Opinion: Buying a new car as an investment

New car prices have shot up recently due to tighter emissions norms, higher input costs and long waiting periods.

Can a car be an appreciating asset? If the universe conspires, it can. Allow me to explain. Many years ago, a conversation with a high-end used car dealer uncovered an eye-opening trend. Back then, many Rolls-Royce owners were selling their Ghosts and Phantoms at a premium over what they paid for, even after some years of ownership. The reason cited was the weakening Indian rupee against the British pound, which inflated prices of new cars by 30-50 percent, to the extent that even billionaires found value in taking the pre-owned route.

Lately, even mass-produced brands are following a similar trend. Reason being, cars have gotten expensive by 5-15 percent across the board in the last three years on account of tighter emissions norms, rising safety standards and higher input costs, and the limited supply and long waiting periods of some brands have further been a catalyst to influence residual values.

To put it into perspective, a top-spec Hyundai Creta diesel automatic SX (O) variant is priced at Rs 23.16 lakh (on-road, Delhi) today compared to Rs 20.49 lakh back in 2020. As a result, a buyer who would have purchased the car in 2020 and used it for a couple of years, will be in a position to command an amount close to its then-ex-showroom price of Rs 17.20 lakh, and will still find buyers for it. The periodic price hikes while waiting in serpentine queues for a new car further encourage buyers to consider pre-owned examples and save a whopping Rs 6 lakh in the process. The story remains the same for popular models like the Mahindra XUV700, Thar, Scorpio, Maruti Suzuki Ertiga and Wagon R, among others, which command a stellar resale due to their strong demand in the new car market.

Premium brands, on the other hand, are prone to higher depreciation hits, with the exception being high-demand models with limited allocations for India. Few enthusiast cars such as the Volkswagen Polo GTI and Skoda Octavia RS have buyers forming a beeline to get their hands on one, as a result, owners are getting close to what they paid for to begin with.

Now, I’m not implying that cars are appreciating assets and the car you’re lusting after is the right ‘investment’ for you. However, if you buy the right car and are lucky enough to procure it when demand is at a peak, you could save yourself from a huge depreciation hit at the time of resale.

Also See:

Opinion: Is ADAS suitable for India?

Opinion: New car, SUV waiting periods and the menace of ‘on’ money

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