Saturday, December 1, 2012

Buying a New Car

Buying a new car is a good exercise to test one's decision making skills. Especially these days when the choices are really too many. If one is in India like me one has multiple models (Ford Fiesta Classic, SX4, Santro Xing, etc.) with multiple versions (LXI, VXI, ZXI, etc.) from dozens of car manufacturers (Maruti Suzuki, Ford, Hyundai, etc.) to choose from. And then due to the increase in prices of petrol in the recent months CNG and diesel cars have suddenly become very popular amongst car buyers.

Suggested Steps for Buying a New Car

So how should one go about buying a car? I am going to narrate my experience and opinion on a suggested approach to decide and buy a car.

It must be remembered that no decision is best and the selected decision should be optimal in a given situation. And most importantly an optimal decision at a given point in time may not remain so afterwards.

So here's a step-wise approach to buy a car. These steps need not be followed in a perfect linear fashion and not only that some of them may need to be iterated more than once.

Step 1 - Check Affordability and Requirements
  • Determine, as the first thing, the affordability which depends on one's financial position. Do consider both the one time purchase cost and the recurring cost for fuel, service, repairs, etc.
  • Determine the requirements based on factors like one's typical monthly running, ratio of highway versus city driving, social standing, lifestyle, ego drive, etc.
  • Decide based on the above whether one would want to buy a petrol, a diesel or a CNG powered car and also whether one would want to buy a hatchback or a sedan or an SUV. In the end however budget is everything and might constrain one's choice to only a hatchback or the low-end version of an entry segment sedan.
  • Decide, in case one already has a car, whether one would want to exchange the old car for a brand new car or buy another one (this has direct impact on the budget).
I had an old hatchback car which I wanted to exchange for a new sedan. After having driven the hatchback for 7 years I wanted to move up so as to say. Also financially I was in a position to afford a sedan. In addition I wanted to buy a car with good ground clearance (a must for the potholed and poorly maintained roads). Based on my driving requirements I realized a petrol powered car would suit me fine.

Step 2 - Check Budget Availability
  • Figure out the initial budget. A range has to be good to go like 6 to 8 lacs or 15 to 20 lacs. 
  • Fine-tune the initial budget based on how much one is willing to spend, down payment amount and loan requirements. 
  • Search on the Internet to find out if any schemes or discounts that are being offered during that period.
  • Do consider the approximate exchange cost (in case one is wishing to sell the old car and buy a new one) as well to arrive at the maximum amount one can stretch the budget to. 
    • One can use the niche websites on cars and automobiles that provide information on approximate exchange cost based on the year of manufacturing of your old car, kilometers driven, condition, accidents and insurance claims history, etc. 
    • For getting the URLs of these websites Google for something like "Buy Car India" or "India Car" or anything that you think appropriate.
I did not want to take loan. I also did not want to pay more than a certain amount in cash (x1). Based on research I could gather information on schemes/discounts on offer (x2) and the fair exchange value of  my old car (let's call it x3). So I could come up with my initial budget, B = x1 - x2.+ x3

Step 3 - Check Car Options
  • Do research into the cars that will fit the affordability and budget parameters.
    • You can use the niche websites to search for cars in the range you have selected.
  • Keep in mind that the cost shown in most websites is the 'ex-showroom price' and the 'on road cost' will be typically 8% to 12% higher. This is for the RTO registration, insurance, dealer handling charges, extended warranty, etc.
Based on searching some of the niche websites I zeroed down upon sedans whose 'on road cost' was within B. I narrowed down to diesel versions of three cars - C1, C2 and C3.
Step 4 - Visit Car Showrooms
  • Visit the car showrooms in person and discuss with the salespersons there. In the visits gather information on 'on road cost' and its detailed break-up for the car models one is interested in. Again one can use the Internet to search for addresses of car showrooms near to you.
  • Take a test drive to get a feel of driving the car of choice. Do ask all any questions that come to your mind while doing te test drive. Typical questions are "how to open the bonnet?", "how to use the wipers?", "how to adjust the seats?", etc.
  • Do inquire about any scheme that may be going on like cash discounts, free accessories, free fuel coupons, etc. Other than ex-showroom price and RTO registration cost everything else can be negotiated.
  • Find out whether there is any exchange and/or loyalty bonus being offered. If you are considering buying another car from the manufacturer of your old car loyalty bonus may be offered. And in case you want to sell your old car for a brand new car exchange bonus may be offered. For availing exchange bonus you need not go with the manufacturer of your old car.
I visited many car showrooms and other than the discussions and information gathering made sure to take the test drive.

Step 5 - Bite the Bullet - Decide which Car to Buy
  • Consider various factors like affordability, requirements, etc. and arrive at a decision
  • Do consult any friends or family memebers
  • Visit the showrooms for next round of discussion and negotiation. Do ask for a better deal or some discounts, etc.
  • Agree on the payment amount and other terms and conditions like number of days for car delivery
  • Make the token payment and book the car.
I made the final decision based on affordability, requirements, etc.and discussion with some acquaintances, friends and family. For me family's concurrence and affordability was very very important.

Step 6 -  Arrange the Finances and Make the Payment
  • Arrange the payment amount
  • Make the payment to the car dealer
  • Get a commitment from the dealer on the expected delivery date
I arranged the finances and made the payment to the dealer leaving a small part which I decided to pay on the date of the delivery. I also negotiated for an early delivery of the car and also that I would leave my old car with the dealer when I come to take delivery of the new car.

Step 7 -  Drive Home the New Car
  • Visit the car dealer on the date of delivery
  • Make sure the documents related to registration, warranty, insurance, etc. are in order. In case one is exchanging the old car for the new one, the sale documents for the old car also need to be checked.
  • Inspect the car and then sign all papers carefully
  • Thanks the car dealer
  • Drive your car out of the showroom!
I went on the day of the delivery to the showroom with my family in my old car. And after completing the formalities drove out in the new car.

And while on the road in your new car, very importantly, don't forget to carry the necessary car documents and follow the traffic rules. Enjoy and let other also enjoy safe driving.

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