Why you shouldn't buy a car this festive season

With banks cutting interest rates and car manufacturers offering cash discounts, it would be tough to resist the temptation of buying a car this festive season.

However, potential buyers would do well to prolong their wait.

State Bank of India and ICICI Bank both have cut rates as well as processing fees. And, car companies aren't behind in offering discounts.

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While Maruti is offering cash discounts of Rs 40,000, Hyundai is offering discounts of up to 12 per cent for the Eon. Tata Motors is also offering discounts of up to Rs 40,000 for the Nano.

But experts say the deals would only get better. Nikunj Sanghi, president of the Federation of Automobile Dealers Association, says, "The number of enquiries and footfalls in showrooms has dropped drastically compared to the last festive season. If this continues, manufacturers would have to offer higher discounts."

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Also, car sales aren't encouraging. According to the Society of Indian Automobile Manufacturers, sales declined 5.36 per cent to 1,57,536 units in September, against 1,66,464 units sold in the corresponding month last year.

Despite six new launches in a single week this month and the discounts offered, V G Ramakrishnan, managing director (South Asia), Frost & Sullivan, says as the growth forecast for car sales is merely two to three per cent, manufacturers would offer higher discounts, especially if sales continue to dip.

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Therefore, potential car buyers should wait, at least till December, to avail of higher discounts.

As December is the 'stock clearance' month, no dealer or manufacturer wants to hold on to earlier models. Hence, they offer higher discounts and freebies to reduce the inventory.

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Also, a number of models are likely to be replaced soon.

While the Maruti Alto (800cc) has already been replaced by the all-new Alto 800, the Chevrolet Aveo UVA (a compact hatchback) would be replaced by the Sail and the Chevrolet Aveo (a sedan) would be replaced by the Sail's sedan version.

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Experts say they also expect huge discounts in the January-March quarter.

This is because in the last quarter of a financial year, manufacturers try to clear inventory and meet yearly sales targets.

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However, automobile makers like Maruti, Hyundai, Honda and General Motors have increased prices by 0.5-2 per cent across product lines.

Though consumers have the appetite, as well as ability to spend, many have postponed car purchases by a few months for better deals and models, say experts.

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However, it's difficult to estimate the discounts that would be offered, as these would depend on the manufacturer and the volume of sales this month.

For instance, if the manufacturer doesn't record good sales in October, there are chances the company would offer more discounts in November.