Is this a good time to buy a car?

The government seems to have come to the rescue of potential car buyers. 

By cutting the excise duty on passenger cars and sports utility vehicles in the Interim Budget, it has encouraged car makers to cut prices.

For example,Volkswagen cut prices by Rs 14,500 to 51,000 across some models. Hyundai Motor India reduced prices across all models by Rs 10,000-1.35 lakh.

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Nissan cut prices by  four to six per cent on some models. Mahindra & Mahindra also reduced prices by Rs 13,000 to 49,000. 

Despite this and discounts, car sales have not been very encouraging. Buyers continued to shy away from new purchases in February.

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Maruti Suzuki sales for February were up marginally by two per cent, largely due to the Celerio launch. Even January was a lean month, as sales were down 7.4 per cent over the previous year.

That’s why, industry experts say, dealers are ready to give additional discounts to offload their stocks before the financial year end. Thus, it may be an opportune time to buy a car.

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“It is a good time to buy cars now as manufacturers have cut prices and dealers are offering discounts,” says N Sibgathulla, founder, Royal Carz, a Bangalore-based multi-brand car dealer.  He adds this might be an even better time to buy high-end cars as the price difference on these is around Rs 6-7 lakh, whereas the difference for smaller cars is up to Rs 65,000. 

However, Kunal Khattar, vice-president of Carnation Auto India, a multi-brand auto sales and services network, says it may be a better time to buy a car for those who buy in the name of their company.

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That is, those who claim depreciation benefit. Cars bought or put to use for company purposes are eligible for a depreciation of 20 per cent. The depreciation in the value of car is adjusted with the profit of the company, thus, lowering its tax liability.

Salaried individuals cannot claim depreciation. It is suggested cars be bought in December to get depreciation benefit, at the rate of 20 per cent. However, the same can be done even in March as depreciation is calculated on the annual profit. But the rate is lesser at 10 per cent. 

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Therefore, Khattar feels this could be a better time to upgrade as there have been new launches, too.

“The best time for individuals to buy cars is the month-end because dealers/ salespersons have targets to complete. Therefore, they tend to give a better deal than that offered in the beginning of the month. Sales numbers also show that month-end sales are higher than first-week sales,” he says. 

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However, one stands to gain by buying now in terms of the resale value.

Even though cars’ age should be determined on the basis of the year and month it was bought in, only the purchase year is considered (because the RC book mentions so).

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This makes a car bought is December a year older than a car bought in March the next year, in turn, fetching a lower resale value for the former. 

Sibgathulla warns this might not be the right time to buy a used car. “Used cars may not see as much discounts as new cars or, not see any price cut at all,” he explains.