does timing the market help in car purchase

[narayan]

ive been too long in the financial industry to not think of this topic sooner than later....while timing the market has always been a oft debated topic while investing in stocks, i think there are some major advantages to timing the market while deciding on your car purchase too...here are some of my first hand as well as observed market patterns


1) in general - the last quarter of the year is a good time to buy a new car bcos, typically everyone defers their purchase to the new year for both auspicious as well as depreciation reasons.. ( a Jan 2007 car is always a 2007 model year car when u decide to sell it and a DEC 2006 car will always be a 2006 model car all though its just a months difference practically )


2) in case ur planning to buy a used car and have decided on the model, just do some research on the same model in its new car avatar...if this model is going to be phased our or is up for a facelift, invariably the previous avatar depreciates in value..for e.g - when the "all new" esteem was launched invariably, the used car price of the previous look esteems dropped by around 5%. the same happened to the FORD IKON 1.3FLAIR, when the company recently made the sporty bumper kit and some other interior specs available only on the NXT models standard on the 1.3 also.


3)similar scenario is observed when the new car is undergoing steady price cuts to revive sagging sales, across the board, used cars also become cheaper for the same model and same condition


4) competition is one major factor affecting car prices these days - any prospective corrolla buyer would have realised this closer to the CIVIC launch. if you had decided on the corolla and made ur purchase a bit before the civic launch, you would have probably ended up paying around Rs80k more bcos, the corolla went for a good price cut on the back of CIVICs huge launch success. even if ur in the market for the corrolla, wait and watch - im sure there are bigger price cuts/ better specs awaited. BEWARE potential FIESTA and AVEO buyers - the succcess of the VERNA ( both petrol and Diesel ) variants can clearly affect the prices in the near term for these cars.


5) market segment realignments/wrong segmentation can big time affect price of new cars - as a buyer its good to observe where car makers try and slot their new offerings with regard to the existing market players. there are some makers who have made this mistake of slotting their car in exactly the wrong place to start with resulting in probably no sales. such cases surely point to a good price cut in the near term (or as and when the company realises its folly). e.g Mitsubishi did this twice over. first with the lancer. the lancer when launched had the company of the DAEWOO CIELO, HONDA CITY, BALENO. In fact around launch time, the IKON 1.6 AND the ACCENT were also priced very close in this segment. Ford and Hyundai figured out they were in wrong company pretty early and realigned themselves ( hence they continued to sell good numbers). Baleno was a no winner for various reasons. all of us know what happened to the CIELO. but HM decided to realign the prices of the LANCER as late as only 2005 when they realised one fine day that there was a large segment of midsizers below Lancers price point which offered excellent value and for marginally more than the LANCER DIESEL, came the OCTAVIA. sales plummetted like no ones business. the mistake was repeated with the launch of the CEDIA at , initially, the same price point as COROLLA. by then the lower mid size segment and the upper midsize or the executive segment had consolidated and launching just a grown up lancer with an underpowered engine just would not suffice. as a result the CEDIA is already taken a Rs100000 price cut. GM on the other hand realised this quickly with the OPTRA and plonked that 1.6L engine and decided to fight it out with the CITY and foregoing its executive segment challenger the 1.8 OPTRA in the process ( a wise thing to do bcos anywhich way, the OPTRA cant hold a candle in the midst of the COROLLA, OCTAVIA,CIVIC )(sales point of view atleast)
another scenario that could span out in 2007 would be when HYUNDAI (if it finalises) the launch of the NEW SANTRO which automags have reported being slightly larger than the existing SANTRO and probably would sell along with the existing one. if that be the case, the existing SANTRO would have to take a minor downward price revision and this would have a chain reation on the WAGON R, ALTO, M800 (hope its still around ) and maybe the XETA also.


6) ok this is a difficult one to time but ppl who did this have really reaped the rewards. if u have decided on the car you want to buy and just in case its getting phased out and (you know that too ) , just go and grab from among the last of the stocks at the dealer ( of course pretend ur doing him a favour by reducing his inventory ) and ur sure to get a handsome discount. i really hate to quote this example bcos i wish i could have timed this myself e.g when the OHC was being shelved off to pave way for the NHC, dealers gave as much as 75K off on the 1.5s and a little more ( i heard ) on the VTECs to clear of the stocks !! :(
ok these are some of the "timing" factors i thought appropriate before a car purchase. thumb rule is, if the new car version is undergoing any price cut, this will have a similar effect on used car versions of the same car..


over to the forum..

[ess_a]

Originally Posted by narayan

in general - the last quarter of the year is a good time to buy a new car bcos, typically everyone defers their purchase to the new year for both auspicious as well as depreciation reasons.. ( a Jan 2007 car is always a 2007 model year car when u decide to sell it and a DEC 2006 car will always be a 2006 model car all though its just a months difference practically )

Interesting read narayan... BTW i dunno why you saying that last quarter is the best time? If you are mentioning discounts et al, then one has to keep in mind the depreciation costs as well...
P.S.- Almost all the observations are common knowledge but good work to list them all at one place