Five things to know while buying a car

Auto manufacturers are promising fabulous discounts for those planning to make a purchase. Go through these pointers before you avail of sops

New year, old model 

Car companies usually offer big discounts in December to clear their inventories before they hike prices and launch new models in January. If you buy now, your vehicle will bear the registration date of December 2013, and in a few days, it will be last year's model. This should not matter if you are planning to use the car for at least 7-8 years. However, if you plan to change the car in 3-4 years, the registration date will matter. A 2013 model will fetch a lower resale price four years down the line. Hence, it will be prudent to wait till January to buy it. Remember that a new car should be used for at least 8 years to get a full return on investment. Sell it earlier and you could lose out on its value.

Buy within your means 

The bigger the car, the fatter the discounts being offered. However, don't let the freebies entice you into making a purchase you can't afford. The golden rule is that the price of a car should not be more than 60% of your annual take-home income. If your take-home salary is 60,000 a month, don't think of buying a car priced at more than 4.32 lakh (60% of 7.2 lakh annual income ). Another time-tested principle is that the car loan EMI should not be more than 15% of your post-tax monthly income, or 40% of your investible surplus after all expenses and mortgage payments. Follow these rules diligently when you choose the car model and you won't regret the decision.

Consider the offers closely 

While you should not look a gift horse in the mouth, when it comes to freebies from car dealers, a closer look is necessary. They tend to inflate the value of free accessories to make the deal seem more attractive. This is why it's better to go for cash discounts rather than free accessories. Don't fall for the exchange offers as well. Most car dealers offer to buy your old car, but the price they quote is usually much lower than the one you would get elsewhere. A bit of market research will tell you roughly how much you can expect for your car, and you won't have to run around to find buyers. Avail of portals like Olx. in, which have made it easier to sell used stuff.

Transfer the no-claim bonus 

All car owners know that if you don't make a claim in a year, the next year's premium fetches a discount. However, few know that a no-claim bonus can be transferred to another vehicle, bringing down the insurance cost of a new car. You will have to submit the photocopies of the sale agreement, transfer documents, insurance note and the car's registration certificate, along with a letter requesting the policy's termination, to the insurer. The latter issues a no-claim certificate, which will get you the discount on the new car's insurance. If the insurance of the new car works out to 15,000, a 50% no-claim bonus will reduce it to 7,500. This certificate is valid for three years from the date of issuance, but you will have to make things clear to the buyer since it is assumed that the old car comes with insurance.

Petrol, diesel or CNG? 

Petrol is the costliest car fuel, but petrol cars are the cheapest. Diesel is inexpensive, but the diesel variants of cars are costlier by 75,000-1 lakh. They also require higher maintenance. Your choice should depend on how much you travel in a day. If you drive more than 80 km a day, go for a diesel car. You will be able to recover the extra cost within two years. This assumes that the gap between petrol and diesel prices will not narrow down further. CNG is a clean and cheaper fuel, but its availability can be an issue. Morever, the CNG cylinder takes up a lot of boot space.