Should You Buy A New Car In December?

Savvy car buyers always wait for the month of December to buy new cars as the manufacturers and their dealers offer exciting discounts during the year-end to clear inventory. This year, it is even better thanks to a depressed economy and sluggish car sales. For example, you can pocket a discount of close to Rs 75,000 on Ford Fiesta, Rs 75,000 on Fiat Punto, Rs 25,000 on a Wagon R, Rs 30,000 on Mahindra Verito, Rs 60,000 on Chevrolet Spark and so on.Interestingly, due to the rise in petrol prices, there is a huge demand for diesel cars this year. That is why the discounts are mostly on the slow-moving petrol models with little or no discounts on the diesel variants. Here is a list of the best deals in town: http://www.bsmotoring.com/storypage.php?autono=6110

So should you grab one of the current offers?Your decision should be based on how long you plan to use the car, how much you drive daily and after calculating whether the current discounts work in your favour.

The first thing to consider is how long you plan to use the car. Are you one of those who buy a car and keep it for 6-8 years, or are you a frequent changer who prefers to sell the car after using it for 2 years? If you are the one who is looking to use a car for the next 6-8 years, then the discount could well be worth it.Take the case of the Honda City 1.5 SMT. While the car was available at Rs 9 lakh or so till November 2011, post discount in December, it is now available at Rs 8.1 lakh. Thus, there is a discount of Rs 90,000 on the car. The math works as follows: Assume you plan to retain this car for the next six years. Now, if you plan to sell this ‘2011 car’ in 2017, chances are the vehicle will fetch you a resale price of Rs 4 lakh. On the other hand, a ‘2012 car’ may fetch you, a slightly higher amount of about Rs 4.5 lakh. So the Rs 90,000 initial discount that you got is far higher than the Rs 50,000 extra you may get in resale value.Hence it makes sense to buy the car. However, if you have the habit of changing cars every two years, the discount may not work for you.You may lose more in depreciation than the discount you got. You would do well to rather wait for January or the New Year to buy your car. Remember these calculations are indicative and the resale value is dependent on a number of other factors besides the age of the car.

Resale value is derived based on the brand, age of the car, the number of kilometers run, type of the model (petrol or diesel), number of hands the car has passed through and physical condition of it. Generally, it is found that diesel cars and cars in the mid-segment today command a higher resale value.While there is no fixed formula to calculate depreciation, a prospective buyer usually depreciates the car by about 8-10% every year. The person is also likely to figure in fuel costs,spare parts availability and costs and proposed usage.