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Old 30th June 2012, 10:47   #121
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Default Re: An upside to the petrol price hike : Used car residuals CRASH

Originally Posted by ashis89 View Post

Heck, even a first time buyer with a budget of 1-1.5L can be tempted into buying a Ikon/Baleno or even an Optra, for that big car feel. But will he(in many cases) able to foot the fuel bills,let alone the service & spare costs? It is a known fact they are gas guzzlers.

Will he not be better off with an Alto?
I have a different take on this. Many people now a days buy cars on loan. For the salaried class it may be that they dont have full cash to make a complete down payment of the cars price. They then decide a comfortable amount to pay upfront depending on their ability to handle the EMIs. Even if they do have cash to pay upfront, many still take a loan as they are confident of investing the balance money in some avenue which is likely to give them more returns after tax even after deducting the interest payed on the loan.
For such people who prefer taking new cars on loans, this is a very tempting scenario indeed.
I ll explain. Suppose Mr A decides to buy a Swift VDI which comes to 6.61 lakhs on road delhi. He pays an amount say Rs 3.5 Lakhs upfront and takes the remaining 3.1 lakhs loan. Assuming 12 % interest and a period of 5 years, his EMI comes to be around Rs 6828 per month.

Now the same person can opt to buy a higher segment vehicle like an optra from the used market and still save on the down payment he was supposed to make on the swift.

With that he can spruce up his car add a few fancy gadgets, and he has with him a good example of a car (provided he has done his homework before buying it) from a higher segment spruced up to his desire.

To top it, he still saves money on the EMIs he would have to pay if he had gone for the swift which can compensate for the added fuel bills in some way. Instead of the Optra he can even go for the civic at a little bit more than his initial down payment and yet save money on the EMI which can be used to compensate the additional fuel bills.

Even in your example a person with 1-1.5 lakh budget if he goes for the Alto, would need to take a minimum of 1.3 lakh loan to buy the base model of Alto. If he prefers an LXi he needs to take 1.7 Lakh loan and if he takes Lxi K10 he needs 2 lakhs loan.

He ends up paying Rs 2863/3744/4405 as EMIs every month. OTOH if he can lay his hands on a well maintained eg of a higher segment car for the same 1.5 lakhs, he can very safely use his EMIs to buy 41/53/62 litres of additional petrol every month. which can very easily take care of his additional fuel requirement if his running is around a moderate 600 - 700 Kms per month. Of course it will bring additional expenses on the maintenance bills, but then you cant have everything can you. For the additional maintenance bills you are getting to drive a much bigger and better car.

Of course to each, his own, and one needs to plan and calculate things according to his needs and capabilities. Moreover buying a used car does require much more effort from the buyer, but if one does his homework properly, he can be more or less certain to be buying a car which is worth in case he decides on it.

Just a thought.


Drive safe.

Last edited by vibbs : 30th June 2012 at 10:50.
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Old 30th June 2012, 17:17   #122
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Default Re: An upside to the petrol price hike : Used car residuals CRASH

Originally Posted by sarathlal View Post
Isn't the title slightly biased on a buyer perspective?
Can the scenario in which the value of any asset nose dive, be considered in a positive manner, even if that might be beneficial to a subset of people?
Sorry but in accounting terms a car is not an asset. Unless you are using it for commercial transportation... Yes present value of a petrol car may have nosedived, but a seller too is selling it off to recover his costs right? he could always have kept it for longer...
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Old 30th June 2012, 17:44   #123
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Default Re: An upside to the petrol price hike : Used car residuals CRASH

I am yet to see any impact in used car prices due to petrol prices hike. Maybe its evident only in higher segment(C+, D etc.) An office colleague of mine has been on the lookout for used cars and we ended up checking Maruti true value, Mahindra first choice etc. for the hatch segment. The prices quoted there doesnt seem to have any impact(-/+). For e.g 2009 petrol Punto for 3.2L, 2008 Alto LXI for 1.9L etc. The reason we were exploring petrol hatches was buying used out of warranty petrol and get after market CNG. But now he seems to be exploring used diesel hatch segment.
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