Used cars & bikes are appreciating asset now. Don't sell for less!

Traditionally, homes are supposed to be appreciating asset and vehicles are counted as depreciating asset. But I feel this has changed now, because of which used car/bike price calculation logic needs drastic change. The process that existed since ages has got some main logical flaws because of recent changes in the automobile industry. If you are selling your old car or bike, I feel you deserve much more value than what vehicle agents or potential customers insist. Read further to understand why.

Let us take some examples:

Bike: I had bought a 160 cc TVS Apache RTR 160 in 2014 for about 80k INR.

So if I have to sell it now, considering yearly depreciation current market value is calculated at around 40-45k INR or half of what I had paid.

 Now the new 150-160 cc bikes cost about twice as much- 1.4 to 1.5 lakhs. [Understand why].

I feel my bike should have a valuation of at least 70-80k today, because of following reasons.

• Since new bike costs 1.5 lakhs. Consider loan interest amount, yearly insurance premium etc, the total spend will be much more. It is fair expectation that 5-6 years old bike is valued at half that price- like 70-75k.
• If I have replaced consumables recently (like tyre, battery, cables etc) then bike is good for another 2-3 years/30000 kms, almost as good as new one.
• If I sell it at 35k now I will have to spend additional 1.2 lakh to buy a same capacity new bike.

Car:

• Tata Tiago that had on road price of 4-6 lakhs in 2016, now costs between 6 to 8.5 lakhs on road. (petrol variants only) 50% increase. So if a 2-3 year old Tiago is in excellent condition, it is worth 5 to 5.5 lakhs easily, than expecting it at 3 or 4 lakhs.

Tata Tiago ex-showroom and on road price in Chennai,  April 2016

Tata Tiago Variant	Ex-Showroom, Chennai (INR, Lakhs)	On Road Price. Chennai (INR, Lakhs)	Remarks
Tiago XB Petrol	3.31	3.81	No AC (only blower)
Tiago XE Petrol	3.71	4.27
Tiago XM Petrol	3.97	4.56
Tiago XT Petrol	4.27	4.91
Tiago XZ Petrol	4.84	5.55
Tiago XB Diesel	4.07	4.67	No AC (only blower)
Tiago XE Diesel	4.42	5.08
Tiago XM Diesel	4.78	5.48
Tiago XT Diesel	5.09	5.83
Tiago XZ Diesel	5.64	6.46

Tata Tiago ex-showroom and on road price now (Udupi, Karnataka, November 2020)

Tata Tiago Variant	Ex-Showroom, Udupi (INR, Lakhs)	On Road Price. Udupi (INR, Lakhs)	Remarks
Tiago XB Petrol	NA	NA	Discontinued
Tiago XE Petrol	4.7	6.0	5.999 to make you happy!
Tiago XT Petrol	5.34	6.82
Tiago XZ Petrol	5.84	7.41
Tiago XZA+ Petrol DT	6.74	8.5	There are few more variants costing between 7.9 to 8.4 lakhs

Of course there're reasons for price increase which I have explained in earlier post. But here my point is, value of older vehicles in excellent condition should appreciate as new vehicles are costing too much more right now.

Homes are sold under same thought process- invest now, pay hefty interest for 20 years, hope home price increases over time as demand increases n supply reduces. Unfortunately it hasn't worked out like that for home buyers- so many new properties are unsold, so no one will pay premium for old houses. But automotive industry is facing that situation now- new cars and bikes cost 2x more to buy and maintain, so it makes lot more sense old car/bike owners deserve a premium if they have to sell their cars.

So if you are selling your car or bike, don't go by the valuation set by agents or buyers. Consider following factors:

• Current on road price of new vehicle with same capacity/specifications
• Condition and potential life of your vehicle and its ability to save money to next owner (in terms of insurance spend etc)
• How much you've spend from pocket to buy a new vehicle after selling your old vehicle

What do you think? Is there a merit in my point of view? Are you happy to sell your old vehicle for peanuts and spend a bomb to buy a new one? Since pricing of new vehicle has gone up, don't the old vehicles worth more than the conventional pricing logic?

Note: Whatever I am saying is a temporary situation because of significant price increase of BS6 models compared to vehicle prices 3-6 years ago. For very old vehicles or very new vehicles these arguments may not hold. Use your discretion. Most vehicles can be used for up to 20 years if maintained very well- but govt wants people to scrap their cars sooner and spend more money buying new cars, so that it can pocket more tax. Of course environment is used as a nice excuse for this.

Also read: Vehicle insurance mafia *