cost of insurance premiums for the next 5 years.
• Rs. 6,20,000 : Realistic resale of your new C+ sedan in year 2013.

Thus, if you upgrade from a C-segment sedan to a C+ segmenter, you will spend a total of Rs. 11,55,000 over the next 5 years. OR 2,31,000 per year.
Pardon me GTO, but unless I dont understand you correct I think your calculation is slightly Off

Since you are calculating the cost from the 6th-10th year of ownership and the first car is already paid for, The proceeds from the old car should not be calculated in your formula. Basically for upgrading, you aren't really purchasing a new car for 12.5 lakh. You are paying 20k EMI for 5 years after Trading your old car in.

For upgrading from C - Segnment to C+ according to your calculations should be (EMI+Maintenance+insurance)-resale value

Or ((20,000*5*12)+(6,000*5)+(1,20,000)) - 6,20,000 = 7,30,000 and NOT 11,55,000

Total ownership cost is 1.46 lakh/year over 5 years.

I think what you calculated was the cost of ownership for FIRST time buyers who put down a down payment of 4.25 lakh

Total difference in cost is 1.46lakh/year - 0.82lakh/year = 0.64lakh/year

Last edited by Warhound : 26th January 2012 at 16:44.
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Old 26th January 2012, 21:52   #402
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

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Originally Posted by Warhound View Post
Pardon me GTO, but unless I dont understand you correct I think your calculation is slightly Off

Since you are calculating the cost from the 6th-10th year of ownership and the first car is already paid for, The proceeds from the old car should not be calculated in your formula. Basically for upgrading, you aren't really purchasing a new car for 12.5 lakh. You are paying 20k EMI for 5 years after Trading your old car in.

For upgrading from C - Segnment to C+ according to your calculations should be (EMI+Maintenance+insurance)-resale value

Or ((20,000*5*12)+(6,000*5)+(1,20,000)) - 6,20,000 = 7,30,000 and NOT 11,55,000

Total ownership cost is 1.46 lakh/year over 5 years.

I think what you calculated was the cost of ownership for FIRST time buyers who put down a down payment of 4.25 lakh

Total difference in cost is 1.46lakh/year - 0.82lakh/year = 0.64lakh/year
Now I am confused. Somebody help me.

I think GTO posted the re-sale value of the new car after 5 years only to illustrate how much it would depreciate, but I don't think it should be taken into consideration for calculation in the example given. But hey, I am a novice in accounting, so would need more insights to this formula.
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Old 6th February 2012, 04:43   #403
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

GTO, I think that there is a mistake in your calculations, but not the one given by Warhound.

Warhound, I think that you have also made a mistake here.

Quote:
Originally Posted by Warhound View Post
I think what you calculated was the cost of ownership for FIRST time buyers who put down a down payment of 4.25 lakh

Total difference in cost is 1.46lakh/year - 0.82lakh/year = 0.64lakh/year
You have not considered the cost of down payment for new car since this is covered by sale of old car which is already owned. This is OK. The cost of ownership of new car is then 730,000 or 1.46 lakh/year. But then while calculating the cost of owning the old car you should not consider its initial value either.

The cost of owning old car is not 410,000 (0.82 lakh/year) but 100,000 + 35,000 - 150,000=-15,000 i.e. gain of 15,000. The net cost of new car is 730,000+15,000=745,000 (1.49 lakh/year).

GTO has considered the initial cost of 425,000 on both options so the net result is the same.

Option 1: 410,000 is the cost of buying and running an old car and selling it after 5 years.

Option 2: 11,55,000 is the cost of buying and running a new car and selling it after 5 years.

The difference between the two is 11,55,000-410,000=745,000. This is the same as above.


Quote:
Originally Posted by GTO View Post
But thatís not the entire picture, is it? What we have not calculated yet is the opportunity cost of the Rs. 20,000 per month that you are blowing away toward the new carís EMI. If you donít upgrade, that money can instead be invested. Even if reasonably invested, the saved Rs. 20,000 per month will become a whopping 15 lakh rupees at the end of 2013!

Net net, retaining your current 5 year old sedan (over a 12.5 lakh sedan upgrade) will make you richer by 22.5 lakh rupees over the next 5 years! Thatís an earning of Rs. 4,50,000 per year. OR Rs. 37,500 a month.
This where I see a mistake. 20,000 per month invested for 5 years is assumed to become 15 lakh in 5 years. But we have already considered 12 lakh as the cost of EMI for the new car (20,000*12*5). The opportunity cost due to gains from investment is only 15-12=3 lakh.

So the net cost of upgrade 745,000+300,000 = 10.45 lakh.
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Old 6th February 2012, 10:59   #404
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

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Originally Posted by highway_star View Post
You have not considered the cost of down payment for new car since this is covered by sale of old car which is already owned. This is OK. The cost of ownership of new car is then 730,000 or 1.46 lakh/year. But then while calculating the cost of owning the old car you should not consider its initial value either.

The cost of owning old car is not 410,000 (0.82 lakh/year) but 100,000 + 35,000 - 150,000=-15,000 i.e. gain of 15,000. The net cost of new car is 730,000+15,000=745,000 (1.49 lakh/year).

Please check your calculations again. the Car is a depreciating asset. You have to factor in how much value the OLD car will have for another 5 years of usage (in other words how much does the car depreciate by). GTO has explained it pretty well in the opening post.

If you still have doubts, you came up with a gain of 15,000 for using the old car. Unless the car is a classic, you cannot make money off it while using it at the same time. This can only happen when the car value appreciates which isnt in this case.

Quote:
Originally Posted by highway_star View Post
This where I see a mistake. 20,000 per month invested for 5 years is assumed to become 15 lakh in 5 years. But we have already considered 12 lakh as the cost of EMI for the new car (20,000*12*5). The opportunity cost due to gains from investment is only 15-12=3 lakh.
Unfortunately, the interest we get by making deposits isn't the same as interest one gets from borrowing from the market. You would get a net ~6% on bank deposits after tax deduction from source (fixed/recurring deposit schemes) while you would borrow from market anywhere between 11-13%. I don't know the math GTO used but its safe to assume the logic is correct.
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Old 6th February 2012, 13:08   #405
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Default Re: ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

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Originally Posted by Warhound View Post
Please check your calculations again. the Car is a depreciating asset. You have to factor in how much value the OLD car will have for another 5 years of usage (in other words how much does the car depreciate by). GTO has explained it pretty well in the opening post.

If you still have doubts, you came up with a gain of 15,000 for using the old car. Unless the car is a classic, you cannot make money off it while using it at the same time. This can only happen when the car value appreciates which isnt in this case.



Unfortunately, the interest we get by making deposits isn't the same as interest one gets from borrowing from the market. You would get a net ~6% on bank deposits after tax deduction from source (fixed/recurring deposit schemes) while you would borrow from market anywhere between 11-13%. I don't know the math GTO used but its safe to assume the logic is correct.
I think my calculations are correct.

Maybe 'gain' was the wrong word to use here. I meant net positive cash flow. The whole calculation on Options 1 and 2 given by GTO is just about subtracting the inflows from outflows. As i have said, I agree with GTO up to this point.

Where I differ is on the opportunity cost of investment. The amount spent on EMI's is already accounted for. Only the gains on potential investments can be added here.

I am not going into the issue of how much return you can expect on your investments. It is just an assumption, as is every other figure that is used in these calculations. The number given by GTO is not unreasonable. Let us stick to it. What matters is the calculation logic.

If you are still not convinced, would you like to give a complete step by step detailed calculation? I can post my version too and we can compare.
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