• how much you can spend on a car *
• how much you can pay as down payment and
• how much you can afford per month.

Creating your own income and expenditure balance sheet and calculating the inflow-outflow situation tells you these numbers. For doing this, first figure out your monthly income. Use net income, as it is a closer approximation to reality. Next, calculate your monthly expenditures. Take care to include debts, mortgage or rent payments, insurance, groceries, spending money, clothing, etc. For a quick analysis, use our Budget Planner format.

As a rule of thumb, your monthly payment for a car should not more than 20 per cent of your monthly net income. This applies to car payments as a whole — even if you own two vehicles and make payments on both.

Are you looking for a regular vehicle upgrade every 2-3 years or are you happy cruising in the same vehicle for 5-6 years and more? This question is answered best by finding out what your needs are and how to exploit the differences between the two markets.

Between the two markets (new and second hand), there is the price differential. In a used car market, even if you were to find identical cars with the same option package and mileage, they probably would carry a different price. Reason — different drivers! If you knew that a Parsi (doesn’t it conjure up images of a safe and sedate driver) drove one and a teen terror (raising dust and burning rubber) the other, which would you plug for?

Another big difference in the used vehicle market is that of lemons (bad used cars). Without any manufacturer to back up the vehicle with a warranty, they could squeeze your happiness once you take possession.

The best used car buyer is one, who can not only negotiate mercilessly, but can easily and quickly determine risk — and establish value from that risk. The moot question now is: Do you have these instincts in you?

Read these questions and answer them as best you can.

• Are you an astute negotiator?
• Can you rapidly determine real value in just about any product as if you were a born "Locating Diamonds from Dirt Czar"?
• Do you like vehicle shopping? Do you roam used car lots and browse the classifieds on Sunday afternoon; even when you're not in the market for a vehicle?
• Are you mechanically inclined /tinker with machines, or have ready access to a mechanic?
• Do you have the patience of a praying mantis in a concrete-covered shopping mall parking lot?

If your answer was an enthusiastic "Yes!" to all of these questions, it’s a surprise that you haven’t yet clinched a deal and got your car. If "No!", chances are that you would have been browbeaten by slick salespersons if you hadn’t gone through our site.

The scenario a decade back, was one where the colour of the car, was the choice for the consumer! Things have come a long way since then. Choice is certainly the flavour nowadays. There’s no doubt that someone who’s shopping for an image car has different needs than someone who wants to get decent gas mileage. But the Indian market is heavily price driven and this has remained its mainstay feature over the years. Continuing this tradition, we give a segment-wise break up of vehicles on a price basis below:

Economy segment (up to Rs0.25mn)
Maruti Omni, Maruti 800, Padmini

Mid-size segment (Rs0.25-0.45mn)
Premier 118NE, Ambassador Nova, Fiat Uno, Zen, Hyundai Santro, Daewoo Matiz, Tata Indica, Maruti 1000, Contessa

Luxury car segment (Rs0.45-1mn)
Peugeot 309, Tata Estate, Sierra, Esteem, Ceilo Executive, Honda City, Mitsubishi Lancer, Ford Ikon, Opel Astra, Fiat Sienna, Opel Corsa, Daewoo Nexia, Hyundai Accent

Super luxury segment (Above Rs1mn).
Mercedes Benz and other imported models

When it comes to deciding which car to buy, logic is thrown to the winds as the heart rules over the head. But if you frame out the reason why you want a car, you can actually narrow down your search and get what best meets your needs. Keep asking yourself, "How am I going to use this vehicle?" The longer the list, the better. We've provided some examples below. Don't restrict yourself to these, but use them as a guideline for your potential choices:

1. commute to and from work
2. take Ram, and his seven friends, and all their equipment to and from cricket practice twice a week
3. go on extended (1 week) family vacations
4. go camping
5. do daily errands (must have cargo space for 8-plus bags of groceries)

Now go back through these reasons that you want and need this vehicle, and underline the most important points. You'll probably find three or four primary uses that will make up 80 per cent to 90 per cent of the vehicles actual use time. Based on your answers, begin crossing out, the major vehicle groups’ as well individual vehicles that don't fit your vehicle use profile. In other words, if one of your key uses is "take Ram, his seven friends, and the cricket kit to and from Cricket practice twice a week" then go ahead and cross out "Small Cars" and "Mid-Size Cars" because these vehicles are designed for not more than 5 people. Any Multi Utility Vehicles will better meet your need.

You may find that even after performing this "negative elimination", you might still have several categories left. Perform this elimination process in an iterative fashion and you are sure to whittle it down to a single group choice.

Once you have decided on the group you want to go for, start compiling information on the vehicles you’re interested in. Make a chart comparing standard equipment, invoice price and MRP, cost per option, and colors. Another thing to look at is the performance of a vehicle. Specifications, or "specs" include engine size, horsepower, number of cylinders, curb weight, gas mileage, etc. All of this information (with the exception of colors) can be found on our Cars section. Now compare the vehicles on a one-on-one basis and cut your list down to a maximum two or three possibilities. This will help later when it comes to negotiating with a dealer.
While compiling the comparison list, here’s are the broad parameters that you gotta watch out for:

 Price
With a budget in mind you can narrow the choice of cars available. For example, if your budget is Rs. 2-3 lacs then you need not waste time considering a Maruti 1000 or an Esteem unless you are contemplating a second hand car. Alternatively, your budget may allow you to buy a particular car, but its running costs may far exceed what you can reasonably afford.

Boot space and comfort
If you are using the car for family travelling and would not like an ugly luggage carrier, then you should consider the luggage or boot space of the car. For large families, more seating capacity and legroom is also needed.

Petrol / Diesel
The choice between petrol and diesel is again an important one. With the price of diesel around one-half that of petrol, the diesel options look attractive. Also, unlike a few years ago, when the diesel vehicles choice was very limited, there is a fair choice of them available today. They range from the small / mid sized Zen, Fiat UNO, Tata Indica to the premium range of Ford Escort and Mercedes Benz. Diesel vehicles are however, more expensive than Petrol vehicles and are normally economical if you are driving more than 25,000 kms in a year. Diesel cars are also more expensive to maintain even though now the technology used for diesel cars is far better then what it used to be.

Cost of Spares & Servicing
This is one of the most important aspect for buying the new car. Here one should not only look at the cost of servicing and maintenance, but also the ease of servicing. This aspect becomes very critical if you are travelling often on highways and smaller towns where it will be difficult to find a mechanic who will be well versed with the car. Availability of spare parts will also be difficult.

Feel of the Car
Ultimately, what you need do is to test drive the model selected to see if it suits you. Check out the overall feel of the car, steering effort and position, legroom, headroom, the gearshift, pedals and its driving capabilities.

Resale Value
The last but not the least is, likely resale value you are going to get if and when you decide to sell the vehicle after a period of time. Generally premium cars like Esteem, Cielo, Opel, Ford fetch much lower value vis-a-vis their original cost than say a Maruti 800 & Zen will.

However, some dealers may not take the phone-in order seriously. Or, they may claim that they require you to come down to the dealership. By requiring your presence, the dealer hopes to gain a greater leverage in terms of carrying through their soft sell act.

If a salesperson refuses to give you a quote over the phone, simply tell them that's too bad because they're losing your business. If six out of seven area dealerships give you quotes, you have something to work with. If none of your area dealerships are willing to give you a telephone quote, however, you'll have to show up at their office.

You could also try the fax route. For starters, you may need to call a dealership to discover its fax number but once you begin the communication via fax let them know that you handle all of your business this way. But don't state in your cover letter that you're simply going to the lowest bidder. Let them know that you are prepared to buy a car right away if the price is fair and if negotiations can be handled quickly via fax. It's important to keep the fax negotiation proceedings as rapid as possible (a two to three days timeframe is more than enough). If the process goes much longer than that, you're obviously in no hurry to buy a car or the dealer is in no hurry to sell a car. If you fail to respond promptly, the dealer will probably end the negotiations for fear of wasting too much time.

Meeting up with a FLEET MANAGER rather than a salesperson offers several distinct advantages.

• When negotiating, it’s always best to reach a meaningful agreement with the person with whom you’re negotiating. In traditional sales, the salesperson will almost always need to get the deal "okayed" by his or her boss — say the sales-manager. So even if you’re a superb negotiator who has just agreed to buy a car at the dealer’s cost, the deal has to get a green signal from the third-party sales manager. And that can be frustrating. On the other hand, A FLEET MANAGER can use his discretion and is completely capable of closing the deal without conferring with the sales manager.
• The FLEET MANAGER is used to providing customers with discounts. He will be willing to negotiate readily, and will not expect the customer to pay the MRP.

If that doesn’t materialise, fix up to meet the sales manager. If that too doesn’t work, you’ll have to simply show up at the dealership.

Before you head for the test drive at the dealership, bone up your car jargon with our Auto Glossary section. The sales team there could cash in on your innocence.

Call up the dealer and tell him that you are interested in buying a vehicle in the next few days. When you step into a dealership’s lot, many salespersons will come forward for assisting you. It is your prerogative to feel comfortable with the person who approaches you, — you have every right to choose another salesperson. Tell the salesperson, sales-manager or FLEET MANAGER that you have narrowed down your selection to a few vehicles, different makes, and this is one of them. This conveys your serious intent and separates you from the likes of the regular window shopper.

It generally takes about 10 to 15 minutes to demonstrate a vehicle’s features while parked. Don’t drive until you’ve been shown everything at a standstill. Listen carefully to what they say, but don’t take it as the gospel truth. Many sales guys know their product well, but some don’t know the first thing about their product line. During the "parked demo," ask a lot of questions like, "Show me how I check the oil level", "This luggage carrier, is it a dealer-installed option". Keep the salesperson focused on selling you the features. Often a salesperson will demonstrate a feature that the competition doesn’t have.

Keep your notepad handy for such important tips.

Once the parked demo is complete, the salesperson might ask you if you have any questions, or if you’d like to go for a spin. It is important here that you arrange to drive the specific vehicle you want with respect to "hard" features. Cosmetic differences don't mean a thing at this point. Do worry about "hard" features that may have several options, such as engine and transmission. Even leather seats should be considered a "hard" feature in that they give a particular "feel" that you might be looking for.

Use the test drive to your advantage. Continue asking questions. In the driver’s seat, pay close attention to how the car handles in various conditions. Does it feel comfortable? Are the controls easy to work, and easy to reach? Does the car accelerate well on the bridge or is it sluggish. How about rough roads: does it have the smoothness you want? Write down what you think of the test drive.

Also pick up every brochure, color chart, bumper sticker, and other promotional material that's available for the model that you just drove. The dealership itself may have some sort of manifesto on customer service and pricing. All this information can become useful at a later time.

Does your present car spend more time in the garage than the roads? Do you spend more on maintenance of the heap than on petrol/ diesel? Most people move on to buying a new vehicle because of the above reasons or for the sake of something new. But when it is time to buy a new car, people usually give up their old wheels without a fight.

Don’t let that ole heap go for free. Make the trade-in work to your advantage. Know the value of your trade. Look our for the indexes of second-hand prices of car models in our site, which provide both market and trade-in values for used cars. Be sure to add or deduct cost for mileage and options.

Next, compare the value of your car with the value of similar cars advertised in second hand car listing sites. Hosts of web sites have listing of quotes for the second hand cars. Here are some useful hyperlinks:
1. http://www.automartindia.com(/
2. http://www.auto.indiamart.com/used-car/index.html
3. http://www.popularcarbazar.com/
4. http://www.cybersteering.com/usedcars/usedcars.html

After arriving at an acceptable value for your car, be sure to adjust for the condition of your vehicle. Any damage such as rust, door dings, dents or scrapes should result in a deduction.
If you cannot sell your current car yourself, or you simply don’t want the hassle of negotiating with the public, then a trade is your only option. Be warned: You will get hundreds, even thousands less by trading-in your car in than if you had sold it yourself in the open market.
Before you take the ole heap to the dealership try to make it look like presentable. There’s nothing more likely to ruin your chances at a great trade-in price than showing up in an unwashed car. The dealer, like any other potential car buyer, needs to feel that you have cared for the car during your years of ownership. Here’s a list of things to do in preparation for a trade or sale:

• Wash and wax the exterior
• Thoroughly clean the interior fabrics, vacuum the carpet, and remove any debris such as food wrappers, coins, aluminum cans, etc.
• Change the oil and oil filter. The dealer will check the dipstick to make sure the car’s engine has been properly cared for.
• If any repair work needs to be done, get an estimate on the cost. The value of your car is lessened with every flaw, so know exactly how much repairs will cost. This will help you arrive at a fair value for your trade.

After everything has been accounted for, and you know exactly what your car is worth, expect to get a few thousands lesser at the dealership.
The ideal situation is when a dealership will agree to buy the car at the trade-in quote whether or not you end up buying a new car from them. If a dealer quotes a ridiculously high price for your trade-in, they make their money back some way or the other (either by loading up the new car with equipment add-ons, or charging you a high interest rate coupled with a long financing term). Fight the urge to accept a high quote on the used car, ridiculous as this may sound. The dealer has to get money somehow, and they won’t budge on the new car’s MRP if they’re already losing their shirts on the trade.

Ideally, you should find a loan when you start looking for your product. This will help in speeding up the delivery of the product to your home. Much like the best bargain being around the corner, there is scope for reducing your loan costs further, if you spend some time shopping around for them.

EMI is the first scale on which you should measure different loans. Don't get swayed by the interest rate quoted by the lender, instead look at the EMI for the same repayment tenure. Besides the quoted interest rate, the effective interest rate depends on the reducing balance method used. Reducing balance is the method of reducing the principal amount repaid, from the outstanding loan amount. Every time you make a payment, the interest you pay is calculated on balance outstanding principal.
The reducing balance can be of 4 types: daily, monthly, quarterly and yearly.

Daily reducing: The principal is reduced every day as if you were making repayment of the principal on a daily basis.
Monthly reducing: In this system the principal on which you pay interest reduces every month as you pay your EMI.
Quarterly reducing: On a quarterly basis.
Annual Reducing: The principal is reduced at the end of the year. You thus continue to pay interest on a certain portion of the principal, which you have actually paid back to the lender. This simply translates to this: the EMI under the monthly reducing system effectively being a smaller amount than under the annual reducing method.

The catch lies in the method of computation. The more frequently the rate is calculated, the better the deal. Going by this principle, a daily reducing balance calculation is better than a monthly, which in turn is better than a quarterly and so on.

Processing and other fee
While applying for a loan, you have to pay a certain charge on the amount applied for. The charge is calculated on the amount of loan applied for and not on the amount actually sanctioned. This charge varies with the lender and may be a fixed amount irrespective of the amount applied for or may be a percentage of the loan applied for. This amount, paid upfront, effectively reduces the money you get.

If the processing charge is 2% of loan applied for, and you apply for Rs. 10,000, you will have to pay Rs. 200 as processing fee upfront. And if the loan sanctioned is Rs. 8,000 , the money you actually receive is 7,800 (8,000 minus 200 processing fee you paid), but you have to pay the interest on Rs 8,000.

This can make big difference in the real cost of the loan. Look for the lowest fees lenders. Use our tools for finding the actual cost of a loan

Prepayment penalty
Try to get a lender who doesn't charge a prepayment penalty. This is a great way of getting rid of your debt in case your fiscal fitness improves. Also if the interest rates fall, you can go for replacing the higher cost loan with a lower cost one.
Also keep in mind that when the bank offers you the option of pre-payment, it does not give the flexibility of part payment .If you decide to repay the loan earlier than the pre-determined period, you have to pay the whole outstanding principal. So perish the thought of paying a part of your loan when you have a surplus as the bank does not allow it.

• New India Assurance Company
• Oriental Insurance Company
• National Insurance Company
• United India Insurance Company

An insurance policy is for a year’s duration after which it has to be renewed. Paying premium to the insurance company activates the policy. You can buy the policy directly from the insurance company or from their development officer/agents. Although you can go in for the minimum ‘Act Only’ or risk – Motor Policy A- which meets the legal requirement, it is better and wiser to go in for the ‘Comprehensive Policy’.

This covers personal injury and property damage. You are protected in the event of death or injury caused by your vehicle to:

1. anybody ( pedestrians, occupants of other vehicles etc) except those within your vehicle
2. the other vehicle’s driver
3. the passengers with whom your vehicle is for hire. Here the owner of the vehicle gets an insurance cover on third party property damage only in case of an accident, that means if you are in an accident the other injured party can claim damages from you. The premiums are dependent on the cubic capacity of the car. This cover does not extend to fire and theft accidents, for which you need to pay additional premiums

The premiums are higher than those paid for a normal third party insurance cover. This type of policy covers both third party insurance and own damage liability. Own Damage Liability includes:

• Loss/damage to the vehicle due to accident, fire, explosion, lightning, theft or any malicious acts
• Damage to the car while in transit by road, rail, water-craft, elevators or any other transport medium
• Risks against floods, earthquake, riots, strikes and terrorism
• To cover accessories like car stereo, car a/c and other items not part of the original equipment

Towing charges upto Rs1,500 for private vehicles and upto Rs 2500 for commercial vehicles incurred due to an accident.

Validity of the Insurance Cover
The cover is not applicable if the driver of the damaged car is drunk, does not hold a valid drivers licence, the vehicle is carrying people more than the capacity permitted by the RTO and if the damage is incurred in a war zone. The policy will not pay for consequential loss, depreciation, wear and tear and mechanical and electrical breakdown.

Amount of insurance
The amount of insurance is equal to the market value of the vehicle and not the original purchase price or book value of the vehicle

Renewal of the policy
The policy has to be renewed before the expiry of the period and any delay can render it invalid and attract a penalty while renewing. It is against the law to drive an uninsured car. This hassle apart, if the insurance policy isn’t renewed within the period of validity, the car has to be taken to the insurance company office for inspection.

No Claim Bonus(NCB)
No Claim Bonus (NCB) clause is applicable to holders of comprehensive insurance policy. The clause refers to the discount that a policy holder can receive on the amount of premium payable, if he has not lodged any claim during the year. The policy holder can claim a 20%, 35%, 50% and 65% discount in the premium of the first, second, third, and fourth year of holding the policy. ‘NCB’ cannot be claimed in the 5^th year premium. The discount is based upon the claim that he has lodged with the company.

Where does this NCB clause fit into the scheme of things? When you want to buy a new car and have a clean claim record, you can transfer this record to your new vehicle. Suppose you have to pay Rs 100 as premium on your car. Because of your clean driving record, you pay only Rs 35 (when you enjoy a NCB @ 65%). Now, when you buy a new car which has a value higher than the current one, premium is undoubtedly higher. But you get to transfer the bonus percentage onto your new car. So, if on your new car the premium that you have to pay is Rs 10,000, because of the NCB, you pay only Rs. 3500 that is you save Rs 6500. However the purchase has to be made within the first three years of sale of the old car.

When you buy a car you have to register it with the Regional Transport Office (RTO). Despite taking a loan from a bank, you personally are liable for the registration charges. Every car has its own Certificate of Registration (RC) book that keeps track of the history of the car.

As a buyer of a car you need to ensure that all the legal forms should be filled in completely and submitted to the right authorities. Say, you live in Mumbai and bought a new car. You need to submit the relevant documents to the RTO under whose jurisdiction your address falls. If the new car is from another state, you will need to obtain a certificate of temporary registration from the RTO. In most places, this certificate is valid only for a very short period, after which a permanent registration number has to be obtained. While heading with the new car to the RTO, take the following with you:

• Application for new car registration or Form 20
• Photocopy of the invoice, insurance policy, ration card or telephone bill as proof of address
• Original Sale Certificate or Form No 23, Sales Tax Receipt, Octroi Receipt
• Pollution Under Control Certificate from the manufacturer or Form No 22
• Letter from the financier, in case you have taken a loan to purchase a car, addressed to the RTO asking them to endorse their lien on your car registration certificate book or Form No 34
• Your PAN number
• Imprint of your cars Chassis Number