Why buy a smaller car when bigger cars are cheaper in the long run

May 21, 2021 3 min read
Why buy a smaller car when bigger cars are cheaper in the long run

We often tend to settle for a smaller car due to lack of budget at that point in time. However, if you are patient and do your number-crunching carefully, you can go for a bigger car.

In India, a car is not just a necessity. It is a symbol of wealth and success. People in India do a lot of research and analysis before buying a car.

However, India is still an emerging automobile market with huge growth potential. The majority of car buyers in India are on a budget. Hence, the largest selling car segment is the hatchback. It's the default choice of most middle-class households. Why it shouldn’t be? Smaller cars are cheaper and attract lesser maintenance costs. Right?

Well, it could be correct in the short term — say 3–4 years. How about the long term? Like 7–8 years or more? Is it still feasible? I don’t think so.

Let us understand with an example.

Now, let us assume that you are planning to spend around ₹ 7.5 lakh for a brand new Hyundai i20 Magna variant right now. But your plan is to upgrade to a bigger car after 3–4 years because you can’t afford that car right now. Here, let us assume that the bigger car is Honda City.

Now, after 4 years, you will have to shell out around ₹ 15 lakh to buy a Honda City.

But after 4 years, the value of your i20 will also depreciate by around 50 percent. In a best-case scenario, you can sell off your i20 for around ₹ 3.5 lakh. That means, you still need to shell out around ₹ 12 lakh to buy a bigger car.

In total, you will spend around ₹ 22 lakh in a period of 4 years. And will get back only ₹ 3.5 lakh from your old car. That means, your effective expenditure in 4 years would be ₹ 18.5.

When I checked the fair price of the 2016 Hyundai Elite i20 Magna variant on CarInfo that has done around 50,000 kilometers, it showed it around ₹ 3 lakh only.

Here is the screenshot.

CarInfo App Screenshot

Here, you need to evaluate the intent of buying a hatchback earlier when you eventually plan to buy a bigger car in the near future.

If living without a car is impossible for you then it is a different scenario. However, if the shortage of funds is the only reason to not buy a bigger car then you need to take a step back and think about the above math.

If you can postpone the idea of owning a car for 1–2 years then you can easily accumulate funds to go for a bigger car. It will help you save lakhs of money.

Not just by the above math. Here are some more reasons.

Bigger cars come with the better build quality. Cars from the likes of Honda, Toyota, Volkswagen, and more are built to last. If you drive these cars normally and follow a proper service schedule, these cars can last for lakhs of kilometers.

A hatch may ask for a major maintenance service after 1 lakh kilometers but a well-built sedan or SUV will easily run reliably for a couple of lakh kilometers at least.

Hence, if you drive more than 2,000 kilometers in a month a plan to keep your car for a longer period of time then it would be wise to invest in a good sedan or SUV. Bigger cars can easily run for 8 to 10 years without any major problems.

Enough logic has been said!

Buying a sedan or SUV as your first car will give you a bigger sense of accomplishment. And driving daily in a better car will make you feel better. Nothing can match the comforts of a bigger car. You can plan long road trips with your family and comfortably seat 3 passengers on the rear seat.

On top of that, you will also get a better resale value of your car as brands like Toyota and Honda are in high demand in the used car market because of their reliability.

Some common sense and patience are all you need to own a bigger car at an early stage of your life.

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