Things to remember while buying a new car

Buying a new car is a significant step for all of us, whether it is the first box on wheels that we are buying or the third premium sedan which we are adding to the garage.

But many of us unwittingly fall prey to temptations laid before us by manufacturers or dealers, miss reading the fine print, or sometimes commit the most common mistakes buyers make while buying a new car. Here are some tips to avoid these mistakes and save some much needed cash. With the current downturn in the market, there couldn’t have been a better time to strike a bargain while heading out to get your dream car.

First off, here is the most under-discussed subject when buying a car – should you buy new or used?

The lure of a new car is very powerful and even more so if you are buying the first car. So, most potential buyers brush aside the thought of buying a used car, until reality hits them hard. The hard reality we are talking about here is depreciation.

More and more buyers who live in the major metros of the country are buying cars for their daily commute to work and nothing much else. The speech bubble with the cartoon character dreaming about a driving holiday to the nearby hill station is often just that – a dream – even in real life.

We don’t want to sound fatalistic, but if one looks at usage trends amongst many new car buyers, it is often less than 1,000 kilometres a month. And annual depreciation (based on market residual or resale value, not book value), could vary from Rs 50,000 to Rs 3 lakh, depending on if it is a small car or an entry-level luxury car.

Depreciation or market value erosion is a silent drain on the value of your car and it is a notional cost which you will realise that you have to account for only at the time of selling the car. Based on the depreciation that we have mentioned above, the cost of this element alone for your car (based on an annual usage of 12,000 kms) could range from about Rs 5 to Rs 25 per kilometre!

To keep the cost of depreciation down and even possibly affording a better car, buyers who are likely to use their cars sparingly should consider a used car. There are a number of used car dealers nowadays, many of them are reliable both manufacturer owned and independent. And many of these dealers use a detailed engineering check list to make sure you won’t land a lemon. The usual stumbling block is often financing the purchase, but many banks are now willing to finance used cars too.

Talking about financing, after deciding to go in for a new car, the next big call to make for the average car buyer is whether to seek financing for a part of the car’s price and who to take the loan from.

First, even if you are going to take a loan, don’t mention it to the dealer immediately. Sales-people at the dealerships are trained to play around with discounts and often present price-cuts in the form of lower interest rates if you are taking out a loan. So talk to them like you are doing a cash-down deal and negotiate the discounted price or the freebies that can be thrown in before revealing your plan to take out a loan.

Car manufacturers or dealers may have an exclusive financing arrangement with specific banks or financial institutions, enabling them to offer competitive rates. But they would mostly have been discounts on the cars themselves otherwise. Very often you will be able to take a loan from a different bank or financial institution at a slightly higher rate, but which will enable you to strike a harder bargain with the dealer.

One other secret to a lower interest rate on your car loan is to strike the deal towards the end of the month. Agents for bankers and financiers are usually under pressure to meet month-end targets and will be more willing to give up on some of their margins just to be able to close your deal.

Here are a few money saving tips and mistakes to avoid after the deal has been struck, and the car purchase has been finalised. Car dealers make most of their money after the sale of the car. While they are entitled to run their business and may still have your interest in mind, there are a few add-ons that you can avoid for your new car.

Most car music systems that are part of standard fitment are already quite capable and are usually manufactured by audio equipment makers (OE suppliers) of repute. For example, while you might not find the brand mentioned in the music system, often they might have been supplied by brands like Alpine, Bosch, Blaupunkt etc. So, unless you are an audiophile and are looking for high-end equipment, replacing the standard audio system can be avoided.

The paint quality that most new cars of today are delivered with is excellent and often come pre-coated with protection. Any sort of anti-scratch protection wears off over a one-year period due to regular wear-and-tear and due to excessive cleaning of the car. To avoid swirl marks clean your car with care making sure that large dust particles are not getting ground into the paint work. Wash your car once in 2-3 days and give it a rub-in polish once a month. A daily wash is not necessary to keep your car shining and may actually do more harm if it is done improperly.

So, if the dealer suggests an anti-scratch coat tell him you’ll comeback for it next year.

Most modern day cars roll out of the assembly line with some sort of underbody rust protection coat already on them. In fact, many cars are offered with a perforation warranty that might vary from 5 to 7 years.

So, a similar coat might not be required to be reapplied by the dealer for your new car. It can wait a couple of years. But, if your neighbourhood is very close to the sea and so the humid saline air can be particularly corrosive and or you are prone to driving on kutcha roads, then an underbody coat which is also chip-resistant might be a good idea.