The Price-Difference Paradox: Why a Used BMW Can Be 10,000 USD in the USA but 18 Lakhs in India
For those who quickly rushed to judgment and accused someone of laziness for not doing their homework, the following explanation should clarify the issue.
Price vs Worth: A Comparative Analysis
When examining the price and worth of a used BMW, it's crucial to consider the context within which these vehicles are bought and sold. This analysis reveals some interesting insights about the economic realities in the USA and India.
United States: Affordable Luxury
In the US, the sticker price for a new BMW typically ranges between $40,000 and $60,000. This price point makes up around 60% of the median income for an American middle-class household, which is approximately $81,593 per year.
Even with a financing plan costing $800 to $900 a month, only a small portion (approximately 12%) of a typical household's income is dedicated to paying off the loan. This means roughly 38% of US households can afford a new BMW.
Subsequently, the worth of a used BMW in the secondary market reflects the initial investment and the affordable monthly payments over time. Therefore, in the US, a used BMW that once cost around $50,000 can be found for around $10,000.
India: Luxury Out of Reach
Contrast this situation with India, where the average cost of a BMW can be as high as 72 lakhs (approximately $93,300). This amount represents an astounding 900% of the median income of an Indian middle-class household, which is approximately 8 lakhs (approximately $10,660) per year.
The financing plan for a new BMW in India can cost between 1.8 to 2.25 lakhs per month in EMIs (Equated Monthly Installments). This high EMI represents a significant portion of household income and makes buying a new BMW unaffordable for almost all middle-class Indians.
Due to this financial reality, the worth of a used BMW in the Indian secondary market remains disproportionately high. A used BMW that once sold for around 72 lakhs might only go for 18 lakhs (approximately $23,330), reflecting its higher relative worth.
Rising Affordability: The Future of Secondary Markets
India is slowly catching up to the US in terms of consumer economics. Over time, the affordability of luxury vehicles in the secondary market is expected to improve. It's likely that in the next 20 years, a used luxury car could be found for a fraction of its new sticker price.
The key factors influencing this change are likely to be increased income levels, improved economic conditions, and the gradual adoption of more affordable luxury car models.
Conclusion
The cost and worth of a used BMW in the USA vs India are vastly different due to differences in median incomes, accessibility of credit, and the relative affordability of luxury vehicles in each market. While a used BMW in the USA might cost $10,000, in India, it can cost 18 lakhs (approximately $23,330) due to the higher initial and ongoing costs of ownership.
As India continues to grow economically, the affordability of luxury vehicles in the secondary market is expected to improve, making it more accessible to the middle class.