How to buy a cheap luxury car

To buy a used luxury car, approach only authorised dealers and ensure verification of documents

A Mercedes-Benz C-Class, which costs about Rs 34 lakh, is available at 75 per cent of the price or about Rs 25 lakh (Rs 2.5 million), after a year. After two-three years, you could get the car at 60-70 per cent of the price prevailing then. Should you buy it? Yes, but preferably from an authorised dealer and only after proper verification of documents.

A luxury car is out of reach for many, given the prices. But owning a second-hand or used luxury car isn’t too difficult. Car manufacturers have dedicated programmes for used cars and even offer financing schemes for these.

Nikunj Sanghi, president of the Federation of Automobile Dealers Association, says for luxury cars, within the first year, prices fall 25-30 per cent.

“This is because owners of luxury cars change their car models very frequently; they are the kind of people who wouldn’t buy a resale car,” Sanghi says.

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According to a CRISIL report, in 2011-12, the used car market in India stood at 2.6 million, of which only 16 per cent was organised. The second-hand luxury car segment is estimated to account for 13-15 per cent of the overall used car market, says Nagendra Palle, chief executive, Mahindra First Choice Wheels Limited.

Though volumes are low, this is a growing market, says Philipp von Sahr, president, BMW Group, India.

Prices of used cars depend on factors such as the age and condition of the vehicle, mileage, current price of the new car, prevalent discounts in the market, demand for the particular car in the market, variant, colour, location, number of previous owners, etc.

One could check the technical details, maintenance history and actual photographs of these vehicles on company websites. It is a good idea to check and compare models online before making a purchase.

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It is advisable to buy used cars from authorised dealers, though one might have to spend more in this case. Sanghi says though a local car broker might sell luxury cars at rates 15-20 per cent cheaper than authorised dealers, one cannot be sure about the car’s condition and documents. Also, buying from an authorised dealer means more financing options.

“Apart from peace of mind, an authorised dealer would also ensure a wide choice of cars compared to a small, local broker,” Palle says.

Mercedes-Benz sells pre-owned cars under the brand name ‘ProvenExclusivity’, only through its dealers. Such dealers ensure quality, a warranty backed by the manufacturer, hassle-free documentation and attractive finance options.

Customers could either approach a bank or a captive financing arm of the manufacturer (Mercedes-Benz Financial, in this case).

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Eberhard Kern, managing director and chief executive, Mercedes-Benz India, says customers using premium sedans are the ones upgrading to the luxury car segment, and some do so through the pre-owned cars route.

BMW sells used cars under the brand BMW Premium Selection. The company has showrooms at 10 locations across India. The target customer is someone who has a budget of Rs 10-15 lakh and might otherwise consider new cars of brands that are less expensive. “For the same budget, the customer could get a luxury car that has hardly been used. If he gets a car just one or two years old, it is as good as new,” says von Sahr.

Typically, interest rates for used cars are two-five per cent higher than those for new cars. Banks charge 15-18 per cent on used-car loans, depending on the tenure. And, since the loan would be a fairly big one, the bank would only be too willing to offer it.

“A customer who would have such big exposure is a good opportunity for banks to sell other products,” Sanghi says.

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In case of luxury cars, it is extremely important to ascertain the profile of the original owner, says Sanghi. Since a luxury car is considered a parameter of social standing, in some cases, people resort to questionable methods to buy one.

Therefore, proper documentation is vital for a used luxury car. One must insist he/she be presented with the vehicle’s title documents and maintenance records.

“If you have absolute certainty about the previous owner, it is a good deal to buy a second-hand luxury car. As buyers are few and demand is less, you would be assured of a good deal,” Sanghi says.

While buying a luxury car, one must also ensure it has been serviced by the company’s authorised service centre alone. This is because these cars require special tools and their spare parts aren’t available easily.

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A company dealer offers better after-sales service, important in the case of a luxury car. For instance, BMW offers those buying used cars under its BMW Premium Selection brand 24-hour roadside assistance.

Insurance for used luxury cars is easily available, irrespective of how old the car is; the premium would depend on the car’s cost.

While buying a used luxury car:

Buy from a company's authorised dealer

Ensure documentation is in place

Verify credentials of previous owner

Ensure it has been serviced only at authorised service stations

Ensure spare parts used are genuine