Get the best deal for used wheels

Source: ET-Wealth-24Jan2011: Get the best deal for used wheels

Aakash Salgaonkar owned two hatchbacks, but still longed for a sedan. A budget of Rs 5 lakh was not helping till he stumbled on a steal: A three-year-old black Chevrolet Optra that had run 28,940 km for Rs 3 lakh. A new model would have cost Rs 8 lakh. Salgaonkar bought the car for Rs 2.7 lakh in early 2010. A year later, the finance executive from Mumbai is still smiling. “With second-hand cars, you can get a model in good condition for sometimes half the price,” says Sandeep Kapoor of Relioquick India , which organises automobile shows. Used cars are perennial suspects for performance, mileage and maintenance costs. But these factors pale before cheap prices. Say, you want a sedan. A new Honda City in Mumbai costs more than Rs 10 lakh. You could get a used model for half that price if you can live with its two-year-old tag. A year-old hatchback could be cheaper by up to Rs 1.5 lakh. The prices vary across cities. Used wheels are an answer to people against loans or accumulating finances. Still, buyers are intimidated by the prospect of future costs. Even if a car costs 50% of its original price, there are doubts on fuel and maintenance expenses. This leads to what is called the ‘lemon and cherry’ problem. This theory discovered by economist George Akelorf is characteristic of the second-hand car market. A buyer usually assumes that what is being passed is a lemon (bad car) and refuses the right price. A seller who is refused the right price even for a cherry (good car) will not part with it. So well-maintained used cars are hard to find.

A buying guide

A car that rolls out of a showroom is considered used. The price wanes as kilometers multiply. Used cars are up to 70% cheaper. Experts say owners these days ditch vehicles after 2-3 years. It could be as early as three months. The chances of getting a relatively new car have risen as a result. Age should not be the only decisive factor. “The parameters that determine the price are its condition, features, ownership and demand,” says Jagdish Khattar of Carnation Auto. Bargaining is fine, but look for the not-so-obvious signs. For instance, dealers say if the paint is fresh, it could be an attempt to mask an accident. Enquire about the ownership and history of a car. To check if a vehicle is worthy of purchase, experts advise on a correlation between the distance run and the years a customer plans to retain it. Banwari Lal Sharma of Carwale, an online portal for cars, says a car must not have run beyond 50,000 kms if a customer is looking to own it for 3-5 years. If the expected ownership is 1-2 years, 60,000-70,000 kms is alright, he says. Sharma is against buying a car beyond 1 lakh km unless you are an expert. Test drive a car accompanied by a mechanic. And drive it on all terrains. Check for its history on defects. Before possession, one should obtain the following documents: RC book, insurance copy, tax receipts, warranty documents, service and maintenance records and a set of car sale documents available with RTO agents and signed by the seller

Where to buy?

The usual stop for a used car is the neighbourhood mechanic. Carmakers such as Maruti Suzuki, Tata Motors and General Motors too have launched pre-owned cars. These companies buy back and renovate models. Dealers charge a commission of up to 2% from buyers and sellers. To check prices, turn to portals such as carwale and gaadi. Dealers often name a price, but they do not offer the best price as they eventually look to sell. It is better to sell to an individual through a dealer. Such deals can return up to 25% more. Abdul Majeed of Pricewaterhouse Coopers recommends reputed dealers. “They do the first level screening,” he says. A mechanic’s price could be up to Rs 25,000 cheaper than a dealer but the amount may not cover servicing and repair charges. The advantage with big garages is that the car will be serviced. Company showrooms can be more expensive by nearly 15% but could be value for money. The car is likely to be in good condition. There is warranty and free service of up to 3 times.

The right price

Used cars are cheaper but securing the right price based on performance and age can be tricky. “You should ideally not pay more than 50% of the original value if the car is 3-4 years old. This 50% should include the 5-10% that you may need on renovation,” says Majeed.

Things to look out for in a used car

Bonnet: Check if the vehicle has been painted fresh.

Engine: A well-maintained engine would not produce unusual noise.
Documents: Check if engine no. and chasis number are matching with the numbers in the registration papers.

Odometer: Do the math on the reading and year of manufacture. A 3-5 year old car that has travelled 14,000 to 18,000 km a year is a good buy.

Leaks: After a test-drive, park the car on clean ground and look for oil leaks from engine or gearbox.

Brakes: Apply brakes at the speed of 30-50 km to check that the car stops in a straight line.

Tyre: Look for wear and tear and also the alignment. If tyres are not in good condition, there is a chance of bargaining for up to Rs 1,000.

Exhaust: Blue smoke during start indicates engine trouble. It means the engine consumes too much fuel, a possible problem with fuel injection.