ARTICLE: YOUR 5 year old car : Keep, Upgrade or Swap?

[Steeroid]

Originally Posted by Sankar

GTO, good thread!

Yup - its a very interesting topic. Beats discussing India's Population Problem in the morning - anyday.

[ajmat]

Sorry, went for a play for was not able to chip in earlier

old man says I think too much but I had agonised over these calculations some time back. I planned on a 3 year loan, Options based on opportunity cost of simply banking the money @7% (rate are much higher !) were

Assuming 4.5 L on my Vtec

Used Octy RS cash down- total cost would be 8.7L + value of vtec

New Octy RS taking a loan + 6 L cash down - total cost would be 12.3L + value of Vtec

Surprisingly - new Laura Elegance - plus cash down of 7.5 L + vtec trade in + for amount = cost would be Rs 10.3 L why ? Due to lower running costs and higher resale value

A Civic on loan would be around Rs 8.7 L

All these include perceived resale which could make or break things. The Jap cars maintenance costs make them far superior long term. The Skoda's have high maintenance costs built into equation.

Rush's calculation assume a bull market, partially correct - I took the Swift on a company lease plan - 100% paid for at an interest rate 3% above market. People thought I was nuts (tax element nullifies things though) but the real gain was that I could invest the 5 lakhs and nearly double my money. Bit tough nowadays.

My advise is for a Skoda - buy at 3 years, sell at 5 years, Jap cars buy at 3 years, keep it till it shakes

Whatever i say, cars are emotional purchases, I never wanted to sell my Vtec, I had no need to except for safety considerations and the fact that it was getting younger and I was getting older (like when a 80 year old marries an 18 year old!) . A colleague of mine wants to buy an auto Civic, yet needs money to furnish his new flat. He has a near pristine Accent. so conversations go like this

Him: "Boss, Rs 50000 EMI will kill me and the house will suck me dry"
Me" Why do you need a new car ?
He" heh heh, actually it is emotional but only practical reason is my legs hurt in this traffic!"
Me: "Keep the accent and buy an i10 auto"
He: "I don't like the i10 looks and one car will never get used"
Me" "Meru cab ? use it 3 times a week, it will come to Rs 12000 per month, a lot cheaper and you can control fixed costs, if you plan well"
He:" a ha"

I bet he will buy that Civic a little later though!

[jesal]

i still cant figure out what to do about my 7 year old accent. nothing goes wrong in it. i want to sell but i dont know what to buy. only autobox needed and this country is useless with that tranny

[Path_Finder]

Originally Posted by blue_pulsar

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.

This is true and I have seen it also.
However the reason here is slightly different – may be they want to show they are still humble and not carried away by success. For e.g. NRN still travels by economy class.

[musicmanaman]

A very good discussion I must say.

I for some reason, never see value in a New Car, I look for cars that have 4 yrs under their belt, taken the initial deprication hit, not too high on the odo, and is overall wellkept.

The biggest benifit is, I don't have to stick to the car for the next 5 yrs, as in my case, if I take a new car, I'll have to stick to the car for 5 yrs, till the EMI's get over.

Car that are 4yrs old and about 25k-40k on the odo are available for 1/3 or lower than the new car price, one can buy such cars and use the same for 2-3 yrs and sell the same, without taking too much of a depriciation hit, and this way enjoy a different car every 2-3yrs or earlier.

When I picked up my 2004 Amby with 23k on the odo in brillent condition and did the maths, the cost of ownership for 5 yrs was working out equalent or low than buying a new Alto. The Amby was ahead of the Alto on all counts except FE, where I would be spending about 24k extra per annum on fuel compared to the Alto.

My theory is simple, till I make it big, where my car is going to associated with my image, only then will I buy new cars, but till then I'll always look for value in the second hand used car market, cause when a person reaches a status where a car is crutial for his image then at that position, he's really not bothered savings and stuff, but till then for normal mass junta like me, I would keep the 5 yrs old car, or keep looking for value in the used car market.

[Steeroid]

Originally Posted by Path_Finder

However the reason here is slightly different – may be they want to show they are still humble and not carried away by success. For e.g. NRN still travels by economy class.

True - pushing that point across publicly probably saves them more money than a few hundred cars.

[suvi]

Originally Posted by DKG

The Japs I think introduced what is known as planned obsolescence whereby an automobile is designed to fall apart after 10 odd years so the consumer comes back to buy a new car. So going by that you actually can use modern cars for upto 10 odd years and they'll manage quite well before serious deterioration sets in.

It was actually Ford Motors. they tried to reduce the cost of the car by reducing the quality of the component which had the highest life. Ford pioneered this idea to make cars more affordable to the public (along with the famous assembly line invention)

[suvi]

In the papers i saw plenty of discounts from Maruti and Honda (maybe others too). I hope they increase the discounts after seeing this thread

[GTO]

Originally Posted by StarScream

No the loans were for five years. 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.

I still don't see how this would be possible since, on a 5 year loan, the principal outstanding (at the time of sale in 2 years) would be substantial. In fact, whatever your Zen or Esteem fetched in resale would go toward loan closure. Plus, the bank would have charged you 2 - 5% in foreclosure fees? Could you please look up numbers and share them with us? Would love to know more about this unique situation, and a possible opportunity.

Originally Posted by khan_sultan

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.

I am a lover of gems in the user car market. If I had a budget of 3 lakhs today, I'd pick & restore a 4x4 (vis a vis a new Alto). For 5 lakhs, it would either be a W124, Honda Accord or Ford Mondeo (vis a vis the Swift). For 7 lakhs, my pick would be the RS or last-gen Accord. Yes, the maintenance in any of these choices would be higher in comparo to new cars for the same price. But consider that I am driving far more expensive cars for a steal, that deliver phenomenal value in driving pleasure and ownership satisfaction.

Originally Posted by Path_Finder

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.

Bet no one would be ridiculing him if it was an Opel Astra or 1st gen Honda City, either of which are still "socially" acceptable today. Also, he would have had 25 lakhs more than his peers at the time of buying a house. Who had the last laugh?

Originally Posted by ajmat

My advise is for a Skoda - buy at 3 years, sell at 5 years, Jap cars buy at 3 years, keep it till it shakes

Do you mean, sell the Skoda at its 5th year of ownership (therefore, 8 years since build)?

Some more food for thought : While I have shown the benefits of owning a car for atleast 10 years (and which I practice), there are decent benefits in owning a car for 7 - 8 years too. But selling a 4 - 5 year old modern sedan that has covered only 60,000 kms just doesn't make any financial sense.

[DieselFan]

I do believe that car is a liability. I also believe that the car is an excellent utility. Keeps you highly mobile and saves hell a lot of time. So I keep wondering what is the right time to sell a call - 6 years, 8 years, 10 years, 12 years or 15 years.

How does one decide to sell before it is too late and everything falls apart without making a mistake of selling it too early. Reliability is my major concern. I would not want to be stranded in a highway with a broken down car. How do we ensure that even old cars are reliable. Is there a good preventive maintenance practice that helps me achieve my above goal on not having a breakdown on a car that is over a lakh km on its ODO?

[ajmat]

Do you mean, sell the Skoda at its 5th year of ownership (therefore, 8 years since build)?

Some more food for thought : While I have shown the benefits of owning a car for atleast 10 years (and which I practice), there are decent benefits in owning a car for 7 - 8 years too. But selling a 4 - 5 year old modern sedan that has covered only 60,000 kms just doesn't make any financial sense.

There are practical benefits - less hassle of disposal, the joy of change for not much more. Helps to leave some value for the next punter

Please see enclosed spread sheet

scene one - I buy a used car for 5 L sell after 5 years for 1 L factor maintenance costs escalations

Scene two - I buy a used car for 5l, sell after three years for 2.5L. add another 5 L and sell after another three years for Rs 2.5L

Difference between scenario will be Rs 1.5 L

car sale.xls

Lets not get too carried away by the money part only - it is important. But if the car has lots of small niggles which eat into your office time - you might pay a little more to offset that.

BTW - why do people buy new cars ? simple - easier money

[benbsb29]

Originally Posted by GTO

I am a lover of gems in the user car market. If I had a budget of 3 lakhs today, I'd pick & restore a 4x4 (vis a vis a new Alto). For 5 lakhs, it would either be a W124, Honda Accord or Ford Mondeo (vis a vis the Swift). For 7 lakhs, my pick would be the RS or last-gen Accord. Yes, the maintenance in any of these choices would be higher in comparo to new cars for the same price. But consider that I am driving far more expensive cars for a steal, that deliver phenomenal value in driving pleasure and ownership satisfaction.

This logic doesnt really go well with me. Agreed, owing a car from a higher segment gives me joy and associated status perhaps, but the joy would be short-lived when i go to get it serviced, or would need to replace some part.

The comparo between the Swift and the Mondeo in itself makes me strongly believe that i would still stick by the Swift. I love the Mondeo, no doubt about that, but financially, i would rather own and maintain the Swift.

[ajmat]

Another aspect is that buying a new small car is not such a bad thing as the opportunity cost was small in the first place and resale is normally good. This topic's scope really begins with midsize cars

[GTO]

Originally Posted by DieselFan

So I keep wondering what is the right time to sell a call - 6 years, 8 years, 10 years, 12 years or 15 years.

As long as the car is healthy and free of trouble. As stated earlier, modern hatches / sedans will easily give 1.5 lakh kms of reliable service with the correct upkeep.

Is there a good preventive maintenance practice that helps me achieve my above goal on not having a breakdown on a car that is over a lakh km on its ODO?

Link to upkeep thread (Maintain the car yourself. A service checklist). Always stick to manufacturer recommended schedules (or better).

Originally Posted by ajmat

Please see enclosed spread sheet

Good numbers. But again, it primarily focuses on used cars which generally offer a strong value proposition from the time of initial purchase itself.

But if the car has lots of small niggles which eat into your office time - you might pay a little more to offset that.

True and dependent on your brand of car, age & quality of upkeep. Easy to extract 1,50,000 of todays cars before the small niggles come in.

Originally Posted by benbsb29

The comparo between the Swift and the Mondeo in itself makes me strongly believe that i would still stick by the Swift. I love the Mondeo, no doubt about that, but financially, i would rather own and maintain the Swift.

Hey, my post was not on the topic of saving money....you really couldn't with a Mondeo or W124 . That part was on the discussion of gems in the used car bazaar.

Originally Posted by ajmat

Another aspect is that buying a new small car is not such a bad thing as the opportunity cost was small in the first place and resale is normally good. This topic's scope really begins with midsize cars

True. When you spend less, you will lose less. E.g. hatches like the Alto, Santro, Swift etc. have great resale.

[Ym-enjn]

Originally Posted by GTO

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?

And then what would you do with that 22 Lakhs, upgrade directly to a D segmenter..? It entirely depends on a person’s need and priorities. If your priority is to save then of course it’s happening and you will certainly do that. For example: Warren buffet was still driving a Beetle at his age of 75, whereas he could afford the costliest car of the world.

If everyone thinks like that then nothing above swift and Honda city should exist. The expensive cars are for people who can afford them, as I said earlier, if you have done your act well of investments and savings and you still have healthy earning and surplus money then there is no harm in going for an upgrade. For me it’s kind of rewarding myself every day. Why do so many people go on expensive vacations abroad? They could save that money and be lot richer after 40 years. And plenty of other things.

First comes necessities.. Agreed. Once your necessities are done with and your future liabilities are taken care off then comes the chance of accessories of life, for example bigger car, big LCD tv, better Vacations, Clubs, bigger and expensive Pets, latest mobiles, branded cloths and shoes and so on.

The facts in this thread are absolutely correct, but do not apply to everyone. If it was only about real cost of upgrading the car, then yes the figures are shocking and spot on, but for a lifestyle, its different for everyone.

PS: I am happy my wife doesn’t do Team-bhp, or else after she reads this thread my dream of 'upgrading' to Altis will go in drain.., as my Ikon is only 35000km and 3.5 years old and running strong. But I plan to keep it for another 4 years as my secondary car and sell the santro.