Steering through year-end car deals

Buying a car in December has its pros and cons. A four-wheeler purchased during the end of the year depreciates by a year just after a few months (March-end), helping the buyer get tax benefits.

At the same time, the current discounts and loan rates available are quite lucrative at this time.

Maruti Suzuki is offering discounts of Rs 15,000-30,000 on models such as A-Star, Alto, WagonR and Omni. Korean carmaker Hyundai's i10 is cheaper by around Rs 25,000.

Even expensive cars such as Toyota Corolla Altis (Rs 45,000-50,000 discount) and Honda Accord (discount of Rs 25,000) are selling well below the sticker price.

"The month of December is when inventories are cleared. Dealer and manufacturer discounts make car-buying attractive," said Reena Wagle, who runs Mangesh Auto Centre, a direct selling agent for HDFC Bank. She deals with multiple dealers to source cars for customers. Annual targets of dealers, companies and DSAs are also responsible for the concessions.

This December, buying a car has become a lot easier due to lower interest rates on auto loans. Canara Bank, for instance, is giving an auto loan at 8.5 per cent for the first year, 9.5 for second and third years, 10 per cent for the next three years and 10.5 per cent for the sixth year.

State Bank of India is offering 8 per cent for the first year and 10 per cent for second and third years.

HDFC has kept auto loan rates as low as 9 per cent for five years while ICICI Bank has dropped rates to 10 per cent. "We further provide a discount of up to 1 per cent on the loan," said Sylvester Rodrigues, director, Ace Marketing, a DSA.

Still, experts say it may not make sense for everyone to rush and grab the offers. For one, if you intend to sell the car after three years, the resale value will slip. Experts said though the buyer would be aware that the car was bought in December for tax purposes, he/she would still quote a price lower than for a similar vehicle bought in the first week of January.

So, if you prefer changing your cars three-four years, you need to calculate the economics. "A small car costing around Rs 4 lakh will fetch the customer Rs 25,000 less in resale if bought in the current month," said Wagle.

Go for the car only if you feel the finance option, combined with cash and other discounts, will be more than the loss of resale value. Taking advantage of the car's age also works if you put a lot of kilometres on a vehicle. This will help you to make the car attractive at the time of selling, despite the higher usage.

Dealers also note that the models currently preferred by customers have waiting periods. These include Maruti Suzuki's Swift, Dzire, Zen Estilo and SX4, Hyundai's i20l; Toyota's Fortune and Honda CR-V. These are not readily available. If you book the car now, the delivery will be in 2010.

Year-end purchase makes sense for those who can claim depreciation on the vehicle while filing income tax. This is essentially meant for the self-employed or a company, besides for those who intend to keep the car for a long time. "Some families keep more than one car. In such cases, cars usually stay longer with them," said Rodrigues.

If you have been planning to buy a new car and lease it, current offers can help save cost. "Vehicles wear off faster in such usage. In such a case, the cheaper the car, the better it is for the owner," said a dealer.

If you have decided to be behind the wheel this month, there are some things to keep in mind. Not all dealers and DSA have the same bargaining power. Get in touch with as many as possible to see what's available.

Some may substitute cash discount for accessories. Evaluate what works best for you. See if the accessories are worth the money or it's possible to buy these cheaper from elsewhere. You may also need to compromise on the colour as the car you get is part of the inventory.