Important things to know before buying a new car or exchanging an old car
Is the end of 2013 a good time to buy a car in India? Looking for useful tips to get a good deal for buying a new car? Why is end of a year probably the best time to purchase a car? Should one buy a petrol car or diesel car? How to transfer no-claim bonus of an old car for discount on insurance of new car? In this article, I have listed some useful things one should know before buying any car.
Rising need to buy a car
In India, cars have slowly moved from being a luxury to being a necessity for many people. Travel is a major concern for people working and living in cities or towns. To make travel easy and comfortable, one wishes to own a car and drive the entire family comfortably to various places. Also, with real-estate prices increasing every year, most people are unable to afford homes near the places of their work. Several industries like IT, manufacturing, etc. are generally setup at one end of the city and only a lucky few manage to get homes near to their place of work. Most of the people have to travel long distances to reach their office, factory, etc. With unavailability of good public transport in most cities (except Mumbai), people are left with no choice, but buy a car (second-hand or new one depending on their budget). In addition, there are people who wish to buy a car after they reach a certain level in personal life (post marriage or post birth of a child or when parents become old) or professional life (promotion to a higher designation with salary increase). With easy availability of car loans, common man is able to buy cars very easily these days.
Why do car sales increase towards the end of a year?
Generally, people in India advise to buy cars during the last quarter of a year. There are several reasons as to why one should buy car towards the end of a particular year.
Some of the reasons are listed below:
-Major festivals like Navratri, Dussehra, Id, Diwali, Christmas, etc. fall in the last quarter of a year. Most of the car dealers offer good attractive discounts during festive season.
-Most of the car dealers borrow big amount of money to buy cars for their showrooms and selling them to customers. They generally pay some interest on the borrowed money and so are in a hurry to sell the car models of a particular year before the models become less popular with people. Most car dealers have a target to achieve in terms of number of car models to be sold before the end of that year and hence try to offer as much discount as possible to attract potential customers. Generally, a new year sees the launch of several new cars and so people may not want to buy old models of previous year. To attract such people to buy car models of a particular year before the year ends, car dealers offer lucrative deals to customers.
-In India, winter generally sets in major parts of the country during the end of a year. In other words, it is the best time to learn driving a new car as most part of the day is pleasant. So, people prefer buying cars during the last quarter as they get plenty of time to get a strong hold over their driving skills before the arrival of less favorable summer and monsoon in the new year.
Thus, car sales generally increase manifold towards the end of a particular year as car dealers and auto manufacturers are desperate to make as much sales as possible and customers benefit by getting good discount offers.
So, it's a win-win situation for both the parties involved.
Important things to know before buying a car
As discussed above, car dealers offer great discounts and lucrative prices in December every year to sell as many cars with models of that year and clear their inventories. They do this so that they have to pay less interest on money borrowed for buying cars in bulk, hike prices of certain models and launch new car models in the new year. But, one should simply not go with the lower price offered on cars at the end of a year (say December 2013 this year). A smart buyer should decide the number of years he wishes to use the new car for. If the customer intends to use the new car for a long period of time (say 7 to 8 years), then, such a customer can plan to buy a car in December getting good discounts on a car model. However, if the customer is planning to change the car after 3-4 years, it is better he / she waits for the new year before buying a new car. This is because a car purchased in the month of November or December of 2013 will bear the registration date of 2013. This registration date matters a lot during resale of a car i.e. when a customer tries to sell his / her used car. The resale value of a car with registration date of 2013 will not offer a higher price as compared to a car with registration date of 2014. So, by waiting for 2-3 weeks and purchasing a new car in January next year, a customer can get car registration date of 2014 that will enable him / her to get a very good resale value after 3-4 years. However, the resale value won't be affected much if a person sells the car after 7 or 8 years as the general saying is that once a customer uses a car for 7-8 years, he / she gets a full return of investment on the car.
So, depending on the number of years for which a car buyer intends to purchase a car, the customer can buy a new car in December month of the existing year or wait for new year to purchase that car.
Several banks offer easy car loans that may entice customers to buy a bigger car than is actually required. Also, car dealers offer larger discounts on bigger cars. But, one should not get lured by them and understand one's need first. For a small family, a 5-seater car shall suffice. Also, one should determine his / her car budget depending on his / her earnings. One should not buy a car whose purchase value is more than 50% or 60% of his / her annual salary. At the same time, a person taking a car loan should ensure that the EMI doesn't make him / her lose more than 12% to 15% of his monthly earnings (after taxation). These points are important to note and will reduce the financial burden on the customer purchasing a new car.
A smart car buyer should do plenty of research online on all the cars in his / her segment of interest. It is important to know all minor differences between various cars which shall help one to decide the car to buy. There are various online automobile-based websites like indiaautomobile.com. One can spend good amount of time to understand all the required features of a car.
To lure customers into purchasing cars and clearing their inventories, many car dealers offer great discounts on car accessories. From the outside, it seems they offer massive discount on car accessories, but often they inflate the price of accessories and then reduce them in the name of discount. So, it is important that a customer checks out the prices of accessories elsewhere in their city and town as there are many small outlets offering same car accessories for cheap prices. One can even check prices of certain car accessories online to get some better deals. Thus, one should not get lured by discounts offered on car accessories and should instead negotiate for cash discount on the car price.
Similarly, car dealers sometimes bring out attractive looking car exchange offers, but it is important to ensure that they give you the best possible price for your old car. Hence, a smart car buyer should check the resale value of his old car from various dealers and auto manufacturers as well as on online sites like "olx.in". This will allow the customer to quote the best price for his car to the car dealer from whom he / she is purchasing the new car.
In India, fuel prices have risen tremendously in the last few years. Petrol is perhaps the costliest fuel, followed by diesel which is less costlier and then CNG which is the cheapest fuel. But, petrol cars are the cheapest, while diesel cars are expensive and require higher maintenance. A customer buying a new car should understand how much he / she is going to drive on a regular basis. A customer driving long distances (50-60 kms) on a daily basis should opt for a diesel car to save money on fuel in the long run (after 3 years). If car usage is less, then, one should opt for petrol car as the normal tendency is to sell a new car after using it for 5-6 years.
So, such a customer with less usage of car buys a diesel car, he / she won't make any savings on fuel in the long run (5-6 years).
CNG is the cheapest fuel, but it is not available at all petrol pumps in a city or town. Also, CNG availability on highways can sometimes be an issue. One cannot fit CNG cylinder in all car models as it takes plenty of boot space and thus the customer doesn't get enough luggage storage space.
Otherwise, CNG car is a pretty cheap option as compared to petrol car and diesel car.
A car buyer should go for a test drive of atleast 4-5 cars in his / her segment of interest. The buyer should try and ensure that he performs the test drive for all cars on the same day as this will help him / her to identify any minor differences between the driving experience of different cars in one segment. Also, one should try to take along a family member for the test drives as they will be able to gauge the leg spacing and comfort level of seating behind in a new car. The car buyer should go for a long drive covering all types of roads like plain roads, roads with potholes and speed breakers, highways, slopes, etc.
Customers who are selling off their old cars and buying a new car should take note of this important point. Generally, car insurance premium is highest in the first year after which a no-claim bonus helps to reduce the insurance premium for the second year on that car. However, customers can also utilize this no-claim insurance bonus of their old cars (after exchanging it for a new one) on the insurance premium of the new car purchased. For this purpose, the customer needs to submit necessary documents (sale agreement copy, transfer documents, insurance copy, car registration certificate, etc.) and follow all steps as per his / her insurance company guidelines (probably a letter requesting termination of insurance on the old car). The customer will then get good discount on insurance premium of the new car, but he / she will have to get this approved from the buyer of old car.
Madam,
I have read your complete article which is very beneficial for people interested in buying new vehicles. While I can appreciate your entire writing, I cannot digest your sentences.
"QUOTE. In India, winter generally sets in major parts of the country during the end of a year. In other words, it is the best time to learn driving a new car as most part of the day is pleasant. So, people prefer buying cars during the last quarter as they get plenty of time to get a strong hold over their driving skills before the arrival of less favorable summer and monsoon in the new year.UNQUOTE
The above is a strange phenomena for buying a vehicle during the last quarter of the year. According to me, no one chooses a month for learning driving.
Anyway, a very well written article to appreciate.