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Buying a used car? Ask these questions

In the previous article (see related links), we told you why a used-car makes a lot of sense if you are in the market for a new set of wheels. However, a used-car is not for everyone. Some people can live with a used-car much better than some others. And it all depends on what sort of person are you? And what sort of car suits you? Read on to find out more.

Here are the five crucial questions you must answer to know if you are the 'used-car' kind of guy/girl.

How well can you drive?

Suyash, 23, is fresh out of his driving school class. He has learnt his ropes on a battered 8-year old Maruti Wagon-R over three weeks. It's time for him to get his own set of wheels now. Wisely, Suyash has decided to keep away from a new car for now. As he continues to sharpen his skills in the real world, there is a very high possibility of a few bumps and nudges here and there.

Suyash has decided to go the 'used' way, and has found a 2003 Maruti Zen that he intends to purchase after he gets his driver's license. He knows he can continue to learn (and make mistakes) on the Zen without worrying too much about damaging the gleaming bodywork.

Arjun, 32, learnt driving on his dad's Premier Padmini when he was 19. He has been driving ever since. To his credit, for the past six years, he has been driving to office -- a daily commute of about 28 km each way -- through merciless traffic. He is also a big fan of weekend getaways, and that has allowed him to hone his skills on Indian highways.

Arjun really likes the Hyundai i20. He has booked one that will be delivered on June 8, just in time for his wife's birthday celebration.

Who are you? Suyash, or Arjun?

veriCAR (http://www.veriCAR.in) is India's first independent used car inspection and certification company. veriCAR uses its expertise to help used car buyers make better purchase decisions, and ultimately enables them to buy the right car, at the right price.

How long do you intend to keep the car?

Suyash knows he will use the 2003 Zen to hone his skills and build his confidence. He plans to sell it off after eight months (hopefully, he will have a big bonus from his software job by then), and buy a bigger, better car. Since Suyash is going to keep his Zen only for a very short period, it makes sense for him to buy used cars. Had he purchased a new car (even if he were an experienced driver), the rapid loss of value of the new car would've dented his bank balance quite a bit.

For Arjun, on the other hand, this is the second most important purchase of his life, and he wants to be careful with it. Arjun intends to keep his car for at least the next five years, before he decides what he wants to do next. A new (or almost new) car makes a lot of sense for him -- he would get the best value from such a car in the five years that he intends to own it.

So who are you closer to? Suyash, or Arjun?

What is your budget?

Akash, 34, has a large family: wife, toddler and parents. He is looking out for a car, and thinks that the Innova absolutely fits his bill. It's spacious, comfortable, reliable and has a great diesel motor. The problem is the budget. He has set aside Rs 7 lakh for the Innova; he can't afford a new one. If he hunts around in the used-car market, he will get a fully loaded (airbags, ABS, power windows, power locks, power steering), three-year old Innova 2.5V for his budget.

Of course, he fully intends to get it checked for any accidents and mechanical problems by an independent used-car certifying authority before he puts his money on the table. Now, isn't that a wise choice?

Puneet, 25, is enjoying his bachelor life, working for a fast-food chain in Mumbai. He has decided to buy a car so he does not have to travel by public transport any longer. He will mostly travel alone (or, at the most, with a couple of friends), and does not really need a big car with its big boot. For his budget, he can afford a new (or almost new) car, and that is exactly what he intends to purchase next week.

Well, are you like Akash, or are you more like Puneet?

Will you be purchasing the car outright, or will you take a loan?

Remember Akash? Well, his steel business has made some money this year, so he can afford the buy the car outright -- without getting involved with a loan. Puneet, the young bachelor, on the other hand, has decided to take a loan on his new car.

Both of them know that used-car loans are difficult to come by in these times. They also know that the interest rate on used-car loans (18 per cent*) is significantly higher than that on new car loans (10 per cent*). If either of them were to take a loan on a used-car, their monthly EMI (equated monthly installment) would not be very different from what they would pay for a new car.

Bottomline: if you are on a tight budget, consider used instead of new. If you would rather take a loan than be on a tight budget, consider a new car instead of used one.

* Indicative rates only

Finally, what is your personality type?

Kishore, 36, works as a manager with a leading engineering company. He has considered a used-car as his next car, but he is sure he will not be comfortable driving a car that has been used by someone else in the past. His risk appetite is moderate, and he does not want to take a risk on any problems that the car may come with. With Rs 3 lakh budget, he has decided to buy a new Maruti Alto LXi, rather than a three-year old Maruti Swift VXi.

Yogesh, 27, is a successful first-generation entrepreneur who runs his own catering business. He is convinced that the used-car market offers some irresistible deals. He has found himself a three-year old Ford Fusion for under Rs 3 lakh. It is big, comfortable, powerful and fully loaded. He has read the previous article, and knows exactly what he is getting into. But hey, he's taken bigger risks in his life. What's more, he knows a professional company that will help him take an informed decision about the car he is buying. Yogesh has nothing to fear. He is definitely the used-car type.

Ask yourself if you are more Yogesh, than Kishore? Answer these questions, and you should be ready to go. 

Coming up next week, how to start looking for a used-car.