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Money Dec 7, 2012

Car prices to rise in Jan: Should you buy in Dec or wait?

By Bindisha Sarang

If you are thinking of buying a car, and not sure if it's going to be this month or next, you better know a few things. As per various media reports, car prices are expected to rise come January, with Maruti and General Motors leading the pack.

So, should you buy a car now in December or wait for the new year?

The good part: December is usually that time of the year when there are good deals around. Most car companies' festival discounts extend to this month. There are a few companies that actually offer special discounts during the month. For instance, Tata Motors has announced an 'ultimate December offer' on various cars, including Nano. The company promises benefits up to Rs 25,000 for booking a Nano before 31 December.

Make a cost-benefit analysis before simply going for December deals. Reuters

The bad part: You should keep in mind that when you buy a car in December you get a registration date of the current year (2012), and even as the new year is just a few days away.

Why this is important: Abdul Khan, general manager, The Western India Automobile Association, says, "The registration date would make a difference while selling the car. When you resell the car, the buyer will look at the year of registration and not the month." This means, on resale you will get a lower amount since a few days will actually add a year on your car's RC book. More often than not, the amount you get for reselling the old car usually funds the next car purchase. So, resale value becomes an important parameter. A five-year-old Maruti car would lose value by 20-30 percent, but by the sixth year the value would go done substantially by another 5 to 7 percent. So if you buy the car in December, you would be adding an extra year to the age of the car and lose on the resale value substantially.

So, assuming you get a car in December for 4,75,000 and sell after six years you would get around Rs 1,75,750 less and the resale value would be Rs 2,99,250. But, if you wait for January and buy the car for Rs 5,00,000, the resale value after five years, which is 30 percent or Rs 1,50,000 less, will be Rs 3,50,000. Of course, these are number as per the assumptions we have made of 37% loss of value for the December car. But, as mentioned earlier, the amount you get for reselling the old car usually funds the next car purchase.
January is the best month for exactly the reason why December is not. Of course, you get a lower price in December. But you get a better resale value for the car.

What to do: When to buy a car will really be your call. But, we do have a suggestion. If your plan is to use the car for a long, long time, with no plan to sell at all, you could look at making use of the December discounts. For those who plan to resell the car in three-five years, buying the same in January may work out better. But we suggest you do your own math by finding out the resale value of the car (company as well as specific model) you are planning to buy. In short, make a cost-benefit analysis before simply going for December deals.

by Bindisha Sarang

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