[vinayvtec]

Regarding retaining a car depends on which one you are driving, believe me selling a very well maintained car like old shape VTEC is not a good idea. I know its demand I as I was searching for more than a year.

Instead of selling it, add a new member (referring to a car) to family and slowly keep adding more performance stuffs to existing one and pass it on to next generation if they really know what that car means to you (again it will depend on which car you have). I bought her just to have the unique look and to feel the power, she might not have turbo or supercharge but those things can be added anytime. I have got lot of plans to her, and you guys will be coming to know as I implement them.

[anilkalvani]

@Max and @anilkalvani, I don't think GTO is suggesting that all of us should stick to our old M800, Santro, Ikon, Baleno etc till kingdom come. He just wants to give an idea of how much we are losing financially when we upgrade. While we would think of only the extra EMI, he wants to bring to the fore the other variables that we would normally miss. Just so that even when we are upgrading, we know the cost involved and are making an informed decision.

@SupremeBaleno
I agree with GTO fully & have seriously decided not to sell my 2004 Viva (as it is the resale value is zilch coz its discontinued; plus i have hardly covered 10k's in 4.5 years as i am the only driver at home now, dad hardly drives) & the Logan (which i know in the future will go the Palio way; poor resale value) for atleast 8-10 years or 1.5L kms which ever is earlier. The Logan, even though its just 4 months old, i feel i can hold on to it for a good 10 years. Can't say the same of the Viva though.


I agree fully that people have this wrong perception of maintaining their status quo by getting a new car every 3 years. It was just an opinion by my Chacha when he said the you live only once & all...

[GTO]

Originally Posted by sridharps

And there are people I know, barely into twenties and who have just started earning, willing to spend most of their salary in paying EMIs for a new Honda Civic. Pray, why? - because it is 'tashan'.

But there is now a new breed of Indian youth who, with much more financial power at a younger age than their parents at a similar age, is willing to spend, to splurge and seek out the 'best' in life.

I myself have a spendthrift side, but never ever on credit. Its interesting that you bring out this point. A recent edition of BusinessIndia focussed on the emerging Indian youth. As part of the article, SBI reported that their highest credit card spenders were in the age group of 25 - 35.

I hate using credit cards.

[phamilyman]

yeah,

I know a guy who just 25, got married, earns some 8-9L in bengaluru (IT), pays some 15k pm rent, lavishes cash in his house, wifey is a homemaker. He drives a NHC (own EMI) because nothing else will do for him. The only problem with him is that the word savings doesn't exist in his dictionary.

[vnabhi]

This is a fabulous thread and the hidden costs of upgrading one's car to a higher segment have been laid threadbare. I agree with GTO and others that upgrading ones car for higher status is a misnomer. Alas, many have fallen prey to that cult, mostly those in the IT sector.
If a businessman does it, it may make sense because he stands to reap the benefit of depreciation. But a salaried person does not gain as much.
I bought a 3 year old M800 in 1989 and held on to it till July 2001. It was a fabulous car that served me well. I decided to upgrade to a WagonR only because I wanted an AC car badly, owing to global warming and office-pampering (in PSU's, you get an AC in the office after you reach a certain level in the management). I'd seen how badly the performance drops on my neighbour's M800 when the AC was switched on . This apart, my 800 had done 85K on the odo, and I did not want to punish it with an AC.
Hence my decision to upgrade to a WagonR.
I still have the WagonR (48 K on the odo), though I went in for a Fiesta 1.6 sxi last year. My wife's assignments were getting more frequent and she needed a separate car. This apart, my son was reaching 18 years of age and would be needing a car now and then.
Therefore the morale of the story is to upgrade only if it is a dire necessity, and not merely for perceived status.

[sandeep2006]

Just needed some advice and hopefully am asking for it in the right place!!!

I bought an Optra Royale in 2005 and have driven about 10000KM, my work has been taking me increasingly abroad and am now looking at working out of India for a couple of years. The car has not been used at all in the last 1 year and is really in mint condition.I have paid 36 months on the 60 month loan - another 24 months to go on the loan. I really liked the car!!!! I also have a Palio 2001 model fully paid for as well.

Does it make sense to continue paying the full loan and keep the car and use it when I return to India say in two years OR does it make sense to sell the car and payback the loan amount and purchase a new car at that point of time.

Which is the best place to know what is the value of the car? It is a October 2005 Black Optra Royale Model.

[GTO]

Originally Posted by phamilyman

yeah,

I know a guy who just 25, got married, earns some 8-9L in bengaluru (IT), pays some 15k pm rent, lavishes cash in his house, wifey is a homemaker. He drives a NHC (own EMI) because nothing else will do for him. The only problem with him is that the word savings doesn't exist in his dictionary.

I don't want to go offtopic, but couldn't resist. Man, this guy is a serious nutjob.

6.xx lakhs : Income after tax
Less 1.8 lakh : Annual rent
Less 1.5 lakh : Minimum annual EMI on the NHC
Less 2.4 lakh : Averaged mimimum (@20k / month) annual household expense. Is 20K / month a safe figure for Bangalore?
Less 0.5 lakh : Incidental expenses
Less 0.75 lakh : Insurance premiums (car, health, life etc.)

Even an idiot can see that this guy is living in negative balance. And we haven't even accounted for holidays, shopping etc. etc. Ask him how many credit cards or loans he is carrying? Dude is sliding down...can you imagine the consequences if he loses his job?

[karanraheja]

Originally Posted by sandeep2006

Just needed some advice and hopefully am asking for it in the right place!!!

I bought an Optra Royale in 2005 and have driven about 10000KM, my work has been taking me increasingly abroad and am now looking at working out of India for a couple of years. The car has not been used at all in the last 1 year and is really in mint condition.I have paid 36 months on the 60 month loan - another 24 months to go on the loan. I really liked the car!!!! I also have a Palio 2001 model fully paid for as well.

Does it make sense to continue paying the full loan and keep the car and use it when I return to India say in two years OR does it make sense to sell the car and payback the loan amount and purchase a new car at that point of time.

Which is the best place to know what is the value of the car? It is a October 2005 Black Optra Royale Model.

Usually most of us check the value of the car at Carwale.I guess if you sell your car right now it should fetch you anywhere between 5.75-6 lacs ,maybe more since your running has been minimal. Your loan period should be over by the time you return back. I would suggest you to stick to this car . Since your car has hardly been driven more than 10k. No point in getting such depriciation. Mint money come back and then decide about upgrading. My 2 cents.

[SilentEngine]

Great thread GTO!
I must admit the thread has made me think seriously about my upgrade plans. I currently own a 4 year old M800. It has just about clocked 15k as the daily home-office is very short and I don't like to venture into highway drives in this car.
My plan was to upgrade to a B+ hatchback like Grande Punto around Jan-Feb 09. Now I am actually thinking of considering a used car instead of a new car.

[blue_pulsar]

Originally Posted by GTO

I don't want to go offtopic, but couldn't resist. Man, this guy is a serious nutjob.

6.xx lakhs : Income after tax
Less 1.8 lakh : Annual rent
Less 1.5 lakh : Minimum annual EMI on the NHC
Less 2.4 lakh : Averaged mimimum (@20k / month) annual household expense. Is 20K / month a safe figure for Bangalore?
Less 0.5 lakh : Incidental expenses
Less 0.75 lakh : Insurance premiums (car, health, life etc.)

Even an idiot can see that this guy is living in negative balance. And we haven't even accounted for holidays, shopping etc. etc. Ask him how many credit cards or loans he is carrying? Dude is sliding down...can you imagine the consequences if he loses his job?

Nice calculation GTO. I have been wondering for a long time what percentage of your monthly salary can one spend on car EMIs. Was planning to start a new thread on this. But now that this topic has come up here, we can discuss the same here I guess. Please guys, lets have some thumb rule how much is it 'safe' to spend on car EMIs. This will also help first time buyers.

[WhiteKnight]

Originally Posted by sandeep2006

Does it make sense to continue paying the full loan and keep the car and use it when I return to India say in two years OR does it make sense to sell the car and payback the loan amount and purchase a new car at that point of time.

Let me apply "GTO thinking" in a simplistic way to your situation.

Assumptions (L for lakhs)
Your Loan amount=10L. 6 L paid and 4 L outstanding.

Scenario 1--Sell the car now
Say you get 5 L. Close the loan and you have 1 L in hand. Save your EMI and at the end of 2nd year you have 5 L in hand, if you just sit with the cash. If you invest, you could make a windfall, as the markets would be exiting recession by then.

Scenario 2- Keep your car
At the end of 2nd year, you have a car worth, say 3.5 L.

I guess the choice is clear

[e1t1bet]

Originally Posted by GTO

I don't want to go offtopic, but couldn't resist. Man, this guy is a serious nutjob.

6.xx lakhs : Income after tax
Less 1.8 lakh : Annual rent
Less 1.5 lakh : Minimum annual EMI on the NHC
Less 2.4 lakh : Averaged mimimum (@20k / month) annual household expense. Is 20K / month a safe figure for Bangalore?
Less 0.5 lakh : Incidental expenses
Less 0.75 lakh : Insurance premiums (car, health, life etc.)

Even an idiot can see that this guy is living in negative balance. And we haven't even accounted for holidays, shopping etc. etc. Ask him how many credit cards or loans he is carrying? Dude is sliding down...can you imagine the consequences if he loses his job?

That guy is seriously crazy,unless his wife is earning(and contributing) as well.
I know a bunch of guys, similar ages, who are paying 20-25% of their salaries on EMIs. People should just accept that having to pay anything above 15% of their monthly salary on EMIs means they cannot afford the car(unless someone is married with kids, when a family car is justified)
I am 24 myself.
I got a car(used Palio in decent condition,dirt cheap) because:
(1)Two wheelers are SERIOUSLY unsafe in Bangalore
(2)Public transport is non-existent in Bangalore and I was spending more on auto-rickshaw fares than what I am paying for petrol now.
(3)Used cars(except Altos,Zens,Santros etc) are dirt cheap.
(4)Overall I won't lose much. In the worst case, even if I can't get more than 30-40k while selling my car,I will be losing something like one lakh over two years.

Another thing people forget(especially when buying a small hatch) is that for a new car, you need to pay for registration.


P.S. That reminds me. If someone really has to sell his car and just cannot find a good deal, is it a good option to park your car, in a shady place, with the keys inside and hope someone steals it? (Of course, I am thinking of claiming insurance)

[iraghava]

Originally Posted by e1t1bet

P.S. That reminds me. If someone really has to sell his car and just cannot find a good deal, is it a good option to park your car, in a shady place, with the keys inside and hope someone steals it? (Of course, I am thinking of claiming insurance)

My uncle tried that with his Fiat many years back since the resale value for a well maintained car was a pittance. Unfortunately, in the morning it was standing at the same place he left it at the night before!

[amu1983]

As someone indicated earlier (page 1-2), upgrading / switching cars is financially sub-optimal decision, provided the new car offers the same value to the buyer. This is even more applicable to a salaried person since he/she has absolutely no tangible benefit from the upgraded car (referring to the case where someone was upgrading to a Civic from a '03 OHC, and according to him both the cars offer the same value/utility).

But the equation changes (perhaps slightly) when one is a business owner. The depreciation of the new 'toy' offers some mental comfort and an additional incentive to buy. Also, one does not have to truthfully declare the proceeds from the old car. One can sell the OHC for 4 lakhs and only show Rs. 2 lakh on paper. That's a tangible benefit of 30% X 2 lakh = 60 k. One can even ask the dealer to beef up the price of the car (on paper) with the accessories and what not, and reduce one's tax liability and get a bigger depreciation afterwards.

My thoughts on this - The depreciation benefit is a false, psychological incentive by the government. I'm not sure what it tries to achieve by this (perhaps, assistance to auto industry/ employment). The depreciation IS a real loss. If someone wants to claim tax benefit out of such loss, why not simply commit a real 'loss' in business (by something like selling off too cheaply), or better yet, a donation?

[lancer_rit]

Another point with using your current car for longer is that sometimes its possible to offset some of the expenses like tyre change, engine maintenance etc against reimbursement which is not taxable. Of course, this depends on your company's compensation policy.

In such cases, you can save 33+% off on the expenses in terms of Income Tax :-)
Now if you were to buy the new car, your new tyres, engine etc don't give you any tax breaks, or ?