A common misconception amongst people is that of a new car purchase being cheaper than holding onto your old car.
Most people's knowledge of a new car's cost begins at the ex-showroom price and continues with the on-road price. What they fail to realize is that the true cost of a new car involves much more than just its purchase price.
To the ex-showroom price, one must add duties and taxes. Then comes the insurance cost. For a small hatch, these two components easily add up to around 40,000/- With the B-Segment offerings and those above, this amount keeps increasing.
But the biggest component and the one most neglected is Depreciation. A car is a depreciating asset and for the salaried class owner, Depreciation is the biggest value eroding component in a new-car owner's life.
A quick look at the used car price charts will give one a good insight into the depreciated value of cars in the Indian market. You will notice that the compact hatch segment depreciates the least while the depreciation increases in direct proportion with the size of the vehicle.
On the other hand, the European Marques see their value being eroded quicker than the Japs or the Koreans even in the A & B segments.
So, a new car does not make much economic sense especially in our example of Sameer Patel. So What then should Sameer do ?
