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Old 27th August 2008, 17:40   #31
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Yes, upgrading when there is a need to upgrade makes sense.
But my point is that people who upgrade "without" need to upgrade are looking for other things. For them car is not a utility, its like that latest phone they must have, even though a 1100rs Nokia Torch light phone is good enough.

If somebody is upgrading after 5 years because of innate belief that cars fall apart after 5 years, then that person stands to save a lot of money by understanding this logic.
But if you look at majority of upgrades they will fall into two categories
1. Old car problematic. Many people maintain cars from authorized dealers, and given the standards of service, old cars often become problematic. Its not the money issue in fixing them, its the time and risk issue.
2. Status. This happens with people for whom car is a status symbol. So they have to have the latest designer dress, the latest car, the latest phone.

The logic of this thread is most beneficial to people who think their well maintained old car will start giving troubles.

For example I have the option of selling old indica and buying an alto or something for city runabout. Why the deal will have me lose 1.5Lakh+, and I don't think I am going to spend 3000/month on repairs since as a city runabout the car will do max 850-1000kms.
When I sit down and look at the numbers, the total maintenance cost of my car after 80K kms is 1.61rs/km.
But how many people maintain this record. With this record in hand I can make an informed decision that a new car does not make sense, its better to keep repairing this one.

So yes, if somebody is upgrading the old car because of a belief that it costs more money to maintain than a new car, then it makes sense to sit down and write down the expenses and get a reality check.

But if somebody is buying because
1. Safety and risk : Car is prone to failures and is unreliable, or parts are available with difficulty etc.,
2. Status : Status is priceless.
to those people such calculations will not matter.
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Old 27th August 2008, 17:41   #32
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Originally Posted by GTO View Post
However, for hrag who has posted right after you, it probably makes sense as a diesel Indica @ 90,000 kms is on the verge of losing its reliability. Atleast most Indica's do a little after a lakh kms.
But mine is a petrol Indica.

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Old 27th August 2008, 18:27   #33
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Thats perfect calculation.

In 2006 I realized this funda after doing similar calculation when I was very upset about the way my brand new Swift was treated.

And within few months purchased just 8 months old Petrol Innova (very good condition) for 7 lacs including accessories worth 60,000/-. I saved straightaway minimum 2 lacs. rupees compared to brand new vehicle. Nearly 2 years of ownership I can say it would be good deal If one finds good maintained used car than buying brand new.

In early 2008 I have baught 2001 end manufactured Matiz SG model not so good condition but over all it is excellant considerring its 6+ years old. Total Cost including service and accessories (worth 20,000/- ) 1.5 lacs. Even If I have to spend 15,000/- per year towards service I don't mind as long as AC is working and vehicle is moving!

I realized this math only after buying 3 brand new cars year after year! When Maruti and BIMAL auto agency, Bangalore didn't resolve some of the issues I pointed out in Swift I started thinking why brand new car, Search good maintained car for month after month till you get it! So I decided to buy used car.

After reading so many stories of brand new car my advise search for used car first and spend 2000/- to 5000/- to find good used car take your trusted mechanics and inspect the car and make sure money you pay is worth for the car's condition. Tis would much better deal than buying brand new car.

Good thread!!

Regards,

Ravi.

Last edited by ravibhat : 27th August 2008 at 18:30.
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Old 27th August 2008, 18:38   #34
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GTO, what a perfect time to write on an article like this.. Interest rates at highest, petrol at highest, economy slowing down etc, etc.. people already afraid to buy anything on EMIs and auto companies already worried.

Its very thought provoking though.

I think there are lot more feelings attached to 'buying a new car over your 5 year old car' then the math’s involved. On top of it if you have a capability of upgrade then, you have that feeling of rushing blood in your arms. Everyone knows and it has been said in the thread that cars like many other things are depreciating assets. Over time they reduce value of money put in them. They need maintenance and cost of running. Then why on first place people buy expensive cars?

The answer is word 'expensive'.. It holds different value for different people. It entirely depends on a person’s financial condition and status to decide which car to buy or not to buy. Same is logical for Upgrade and changing ones old car. If your financial situation allows and you have a will then do it, if doesn’t then leave it.

The other major factor is priorities. If your priority is a new house or new office over the car then you'll do that, no matter how much trouble your old car gives, you won’t buy until you buy a new house.

Status, IMO, a status increase doesn’t mean that if you have just 15 lakhs rupees, then go and buy a top end Civic. That won't increase your status. Rather if you have upgraded your house, your job/office, your standard of living, your clothing, your eating out places, have better savings and insurance, bought good jewellery for wife and yourself, then certainly yes you deserve an upgraded car.. (clapping)
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Old 27th August 2008, 18:44   #35
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Interesting thread. I would add the costs of buying a new car go up if your existing car has 'lower' resale price which can be the case for certain brands and models.
For eg., a Lancer 2003 will probably sell for 75k-100k lesser than a OHC 1.5 Vtec 2003.
OTOH, Lancers are extremely reliable and pretty robust by Jap standards - so, I am enjoying driving mine into the 6th year. When I buy a new car, I would still retain it.
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Old 27th August 2008, 18:49   #36
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The difference comes during a regime of falling interest rates - for a very small increase in EMI you can upgrade. It was great the early part of this decade as rates fell - I changed my cars every two years.
Now of course the situation is very different. My City is already 3 1/2 years old and I definitely foresee keeping it till rates start to come down or I really need to change/upgrade.
There is one other factor here. The Honda is the first car I've owned that feels capable of lasting a long time. My Zen, Santro or Esteem just didn't give me that feeling - a totally subjective thing. Those cars would start loosening up at about 50k on the clock. The City has done 70k with hardly any issues and seems capable of doing double that. As my boss in the US once told me, a Toyota Corolla was the first `good car' he owned. I feel the same way about the City.
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Old 27th August 2008, 18:50   #37
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Was facing the same situation when my dad wanted to dispose off his esteem. Holding it actually has been helpful as the amount of usage of this vehicle had reduced and also it is still performing well with minor works sometimes.
I just feel usually people upgrade only for Tax benefits or for getting something new but they actually are loosing money on it.

PS: One more reason for not selling the car was the croooks as in brokers who used to apprach us with ridiculous pricing. Some of the prices which were quoted were
96 esteem single owner- 75000 in 2004
95 MM540 4 speed Xd3p - 95000 in 2003(both single owner and well maintained)

Well the reply given were we are quoting a price and tell someting reasonable else we got place to actually park them. Matter of fact is these two vehicles are being well used now and still cant think of selling them looking at the usage it has.

One more point which makes me think before i sell is my uncles 96 model car was sold off by the broker for a good 50000 profit. Thinking of it my uncle must have been insane to sell it off at that price
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Old 27th August 2008, 18:51   #38
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Quote:
Originally Posted by tsk1979 View Post
For them car is not a utility, its like that latest phone they must have, even though a 1100rs Nokia Torch light phone is good enough.
Tanveer, a mobile phone's MRP is pocket change compared to what a new car upgrade costs. A phone is an accessory, the new car a substantial outflow on the finances for most of us. I see where you're getting though. My sister wouldn't think twice before spending 75 grand on a Gucci handbag. On the other hand, my Jiju would be keenly interested in a thread like this.

Quote:
1. Old car problematic. Many people maintain cars from authorized dealers, and given the standards of service, old cars often become problematic. Its not the money issue in fixing them, its the time and risk issue.
All the more reason to maintain your car with discipline. I can personally attest to the fact that a well-maintained well-engineered sedan (e.g. my Maruti Esteem) can serve reliably, way after crossing the 1 lakh km mark. Jap cars, in particular, rule in long-term reliability. I maintain my cars for the passion I have, yes. But I also realise that every minute or rupee that I spend toward their upkeep will be rewarded with driving pleasure, reliability, service & resale that's far greater in value.

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2. Status. This happens with people for whom car is a status symbol. So they have to have the latest designer dress, the latest car, the latest phone.
Quote:
2. Status : Status is priceless.
Status : The result of a wicked state of mind that is dependant on the society's equally twisted state of mind . Can't argue with that and for those who do, well, to each his own. I don't have a problem taking my rusty Jeep along on a saturday night, when the gang is coming in their Benz' and BMW's.

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But mine is a petrol Indica.

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Got it, sir.
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Old 27th August 2008, 19:07   #39
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Quote:
Originally Posted by ravibhat View Post
And within few months purchased just 8 months old Petrol Innova (very good condition) for 7 lacs including accessories worth 60,000/-. I saved straightaway minimum 2 lacs.
Used makes so much sense. Look up Ajmat's article on finding true gems in the market. I saved over 2 lakhs on the OHC Vtec which had run a paltry 3000 kms. Though the real reason I went used is that Honda had ceased production of the Vtec.

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Originally Posted by Ym-enjn View Post
GTO, what a perfect time to write on an article like this.. Interest rates at highest, petrol at highest, economy slowing down etc, etc.. people already afraid to buy anything on EMIs and auto companies already worried.
Tell them about it, YM-enjn. Car manufacturers have found themselves in trying times. Funny thing is (or was it obvious), luxury car sales are growing. I guess that's the segment most insensitive to inflation.

Quote:
On top of it if you have a capability of upgrade then, you have that feeling of rushing blood in your arms.
Absolutely. But the point of this thread is to make people aware of the real cost of upgrading. C'mon, who would have thought that there is an opportunity to be 22 lakhs richer by retaining the current C-segmenter vis a vis a new Civic, Corolla or Jetta?

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Originally Posted by lancer_rit View Post
I would add the costs of buying a new car go up if your existing car has 'lower' resale price which can be the case for certain brands and models.
Interesting point. Someone with a Ford Fusion, Fiat Palio / Petra and Ford Mondeo would do better to hold on to their car, than lose even more money in the resale bazaar. All down to depreciation.

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Originally Posted by StarScream View Post
The difference comes during a regime of falling interest rates - for a very small increase in EMI you can upgrade. It was great the early part of this decade as rates fell - I changed my cars every two years.
Did you opt for only a 2 year loan duration on your cars? After all, a majority of our earlier EMI payments consist of interest. And even if the interest rates are low, you still can't escape from depreciation on your existing car. Nor the opportunity cost of your upgrade $$$.

Last edited by GTO : 27th August 2008 at 19:08.
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Old 27th August 2008, 19:33   #40
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Undoubtedly depriciation is the biggest and most overlooked cost with any automobile.
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Old 27th August 2008, 19:35   #41
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Quote:
Originally Posted by GTO View Post
Did you opt for only a 2 year loan duration on your cars? After all, a majority of our earlier EMI payments consist of interest. And even if the interest rates are low, you still can't escape from depreciation on your existing car. Nor the opportunity cost of your upgrade $$$.
No the loans were for five years. And I get your point that the advantage went to the bloke who bought the car from me but let me give you an illustration of what happened.
Say I bought the Zen almost totally financed in 2002 for an EMI of 10k (I dont remember the exact numbers). Sold it in two years when Maruti had the highest exchange bonus for upgrading to an Esteem (30k it was, I think) for very good resale - I lost about a lakh on the Zen, which had 30k on the clock by then. In those two years interest rates dipped some 2 percentage points.
Reinvesting the sale proceeds into the Esteem, I got a bigger car for the same EMI as the Zen. In two and a half years I sold the esteem with 50k on the clock and got the City for 11k EMI. No extra downpayments out of pocket.
In the last 5 years I haven't really paid more in EMI for my cars. Falling rates have helped me upgrade to bigger cars. Now, with rising rates, the situation is different.

Last edited by StarScream : 27th August 2008 at 19:38.
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Old 27th August 2008, 19:40   #42
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Quote:
Originally Posted by GTO View Post
.... You can also consider upgrading sensibly. Plenty of used (and excellent) Accords, Mondeos & RS' in the 6 - 7.5 lakh price band. ...
Well, let me introduce another term here w.r.t upgrade -- 'lateral upgrade' (if we can call it that).

I had a Santro that ran wonderfully for 5 years, had done only 28K kms, No EMI's to pay. I wanted to upgrade to a better performance car and went in for a used S10 (done just 31K Kms 5 years old, spotless.). In the bargain I got 20K in return also.

So after the upgrade I have a better performance/drivers car + 20K in my pocket to take care of the so called poor FE (8-9 kmpl) of the S10.

In a nutshell, I do belong to the same school of thought that GTO subscribes to for car upgrades. If done wisely, one can get bargains during the upgrade process.

Cheers,
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Old 27th August 2008, 21:15   #43
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Good point made out by GTO in this thread. But having agreed, let me point out the reality too.

One of our finance managers did all these calculations and even more all along – result: he never found it attractive to change his car and as a result he was struck to his Ford Escort for 9 years… even as his peers upgraded to swanking new cars. And he became a matter of ridicule with friends and family. Recently he changed to a Civic

Point is that this is not just numbers – there are things that get itself associated with aspiration and status values and Car is an important one. To take it a bit OT, wonder if someone does any calculation like this before buying jewellery … Ah! Even the above finance manager would not do it.
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Old 27th August 2008, 22:08   #44
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Nice thread by GTO. Makes sense, especially for the salaried class. Thanks for the beautiful thread.
Makes sense to keep the car till it runs for 1,00,000 kms atleast. Or till it starts giving problems.

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Originally Posted by Path_Finder View Post
One of our finance managers did all these calculations and even more all along – result: he never found it attractive to change his car and as a result he was struck to his Ford Escort for 9 years… even as his peers upgraded to swanking new cars. And he became a matter of ridicule with friends and family. Recently he changed to a Civic
I heard that even great personalities like Narayan Murthy and Azim Premji kept their cars for a long time. Narayan Murthy, as I heard, stuck to his M800 for many many years. Azim Premji was also driving a Ford Escort till recently, I heard.

Last edited by blue_pulsar : 27th August 2008 at 22:16.
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Old 27th August 2008, 23:28   #45
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GTO, good thread! I will now 'think' before i plan to get my next acquisition. Should teach head to rule over the heart
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