[rapid_fire]

Originally Posted by spr1ngleo

dumb question: can you reduce the IDV on your own, to save on insurance cost () ? so far whenever i bought the comprehensive insurance on policybazar, IDV was auto-calculated. pls advise.

Yes, you can. There is an option to edit the IDV in policy bazar also. But the amount you save will not be that big and so not recommended.

My brother in law did the same mistake of lowering the IDV when he took insurance for his polo (actually he didn’t do it intentionally, he choose the lowest quote in polcybazar, which had significantly low IDV). But in the same year, he had to put the car for sale, as he was going overseas. One guy liked the car and agreed to pay 600000, but when he saw the insurance papers, he said he can only give the IDV (450000), as he need to apply for loan, for which the amount they approve will depends on the IDV.

[Bluehead]

Originally Posted by GTO

Wanted to just chip in and say, you MUST consider the pre-owned route if you have even a little knowledge about cars. That'll straight away save you a whopping 50%. As an example, I bought a 3-year old Civic with ~7000 km and a year of extended warranty left, for 8.10 lakhs (price of new at the time was 16 lakhs).

TBH I was not even contemplating this option until GTO specifically called it out. The more i think about it now, it makes more and more financial sense.

Pardon my ignorance, for going the pre-owned route , I have two questions ;

1. In the classified section of Team BHP, is there a way i can search for car advertisements issued ONLY by Team BHPians. Buying from a fellow bhpian will give the comfort that car would have been well maintained by the owner

2. Discussed GTO's point with another car enthusiast. He said to look for expats who are selling their car. His logic was that these expats get transferred to another country or are called back abruptly. They invariably are in a hurry to sell and the chances of landing a bargain are quiet high.

Is point no 2 a valid assumption ? If yes, are there any offline / online site which specializes in this ? or put differently how do i know the expat pre-owned cars that are on sale .

[McLaren Rulez]

Originally Posted by Bluehead

1. In the classified section of Team BHP, is there a way i can search for car advertisements issued ONLY by Team BHPians. Buying from a fellow bhpian will give the comfort that car would have been well maintained by the owner

Off topic but be careful with this idea - this is a large forum with lots of members. Some maintain their cars well, some don't. The only case where there is a bit of extra peace of mind is if the car has a regularly updated ownership report, but even there, things can be conveniently omitted. You also restrict your pool of cars unnecessarily by this sort of filtering.

[sunilch]

Originally Posted by Bluehead

TBH I was not even contemplating this option until GTO specifically called it out. The more i think about it now, it makes more and more financial sense.

Welcome to the world of pre-owned deals that will give you great Value-For-Money ratio

Points to be noted here are:

1) You need a good amount of patience and time to spare and wait - Good pre-owned deals are not quick to come by unless you are extremely lucky. You may have to meet multiple sellers, visit some showrooms to check service history, meet the same seller a few times to check the car that you like, etc.

2) You will need to have some know-how about cars or someone who has the knowledge and has time to accompany you during your search - a friend, any cousin or a very trusted Mechanic (he may charge a nominal amount though)

3) Are good at negotiation and have an open mind. You may not get the desired model/variant/color/interior combination. Seller may not come to your price but will be close to it. You may get a different color but a desired brand and vice versa. So be open and flexible here.

Originally Posted by Bluehead

Pardon my ignorance, for going the pre-owned route , I have two questions ;

1. In the classified section of Team BHP, is there a way i can search for car advertisements issued ONLY by Team BHPians. Buying from a fellow bhpian will give the comfort that car would have been well maintained by the owner

4) It is not guaranteed to be the case. Not everyone can or will take care of his car in the best possible way.

Originally Posted by Bluehead

2. Discussed GTO's point with another car enthusiast. He said to look for expats who are selling their car. His logic was that these expats get transferred to another country or are called back abruptly. They invariably are in a hurry to sell and the chances of landing a bargain are quiet high.

Is point no 2 a valid assumption ? If yes, are there any offline / online site which specializes in this ? or put differently how do i know the expat pre-owned cars that are on sale .

5) Point 2 is valid but it is very rare to happen to you when you look out specifically for it. There are no such specific forums for this. It is pure luck that you may come across one. And this not just applicable to expats but also to Indians who might be working in your state but will need to move to another due to job transfer. I know because I have purchased a car from one such person in the past.

Important: It is a common scam run by some African nationals (look around on this forum and you will read a lot about it) that they try to sell you an expat owned vehicle and try to get a token/deposit from you before you see the car. So do not go out on numerous forums and post your 'Need to buy an expat owned car'.

[Ry_der]

I follow a simple rule.

Preface: I own a preowned Hyundai Accent 1.5 GLE/CNG variant 2010 with 88K on odo as on date.

Last year, I was almost on the verge of buying a new Freestyle T+ or Amaze S. But the sixth sense kicked in the chest and stated " You dumb moron, why do you wish to change your car? " To which I could only utter "Because I want to". After this question, I tried to search an alternate answer but I couldnt find one.

Then I realized, I dont need a new car at all. My yearly running is less than 8K KMs out of which City running is atleast 5K KMs. My Car has some of the cheapest OEM Parts available in the market as of now. Ownership cost is way lesser than the TBTS 350 I have.

Than I worked out for a formula for me to buy a new car.

Interest for 1 year for an amount needed by me to get financed should be less than the current Annual maintenance charges borne by me.

For example: I will need atleast a loan of Rs. 5 lacs to get a decently spec'ed vehicle. On which I had to shell out a sum of Rs 40K(Atleast) as Interest P.A. So as long as I am not shelling a sum of Rs 40K on maintenance on my current ride, I shouldnt buy a new car. And I dont even spend 40K including fuel on my Car during a year.

[BLACNWYTE]

I violated almost all of the thumb rules listed in the OP. Even I can't believe I just said and did that because I'm considered financially prudent by most of my family. But I have my reasons. First I will tell you how I violated the rules and then I'll tell you why.

First and foremost the budget rule. Instead of sticking with the conventional 50% of your gross annual earnings, I went for about the 250% of my gross earnings budget. To give you a scarier picture, the loan amount was almost double my annual income. Then came the loan tenure, it's for 15 years! Yes, you read it right- fifteen years. When the loan is closed my baby will need an RC renewal. And you know who put me upto this, my dear wife. She works for a bank and they have amazing terms for employee loans (actually the car is hers ). See now the picture doesn't seem that scary, right?

What I pay (when I say 'I' actually I mean 'my wife', the loan is in her name) as EMI for the incredibly huge loan is what I would have paid for a normal B segment hatch whereas I drive a C2 segment SUV (supposedly). The terms of the loan is such that I'll be paying the principal first and I'll be charged simple interest on the diminishing principal. To get a better picture, I'll be paying less interest than a normal car loan of the same amount at the lowest available fixed rates for five years. (EMI remains same my income will only increase. fingers crossed). I retain thing for long, typical middle class mentality so the loan is a boon for me and an excuse to keep the car for as long as I can. And while purchasing, my key concerns were quality, reliability, low service and spare costs and its availability and accessibility. I chose Hyundai because it addressed all my key concerns. The only part I didn't consider was the yearly insurance which honestly shocked me for the first renewal but now I do proper research and get better deals without burning a hole in my pocket and compromising the IDV.

My advice was and still is to stick to the best car which you can afford. It may not be 50% of your annual income or others but the one which you can own without compromising on your current lifestyle. Even though it seems I have gone against my own advice, in reality it never was. I took a calculated risk with the purchase and two and half years down the line I can safely say that now I can fulfill the thumb rules of car purchase. And as with many other BHPians I have started a new car fund as soon as I took delivery of my steed.

[V.Narayan]

Originally Posted by V.Narayan

Well said, locusjag. The entire question of affordability while buying a car arises because we are assuming here that a loan will be taken and EMIs paid over the course of a few years i.e. we mortgage our future assumed earnings to pay for a luxury non-asset that is more expensive than what our current savings and safety buffers permit. A salary man assumes steadiness of income with some reasonable truth to it. But with India's economy slipping seriously and dark clouds of trade wars with USA on the horizon if I were in IT as a salaried man I wouldn't stretch my budget and EMI too far. Better to buy what you can with the liquidity you have today than assume a steady or growing income 5-years into the future. In my time I've bought over a dozen cars all cash down with what could be afforded at that time's income and savings. EMIs were reserved only for real estate which all said and one has a tendency to appreciate.

Forgive me for quoting my own post written about 10 months ago when the world was very different. With CV-19 we do not know if the economic winter is of two quarters or two years. For young people today setting out to buy a car I would once again advice prudence and not stretching yourself on EMIs. Most Indians below the age of 40 are experiencing the first economic shock of their lives as adults. They are witnessing an event they only read about in business magazines but was too far removed from the reality of ever growing incomes that their reality was. Today CV-19 has changed that realty forever and this pandemic has become a defining experience. Better to live well within your means and never a debtor be.

[himanshugoswami]

Originally Posted by V.Narayan

Forgive me for quoting my own post written about 10 months ago when the world was very different. With CV-19 we do not know if the economic winter is of two quarters or two years. For young people today setting out to buy a car I would once again advice prudence and not stretching yourself on EMIs. Most Indians below the age of 40 are experiencing the first economic shock of their lives as adults. They are witnessing an event they only read about in business magazines but was too far removed from the reality of ever growing incomes that their reality was. Today CV-19 has changed that realty forever and this pandemic has become a defining experience. Better to live well within your means and never a debtor be.

Completely agree with you sir.

I am in the market for a car out of dire necessity as I am currently without a ride (mistimed the sale of one of my cars and the other one has become a bit long in the tooth and hence not very reliable for the frequent inter state trips I take). I was all set to buy a car on loan in early March (with 80 percent amount as loan) to take depreciation advantage.

Now with lockdown, I have reassessed my situation, and what I am planning is the following:

I am going down a segment (or a segment and a half) from what I was originally planning.

I have ensured that the total on road price of the car is put in an FD. SBI offers a very attractive car loan if securitized with FD, with the rate coming to only 7 percent.

This gives me some buffer against future drop in earnings while still allowing me to avail tax benefits on the interest paid.

I would advise all the youngsters who are looking to buy a car to really reevaluate and buy only if you need, and not based on your desires. There will be enough opportunities in future to indulge your desires, now is the time for prudence, fiscal and otherwise.

[V.Narayan]

Originally Posted by himanshugoswami

I am going down a segment (or a segment and a half) from what I was originally planning.

Nice to hear from you. :-)
Right thing to do.

My policy vis a vis cars and homes is to buy a home {to live in i.e.} that is one segment higher than what I can afford comfortably. And to buy cars that are one or two segments below what I can buy comfortably. And in my case at least do both without loans.

All the best.

[Lobogris]

Originally Posted by himanshugoswami

I have ensured that the total on road price of the car is put in an FD. SBI offers a very attractive car loan if securitized with FD, with the rate coming to only 7 percent. This gives me some buffer against future drop in earnings while still allowing me to avail tax benefits on the interest paid..

It is good that you are exercising financial prudence. However, I fail to see the benefit of taking a loan against your FD. You will get say 6% interest on the FD and the loan will be at 7%. All you are doing is paying to use your own money. You can deduct a percentage of the interest paid from taxes but you will have to pay tax on interest earned on the FD as well. End result is that you are losing around 1% per year. If you need money in an emergency, you won’t be able to encash that FD as long as the loan is not paid off. You would be better off in buying your vehicle in cash and then putting the EMI amount in to your savings each month to rebuild your corpus. Of course it would be even better to buy a cheaper used car from a higher segment in cash.

[vharihar]

Perhaps 2-wheeler sales will drastically shoot up in the next 2 years, bcoz:
- Public transportation will drastically lose its sheen as it's totally against the concept of social-distancing.
- People may postpone car purchase decisions due to continued employment risk.

[Mohitkumaar]

Here is my take on buying a car. Need your comments upon the same.

My current car is a 2012 A-Star AT (purchased by parents from their life savings) which will complete 10 years this Republic Day. I plan to run it for the next five years until its registration runs out. Since Delhi allows only 15 years and no extension on registration, I will have to get a new car when the A-Star has lived its life.

My plan is simple.

Instead of paying interest on a car loan, I will make the bank pay me interest while I save for the car.

Not buying a new car. When I purchased the 2016 Nano AMT for wife in 2019, the car was 38 months old and had run around 28,000 kms. The person had purchased it in July 2016 for 3.15 Lakhs and in 2019 September he sold it to me for 1.5 lakhs! That's less than half. Damned if I ever buy a new car again!

Starting 25 Jan, I will open a 5 year RD with a bank and will start putting 10,000 in it. The assumption is I will end up with >6 lakhs by the time RD is over and A-Star runs out (At this point I will explore if EV conversion kits are possible. If yes, I will get this converted and only buy a used car from whatever is left.) I am not really bent on buying a large car. Small hatch will do.

The key is once the first RD is done and I have purchased A-Star's replacement, I will not stop! I will carry on with a new RD and will carry on until I am ready for the next car when I will have much more money.

[graaja]

Originally Posted by Mohitkumaar

Starting 25 Jan, I will open a 5 year RD with a bank and will start putting 10,000 in it. The assumption is I will end up with >6 lakhs by the time RD is over...

Instead of RD, why not do SIP in mutual funds? As you have a 5 year horizon, you could invest 50% of the monthly investment in equity MFs and 50% in debt MFs or RD. The 50% you invest in equity MFs over 5 years should provide a better corpus appreciation than just RD.

[Scorpio80]

Originally Posted by Mohitkumaar

Need your comments upon the same.

It would depend on your savings philosophy. If all your saving regularly go into RDs/FDs, then it might be okay for your personally. But if you regularly save in MFs or equity, and doing RDs just for car, then it might not be that beneficial (especially for a 5 year horizon). I will give you my logic below.

When I wanted to buy the car, I regularly invested my money in Mutual Funds through a SIP. When I actually bought the car, the money that I had invested had grown at >15% CAGR. Looking at the growth my investments were providing, I decided to go ahead with a car loan instead of liquidating my investments (and paying exit load and tax on it). Ended up as a good decision as the investment has grown drastically over the last year, easily covering the interest and then having enough return to still beat a FD. In reality, my car is cheaper than what I paid for because of the loan.

For a 5 year horizon, equity usually tends to beat FD/RDs. You can make a decision based on you risk appetite.

[Mohitkumaar]

Hmm,i will consider MF SIP.

Can you explain your last sentence though, about your car being cheaper than wat you paid becuase of loan preferably with numbers in the example.