Planning to buy a new car? Look at the resale value before you do

Planning to buy a new car? Look at the resale value before you do

What do you look for when buying a new car? The model, the make, performance, the list can go on. But how many of us even think about the resale value the car will fetch some years down the line? Resale may be the last thing on your mind when buying a car, but ideally that shouldn’t be the case.

Remember that a car is a depreciating asset and only a few years down the line, you may need to go for another one. Besides, your next car, even if it’s the same model, may cost you much more than your present one due to inflation and technological upgradation.

Hemant Dalvi, deputy manager, Millennium Toyota, a car dealer, says: “Resale value is one of the most important parameters that one should look at before buying a car."

So, how do you find out which company or brand is the best deal for you? Money Matters did a quick survey to find out which cars have the highest resale value and which ones the lowest. We talked to 10 dealers, including online portals, in Delhi, Chennai, Kolkata and Mumbai to get a fix on this.

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Interestingly, most of the dealers were unanimous in slamming some brands, while recommending some others. Maruti Suzuki India Ltd was the top scorer with all the dealers maintaining that all Maruti cars, except Esteem, fetch the maximum price. Here are some other findings.

The winners

We found that Japanese makers, Honda Siel Cars India Ltd and Toyota Kirloskar Motor Pvt. Ltd, had the highest resale value in the big car segment. “Honda City has the best resale value as a product as compared with any other car available in the market today," said nine out of the 10 dealers we spoke to.

Samuel Jayekumar, chairman and managing director,, an online car dealing portal, says, “Innova from Toyota, and Honda City have the best resale value."

In fact, 90% of the dealers said Honda cars lose just 20-30% value in three years compared with other cars in the segment. On the other hand, 80% said Toyota Innova gets 70-80% of its on road price. Tapas Kundu, owner of Kolkata-based car dealership, A One International, says, “In Kolkata, the market for big cars is small. Here, too, Japanese cars fetch the maximum price on resale."

Among small cars, the ubiquitous Maruti cars were right ahead, with Hyundai Motor India Ltd close behind. “Maruti 800, Alto, Wagon-R and Zen fetch the best resale price. Even Hyundai’s Santro has a good second-hand market," says Vikrath Ramdhia, CEO, Hot Wheels Auto, a Mumbai-based car dealership.

Maruti cars lose 20-30% value in five years, while Hyundai cars lose the same value in three-five years, said 90% of the dealers. “There is high demand for Hyundai’s Santro in the second-hand market; demand for i10 is also picking up," said Kundu.

The losers

Tata Motors Ltd, General Motors India Pvt. Ltd (GM), Chevrolet and Ford India Pvt. Ltd are the least popular in terms of resale, the survey indicated. Jayekumar says, “American cars, such as Chevrolet and GM, have the worst resale value. Tata cars only do slightly better."

Rambhia says, “Ford, GM, Chevrolet and even Tata have poor resale value." Tata Sumo Victa has a fairly good resale value compared with its other models, but its Indigo Marina is poor on resale.

Tata cars lose 50% of their value in just two years, maintain four out of five dealers. On the other hand, GM cars shed 65-70% of their value in the same period, said nine out of 10 dealers. Ford loses 50% of its value over the same period, said seven out of 10 dealers.

A dealer, who did not want to be named, gave another perspective on Tata: “It may get a better resale than a GM or a Ford. This is because it has takers in the second-hand transport vehicle market. But, otherwise, they have poor resale value."

What affects resale?

You may be wondering how does the resale value gets fixed. It’s definitely not arbitrary. There are other reasons, besides the obvious ones, such as the condition of the car, the registration date and the number of miles the first holder has covered through it, the survey reveals.

Image: How the buyers perceive a particular product makes a large difference. “While the American cars are perceived as fuel guzzlers, the Japanese technology more efficient," says Jayekumar

Spare parts availability: Car accidents and road bumps are common in India making spare parts an important part of the car-buying decision. While getting spare parts for Maruti cars is not a problem, getting those of GM, says Jayekumar, may not be that easy.

Maintenance: It’s common knowledge that most luxury cars have high maintenance costs. Cars from brands such as Maruti and Hyundai take that worry off. Maintaining big cars, especially those from GM and Ford, may take a big bite.

After sales service: Car companies that provide better services seem to have an edge.

And, of course, how you keep the car is something that no brand can overcome. Badly mutilated clutch plates are some of the first things that smart buyers look for. So watch that foot.

Graphics by Rahul Awasthi/Mint