[sterlingsilver]

Hi Guys,

I need your advice and perspective please.

My wife drives a Suzuki Baleno 1.2 Petrol Delta Variant (Manual) 2017 model. She bought this new in 2017, just before we got married. The car has run just about 30k kms to date, is in pristine shape and is very well maintained. Everything is stock and the car is sparingly used. Extended warranty is available till 07/2021.

The car's On road price was approx Rs 7.25 Lakh at that time. She took a Rs 6.25 Lakh loan to buy the car, with a tenure of 7 years Her EMI payments are on time and despite some bullet principal repayments, her principal outstanding amount on the loan is about Rs 3.25 lakh on date.

Everything was fine and life was going great, till now. Now comes the best part.

An aged relative of ours owns a Corolla Altis 1.8L AT VL Variant 2014 model (new shape, the highest trim) which he bought new as a retirement gift to himself in 2014. The car is in absolute pristine shape and done just about 30k kms. With his age, he finds that he is unable to use the car as much he hoped for and he is asking us if we would be interested in the car, for a price of Rs 4.75 lakh. There is no loan on the car.

A quick check revealed that our Baleno would sell for atleast 5.50 lakh now. With 3.25 lakhs taken away to pre-close the loan, we would be left with Rs 2.25 lakh on hand. We need to put in 2.50 lakhs from our savings to buy the altis, which is possible. With the Corona playing havoc with everyone's future, we are unsure if we need to spend Rs. 2.50 lakh from our savings now, for buying a used car. We also have our first kid on the way.

We are thoroughly confused on what to do. We have not purchased any pre-owned car before, but we are tempted to. We are unsure if this a good financial move too. Our car was bought new, but we are trading up for a pre owned!

We wanted our advice on the above deal and would like members to guide us in this matter.

1. Is 4.75 lakhs the right price for a single owner Corolla Altis 1.8L AT VL Variant 2014 model with 30k kms on the odo?

2. Is it prudent to hold on to our baleno and continue to pay the EMI's and hold on to the car, or good idea to trade up in the current circumstances?

3. Though we have some savings of 2.50 lakhs, we DO NOT PLAN to use this is preclose the Baleno loan to that extent. We would like to continue to pay the EMI on the car and look for bullet principal repayments as and when we can.

4. Considering that the 7 year loan tenure taken to buy the baleno was not a smart move, is it prudent to sell the car for 5.50 lakh, close the loan, uptrade the car to altis and put 2.50 lakhs out of our pocket? We do not want to take a loan to buy the altis.

5. We are used to the mileage, service and upkeep cost of the baleno. By how much would this go up with the altis purchase?

6. We love the comfort of the rear seat of the altis and always wanted to buy an automatic car someday for our city drives. All this came together at the same time, at the most inappropriate corona-uncertain time, which is causing so much confusion.

Please help!

[GTO]

I'm a huge fan of lateral upgrades, but would advise against this.

- Assuming your wife isn't a car girl, the Baleno suits her needs just fine.

- You're losing way too much money on the Baleno due to depreciation (steepest in the initial 3 years) & the long-term loan, and how financing is structured (heavy interest vs principal in the initial period).

- You are saying that you need to dip into your savings. That's a big no-no in this pandemic. If anything, one needs to strengthen their savings (more so because you have a kid on the way). Also note that the parts cost of a 6-year old Corolla will be significantly higher than an in-warranty Baleno. 1 major mechanical failure (yes, it happens in Toyotas too) can cost you Rs 100,000+.

Don't sweat it out. There will be lots more Corollas in life .

I'd much rather live a stress-free life with a Baleno than stretch my finances / savings for an old Corolla.

[KunalMadaan]

I would say go for it. With a baby on the way, build quality and comfort of a corolla would be a boon for the baby as well which baleno would not be able to provide.

[rayjaycleoful]

Originally Posted by sterlingsilver

1. Is 4.75 lakhs the right price for a single owner Corolla Altis 1.8L AT VL Variant 2014 model with 30k kms on the odo?

Please help!

Am I reading this correct? The car is with worth atleast 8 lakhs, that too in Delhi. If your relative is aware of the actual market price, please go ahead with this purchase. You won't find a deal like this again, it's an extremely comfortable and capable car. A couple of brake pad and CVT oil changes are the only foreseeable expenses in a Corolla under normal use!

[alikidwhy]

Go for it. The market price for 2014 Altis is north of 8 Laks in Delhi and these are run minimum 50-60k kilometre.

It’s an amazing deal. The long term benefits outweigh the current costs.

Even if you sell it after 5 years, you’ll AT LEAST break even.

[sterlingsilver]

Originally Posted by GTO

- You're losing way too much money on the Baleno due to depreciation (steepest in the initial 3 years) & the long-term loan, and how financing is structured (heavy interest vs principal in the initial period).

GTO, would appreciate if you could please clarify/elaborate. I was thinking getting 5.50 lakhs for a 3 year old car is in line with normal depreciation and infact a good price by current standards for such a car (please correct me if iam wrong).

Our logic for considering this "upgrade" was getting 2 birds with one stone: 1. To pay off the car loan existing on the baleno by selling the car at a good price (thereby putting a stop to further funds down the drain as interest and EMI's) 2. A lateral upgrade to a sparingly used car, coming in at a reasonable price at the same time, with a 2.50 lakh outflow from our side.

On the basis of financial prudence, Am I missing something here, or where am I going wrong with the math /reasoning? Please advice. You are an advocate of lateral upgrades in this forum. Would love to know your reasoning and how you work out the math in such cases to take a call.

Originally Posted by rayjaycleoful

Am I reading this correct? The car is with worth atleast 8 lakhs, that too in Delhi.

Rayjaycleoful, Iam completely baffled too. Unfortunately, I could find no proper valuation/guideline rates online. Few Car websites indicate anything from Rs 4 lakh to Rs 6 lakh, cars on OLX and Cars 24 are listed for 8 lakhs+. An executive with the Toyota dealership and Toyota U trust in Chennai indicated that this was a fair rate as the model was now discontinued. But Iam not convinced. That's why I posted this on TBHP for members to advice.

[Aafaq]

I would say it is a very good deal!
Corolla is a big car with bigger engine has a good built quality compared to Baleno and will be easier to drive as well being an automatic. plus the asking price is not that much as per the used car standards.

[rayjaycleoful]

Originally Posted by sterlingsilver

Rayjaycleoful, Iam completely baffled too. Unfortunately, I could find no proper valuation/guideline rates online. Few Car websites indicate anything from Rs 4 lakh to Rs 6 lakh, cars on OLX and Cars 24 are listed for 8 lakhs+. An executive with the Toyota dealership and Toyota U trust in Chennai indicated that this was a fair rate as the model was now discontinued. But Iam not convinced. That's why I posted this on TBHP for members to advice.

Not true! Please don't be misled by dealers. They would list a car like this for 12 lakhs. Realistic price is at least 8. I'd buy two if I could find this variant/ year for 4-6 lakhs .

[knrn]

Hi.
You are in the doldrums.

I would advise you to re assess your financial situation.
How much savings will you end up losing? If it's around 30-40% of your portfolio then you can do this but if it is more then you shouldn't. Just offering an insight to help you dear friend.
Remember these are the times to survive.
People are not getting salary. Jobs are being cut. Moreover you have a kid on the way. You will end up spending north of 60,000 on the hospital bill during delivery plus additional expenses. I don't know whether your wife is working or not but if she is then there might be some issues. Plus your wife will be on maternity leave. Ideally she is supposed to get paid for six months but what if the company doesn't. Child care products are expensive too. Add immunisation to that.

Nobody knows how long this corona havoc is going to last. Even if a vaccine is developed at the earliest it will be another 6 months till it reaches us public. And corona curve has just started rising in India. America is at its peak while it is going down in Europe.

I agree this is a very tempting offer but you must rethink your finances. Do not depend on resources borrowed from the future. What matters is the present. So rethink your finances. Do you have enough reserve for the next six months?
Alternatively you can commit to your uncle not to sell the car now assuring him that you will definitely buy it later. Can give him some token money.

Opportunities like this come and go but do not land up in trouble.
Think prudently. I am sure you will take the right decision.

[sterlingsilver]

Originally Posted by knrn

I would advise you to re assess your financial situation. Just offering an insight to help you dear friend.
Remember these are the times to survive. Think prudently. I am sure you will take the right decision.

Thanks for the genuine advice knrn, really. This opportunity to upgrade cannot be more ill timed with everything happening (positives and negatives) all at the same time. I completely agree with your viewpoint.

I want to keep financial prudence as the key decision factor here. While I am aware that I am getting the corolla for literally a steal, the existing car loan on my wife’s baleno is a silent killer and thought that this lateral upgrade deal gives me a stoploss.

I know iam not skilled enough to decide the financial math of this “depreciation vs selling price vs loan outstanding vs lateral upgrade” conundrum all by myself.

I know GTO to easily recommend and use Pre owned lateral upgrades for financial savings and to the enthusiasts’ advantage. If he is recommending to stay away from this (for some reason), I will take his (and your) advice.

[Axe77]

I think there are two key aspects in the order below which are partly interlinked.

1. Your financial status;
2. Kid on the way.

IF and only IF you can feel confident about the financial spend should you go ahead with this. I took away various concerns from your post about dipping into savings (which isn't bad per se). If you re confident about stable non-declining cash flow in the near to mid term and are well placed for all other liabilities then this is a great lateral upgrade. If not, sit tight. Period! For all the reasons GTO articulated well. The last thing you need with a new kid is being in financial doldrums. Not just for the financial pressure but also the added insecurity and mental stress that will cause in an already very new situation with a kid on board!! Moving in a car is a very small part of a kid's life, specially in the early years. While it is undoubtedly a safer car (for the child in particular) its not like the Baleno is unsafe either.

But if financially this is not making you nervous (and please assess that VERY carefully without the excitement of a big car blurring your assessment), then here goes my take on why this is still a good upgrade. Assuming the numbers on sale price / purchase price etc are correct, here goes:

1. Usable life: I feel the Toyota will be easy to own for 10-12 years while a Maruti would perhaps be ideal for 7 - 8/9 years. This is just from my own ownership experience of various Jap cars as well as Marutis (although admittedly I have not owned
a Maruti since 2009). In that sense, both have a residual life of 5 - 6 years approx. At that point, both will also be worth similar money when you go to sell them. Which is next to nothing. (Note that when you are selling a 8 - 9 years+ old car, the used market does not discount further the second owner factor. I myself experience this when we sold our City A/T at about 10 years and 106k+ kms.

2. The car itself is a fabulous deal. Its been owned by a relative, the mileage must be genuine 30k. Its not so low as to be a concern and low enough for it to be a good deal. The purchase itself will be hassle free and its being sold at a great price. Also, given your relative is old, I am hoping it would have been well used over the last 6 years (no boy racing / rough usage).

3. The Altis is a better, bigger, safer car. As a young family, that's always a good thing. Not just because there is a kid traveling in it at times but for the parents traveling in it as well (your own lives are infinitely more valuable now that you have a child).

4. Under the guise of this transaction, you are also becoming EMI free for the next 4 years (albeit with some dip in your savings) and I feel that itself is a good outcome. I'd say keep a small major maintenance (unforseen) kitty aside as well. Also identify a reliable aftermarket garage which can reduce your upkeep cost on the car. Toyota service is 12 months and 10,000 kms while maruti wants your cars in the SVC every 3 / 6 months as I recall. Contrary to popular belief, their services are NOT cheap. I will not be surprised if a routine service of a Corolla and a Baleno are the same price - and less frequent for the Toyota at that!

In summary, unless there is a question mark on the work / finances front - go for it.

[self_driven]

Originally Posted by sterlingsilver

An aged relative of ours owns a Corolla Altis 1.8L AT VL Variant 2014 model (new shape, the highest trim) which he bought new as a retirement gift to himself in 2014.

Quite a tricky situation. While the Altis is a steal at that price, the depreciation and loan closure hit on the Baleno will be massive.

One out-of-the-box solution:
Your Baleno is worth 5.5 lakhs. Your relative wants 4.75 lakhs for the Corolla. If you can coax them to keep a small car for local errands, both parties can simply exchange cars (without paper transfer).

Your relative gets the Baleno instead of 4.75 lakhs cash. You pay nothing for the Altis but continue to pay EMIs for the Baleno. Change ownership on papers in 2024 when you've repaid the loan.

Interest on your Baleno's loan has to be paid no matter what. This way you don't have to disturb your savings and can continue to pay off the loan in easy EMIs.

*coax term is used because this isn't a win-win situation for both. Why? Because if your relatives sell the Baleno in 2024, they'll realise that the depreciation hit for these 4 years would have been similar even if they'd held on to the more superior Altis (partly due to the price they're currently letting it go for).

[landcruiser123]

Hi Sterlingsilver,
More pros than cons in this situation, but the one big con- uncertainty due to COVID-19 can't be ignored.

If you, however, feel comfortable spending money and see the upgrade as necessary:

I think Baleno makes a good secondary car in your garage for all those drives to places with limited parking. I see an Elite i20 & Innova listed on your profile. I'd suggest letting go of the i20 for the Corolla.

Reasons:
1. You mention the need for an AT
2. A safer car for your child
3. Overall a superior car in every way
4. A great deal due to known seller, low mileage, and price
5. I assume Innova is your quintessential 8 seater family car that can't be replaced

For FE- Expect 8.5 - 9.5 kmpl in the choc-a-bloc city traffic and 12 - 14 kmpl on the highway for the Corolla. Parts are going to be very expensive(not an immediate concern,) but normal service is generally cheap.

[sumeethaldankar]

For Corolla.
1) Safer, sturdier (biggest factor)
2)More room, space, comfort
3) Sedan look and prestige, this is fast eroding due to the crossover/SUV.
D class sedan salaam (salute) that you will get.
4) Good bargain price.


Against Corolla
1) Will not be as fuel efficient as the Baleno. If you are used to 14-15 KMPL be prepared to get 9-11 KMPL
2)More expensive to maintain if things were to go wrong.
3)Used cars do get some problems now or later. eg it may need new tires etc.

For Baleno
1)It's your new car and you know you have used it from day 1.
2) Outstanding loan will cause massive deprecation hit.
3) FE and lower priced spares. The Baleno has Toyota reliability so not much you will gain here.

Against Baleno
1)Relatively unsafe.
2)Smaller car does not have the premium feel of a D class sedan.
3)Lesser space as compared to the Corolla

I would buy the Corolla at the bargain price If could afford to keep both, however in these trying times such purchases are a big no.

[petrolHead_1609]

Originally Posted by sterlingsilver

A quick check revealed that our Baleno would sell for atleast 5.50 lakh now. With 3.25 lakhs taken away to pre-close the loan, we would be left with Rs 2.25 lakh on hand. We need to put in 2.50 lakhs from our savings to buy the altis, which is possible. With the Corona playing havoc with everyone's future, we are unsure if we need to spend Rs. 2.50 lakh from our savings now, for buying a used car. We also have our first kid on the way.

You're getting a good price for your Baleno and I still can't believe the price for which you're getting that altis .

Here are my observations :
1. You're about to blessed with a kid, first thing would be ensure 2.5 lacs isn't a big chunk in your savings.
2. If it's not, blindly go ahead with this, your loan worry would end for once as it's a big sum and anyway is for an asset which would depreciate.
3. It's a wonderful car with all the bells and whistles and that engine is something which even today's D segment don't offer.
4. For that price, I think you can use it for 2 years and it would still sell for the price you bought it for. (As you mentioned the pristine condition)
5. It'll outlive the Baleno and being a Toyota, wouldn't be heavy on pocket.
6. Peace of mind! I would be a happier to take my kid anywhere in altis than Baleno. Hands down, one of the safest cars out there.
7. It's automatic, sooner or later your wife will be happy to have said bye bye to a manual.

On a different note, may this kid bring you a whole lot of happiness, luck and fortune. God bless