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

[Screwdriva]

All my cars are 20+ years old. IF your car has the following to its credit then ownership becomes relatively easy and sensible:

1) Well engineered and reliable since launch
2) Has parts available new from the factory
3) Sold millions of units
4) Has an large enthusiast following
5) Is relatively inexpensive to operate

Across the world, there are only a few cars that meet all these criteria. Those that do, enjoy daily usage and value appreciation (and admiration) even today.

[ksakotai]

My Toyota Qualis petrol is 11 years old. I bought it in 2004 sight unseen when we moved from US. I used to have a Toyota Sienna which was our guardian angel, having saved us from sure catastrophe.

Other than the usual body work problems, wifey having banged against a buffalo once, it has served us for more than 2.5L kns. Touchwood, the car runs like butter. I will probably not sell it at all but want to remodel the interiors to make it more comfortable (much to the dismay of family members)


- Krishnan

[born_free]

Dear Team-bhp members.
Request you to help me with this dilemma.

My Wagon R VXI is 5 years old, and I never had any major problems with the car so far. In fact I am very happy with the reliability of the car and should have ideally continued to drive it for another 5 years before thinking of replacement.

My only concern is the safety aspect, and need for bigger boot space. I don’t really feel confident, when driving flimsy built car without ABS and Airbags, and the boot can’t even accommodate my baby’s stroller.

But here is the twist, my employer provides an attractive car lease policy the terms of which are explained below. For example if I lease a car with ex-showroom price of 7 lakhs the calculation work out as follows

1. I pay EMI on ex-showroom price for 44 months at market interest rate, and the company pays for Road Tax, Insurance and Maintenance for the duration of lease. The EMI for comes out to be 17000 Rs. per month for a 7 Lakhs ex-showroom price at 12% interest rate.
   
2. At the end of lease tenure (44 months), I can buy back the vehicle at 21% of ex-showroom price. The buyback cost comes out to be 147,000.
   
3. The EMI is tax free and additionally I get 4800 rupees per month as fuel allowance after deducting the tax. Assuming 30% income tax rate the net salary reduction is 17000-5100-4800 = 7100.

So practically I can drive home a Baleno at net EMI of 7100 rupees and buyback price of 147,000 with zero expense on maintenance and insurance till duration of lease.

I would be selling my current car, and put the money in a debt mutual fund so that it can be used for buy-back of leased car.

Now the dilemma is whether to go for it or not considering that it would put some dent on my finances. I have no debt and save 30% of my gross salary and also expect decent salary hike in next appraisal cycle enough to absorb the EMI.

At one hand I don’t want to incur unnecessary expenses especially on a depreciating asset and on the other hand I don’t want to compromise on the safety and space aspect of my current car.

All suggestions are welcome, what would be the ideal compromise.

[ptaneja]

Originally Posted by born_free

All suggestions are welcome, what would be the ideal compromise.

All the above corresponds to what your "brain" says.

Go with what your "heart" says

By all means, go ahead with the swap !!

[DieselFan]

Originally Posted by born_free

All suggestions are welcome, what would be the ideal compromise.

This is straight forward. Go for Beleno. It is economical as well as the right option from safety point of view. You may also retain your wagon R for local runabout for your spouse or any other family member.

[filcord]

Originally Posted by born_free

Dear Team-bhp members.

My only concern is the safety aspect, and need for bigger boot space. I don’t really feel confident, when driving flimsy built car without ABS and Airbags, and the boot can’t even accommodate my baby’s stroller.
.
Now the dilemma is whether to go for it or not considering that it would put some dent on my finances. I have no debt and save 30% of my gross salary and also expect decent salary hike in next appraisal cycle enough to absorb the EMI.

At one hand I don’t want to incur unnecessary expenses especially on a depreciating asset and on the other hand I don’t want to compromise on the safety and space aspect of my current car.

All suggestions are welcome, what would be the ideal compromise.

I would let the safety aspect, especially if we are talking of children, be the decider here. Financially your choice is a no-brainer, most attractive indeed. The only thing is that , long-term I would not use a diesel given the increasing findings of pollution aspects of the technology.

[landcruiser123]

Originally Posted by born_free

My only concern is the safety aspect, and need for bigger boot space. I don’t really feel confident, when driving flimsy built car without ABS and Airbags, and the boot can’t even accommodate my baby’s stroller.

The article (in the first page) recommends you to change your car when your requirements have changed.

I think the requirements you've mentioned above can't be compromised, hence buy the Baleno.

I would like to believe you've been given a good offer, use it to the maximum potential possible.

[V.Narayan]

Originally Posted by born_free

Dear Team-bhp members.
Request you to help me with this dilemma.

My Wagon R VXI is 5 years old, and I never had any major problems with the car so far.... My only concern is the safety aspect, and need for bigger boot space. I don’t really feel confident, when driving flimsy built car without ABS and Airbags, and the boot can’t even accommodate my baby’s stroller.....So practically I can drive home a Baleno at net EMI of 7100 rupees and buyback price of 147,000 with zero expense on maintenance and insurance till duration of lease....I would be selling my current car, and put the money in a debt mutual fund so that it can be used for buy-back of leased car.

At one hand I don’t want to incur unnecessary expenses especially on a depreciating asset and on the other hand I don’t want to compromise on the safety and space aspect of my current car.

Go for the new car your heart is after. Baleno is a good worthy car to upgrade to. You are in the early stages of a 40 year career. Don't worry about the new car being a depreciating asset. All assets depreciate. Go for the new car. Reward yourself with the associated feel good factor. Your car and your house are more than assets - they are an expression of who you are and the status you command or aspire to. Go for it.

[Dry Ice]

Originally Posted by born_free

Dear Team-bhp members.
Request you to help me with this dilemma.

My Wagon R VXI is 5 years old, and I never had any major problems with the car so far. In fact I am very happy with the reliability of the car and should have ideally continued to drive it for another 5 years before thinking of replacement.
..
All suggestions are welcome, what would be the ideal compromise.

Also have a look at the pre-closure conditions and charges. Lease is a good option but then you have to stick with the employer for the lease period. If you are not thinking about a change in the near future, you can consider it

[born_free]

Originally Posted by ptaneja

By all means, go ahead with the swap !!

Originally Posted by DieselFan

This is straight forward. Go for Beleno.

Originally Posted by filcord

I would let the safety aspect, especially if we are talking of children, be the decider here. F

Originally Posted by landcruiser123

The article (in the first page) recommends you to change your car when your requirements have changed.
.

Originally Posted by V.Narayan

Go for the new car your heart is after. Baleno is a good worthy car to upgrade to.

Originally Posted by Dry Ice

If you are not thinking about a change in the near future, you can consider it

Thank you guys for your inputs. Its amazing to know that all of your support going for a new car considering the circumstances.

I will accept the consensus here to go for a new car in the beginning of new Financial year when the salary hike comes into effect.

Will have sufficient time for Test Drive and cost benefit analysis.

This solves the first hurdle in long journey to owning a new car.

Baleno was just an example, I have not yet made up mind so as to which car to buy and the budget is not yet finalized which can vary between 7 Lakhs to 10 Lakhs ex-showroom Gurgaon .

Next task is to finalize the budget and car. This is where a lot more analysis and advice would be required.

May be time to create a new thread in what car section.

[Hayek]

Originally Posted by born_free

But here is the twist, my employer provides an attractive car lease policy er deducting the tax. Assuming 30% income tax rate

So practically I can drive home a Baleno at net EMI of 7100 rupees and buyback price of 147,000 with zero expense on maintenance and insurance till duration of lease.

As someone whose employer provides a somewhat similar scheme (the only difference is I bear maintenance costs), what you should consider is three factors:

1) What percentage of your post tax total comp is the ₹7000. If it is 10% or less, you need not bother about it. If more than 25%, think carefully.
2) Are you expecting a promotion in the near future? Most such schemes lock you in for the term - and if you get promoted in the near future, a Baleno may not seem that great as your limits rise.
3) What happens if you quit or lose your job. Do you have the savings to pay this off. In my first job, I had bought a second hand Zen with such a scheme. But when I changed jobs, my new employer refused to let me move that car onto their scheme - and I had to borrow from my dad to pay off the balance.

Best of luck with your decision

[hserus]

If you buy a bigger car buy it - but your old wagon R is worth keeping - a second car is always useful for quick runs around local and congested areas. The only thing that keeps a wagon R "safe and secure" is that it is driven at slow speeds in congested city areas.

Within those areas you can park in tiny places a baleno isn't going to be able to park, and you have less concern about dents and scratches from carless motorists crowding you than you do on a newer vehicle. So .. buy that bigger car for trips with your wife and kids by all means, keep the waggy as a local runabout. That way you also have a car available for your office when your wife takes the other car out with a driver / call driver.

[sidmumbai]

i am currently using a all new Honda City purchsed in 2011 december. The car has till date run around 1.5 lakh kms mostly on highways in Mumbai-Pune, Mumbai-Goa and Mumbai-Bangalore sections. There has been no major repairs except the clutch plate change, Ac pulley change and the spark plug and brake pad replacement.

Presently I am really in a dilemma whether to sell the Honda city and go for a new car. Personally I am quite happy with the car performance but a little apprehensive on the upcoming repair/maintenance cost. The Service Advisor has warned me for a potential suspension change costing 25 K (Since 2011 model) steering column repairs for 40K.
Really need some insight if these issues are really generic to all Honda City cars

[scorpion_blore]

Originally Posted by born_free

So practically I can drive home a Baleno at net EMI of 7100 rupees and buyback price of 147,000 with zero expense on maintenance and insurance till duration of lease.

This sounds similar to the car lease policy of my current employer. I almost went ahead with the lease, but later decided to drop the idea due to a clause mentioned in the policy which I had missed before.
As per the policy, the car can be run for 36000 kms for a lease period of 3 years. Any additional distance travelled above 36000 kms would attract additional charge of Rs 6 per km. This translated to a distance of 1000 kms per month. Not only I would have to pay for the fuel, but also Rs 6 per km for every km I travel!

I'm not sure if every car lease policy has such a clause, but it is better to enquire your HR if there is any cap on the total distance that can be covered during the lease term (just to be on the safer side).

Please go through the policy fine-print and see if there are any such clauses which can attract penalty. Do keep us posted about your decision.

[ptaneja]

Originally Posted by scorpion_blore

Please go through the policy fine-print and see if there are any such clauses which can attract penalty. Do keep us posted about your decision.

All car leases come with this capping - and this can be modified as well. You can change the max kms you'll travel per year, with a slight increase in EMI/month ( because of increase in maintenance charges to be incurred by Leasing company)