Four-wheelers have gotten quite expensive. I have not bought a new car in almost 10 years and hence never thought much about it. A friend was buying one recently, this topic came up, and I could see that the costs have gone up. Is there a way to reduce the cost of car purchase?
Negotiating the car’s price is one way. Depends on your negotiation skills.
However, this may not always be in your hand. A dealer’s willingness to negotiate on the price of cars depends on the demand for the specific model you are interested in. And you are only adding to the demand. When you have waiting periods for new cars running into months, it is not easy to convince salespeople to reduce the price.
How to Reduce the Cost of Your New Car?
The on-road price of the car includes the cost of the car (ex-showroom price), registration costs (including road tax), and the insurance costs.
- You can get the dealer to reduce the ex-showroom price of the car. Completely depends on your negotiation skills and the demand for the model.
- Registration costs are levied by the state government. Hence, you cannot do anything about these charges. Yes, you can get your car registered in a different state/UT where these costs are lower, but you must be prepared to be stopped by traffic policemen at regular intervals and somehow convince them.
- The insurance component is not insignificant. Now that you must buy 3-year third party insurance and 1-year own damage insurance at the time of car purchase, it does add significantly to the cost of car ownership in the first year. You can buy your insurance separately rather than through the dealership.
Here are the quotations for two cars that my friend shared.
You can notice that car insurance easily makes up for 5-7% of the overall cost.
Is There a Way to Reduce the Cost of Car Insurance?
Well, there is. The insurance coverage that car dealers sell is quite expensive. The car dealerships (or the car manufacturers) have tie-ups with general insurance companies and offer insurance cover from these companies as agents.
Do you know you do not have to buy car insurance through the dealership? You can buy insurance from any general insurance company.
If you are not good at negotiations (like me), this is the lowest hanging fruit for you. If you think you won’t be able to negotiate a better price than the one quoted in the rate list, you can simply say that you will buy insurance from outside.
Let’s consider the examples shared earlier in the post.
- For Renault Kwid RXE (Petrol 1 litre), the dealership quote for Comprehensive cover (3-year third party and 1-year own damage) with Zero depreciation is Rs. 28,815. I am not sure whether this quote includes 18% GST or not. Most likely, it does not. I checked the quotes for the Zero-depreciation plan from an insurance aggregator. The quotes ranged from Rs ~14,000 to Rs ~20,000. These quotes do not include GST.
- For Tata Motors Tiago EV Medium Range (MR) XE, the premium in the dealership price list is Rs 59,904. Again, not sure whether the quote includes GST. The quotes on the insurance aggregator website ranged from Rs ~10,000 to Rs ~35,000. The price difference is quite steep in this case.
As you can see, you can save a lot of money by buying the cover on your own.
The sale of accessories, car insurance plans, and running service centers are high margin segments for the dealerships. Therefore, the dealers insist that you buy insurance from them. However, if you stand your ground, they will let you buy. The dealer can’t force you to buy insurance through them.
You must buy insurance cover before your car is registered with the RTO. Hence, you must purchase the insurance before taking the car out of the showroom. That is not a problem. You get the engine and chassis number from the dealer, reach out to any insurer, share with them the engine and chassis number, and they will issue you the policy after premium payment. You can then share the insurance information with the car dealership. It is that simple.
Make Apples-to-Apples Comparison
A car insurance cover has varying levels of coverage and hence the premium can vary.
It is possible that your car dealership is selling you zero-depreciation insurance at the quoted price. Zero-dep coverage makes insurance more expensive but can save a lot of money if you were to get into an accident. You can’t compare this premium (with zero dep coverage) against a plan without zero-depreciation cover and feel overjoyed that you are saving a lot of money by buying insurance outside. IDV (insurance declared value) may be different.
The insurance plans that you get through dealerships are usually quite loaded. Hence, do keep this aspect in mind.
Another important point: While I have never made an insurance claim for my car, my relatives and friends have shared feedback that the dealerships are quite keen and quick to repair 4-wheelers if the insurance was bought through them. For other insurers, there may sometimes be hassles and you may have to run around a bit. Do consider this aspect as well.