Buying a new car is a dream come true for many people. A average priced car may not be as big an investment as a house. Nevertheless, buying a car can be quite a strain on the pocket for the common man and more so if you opt for a high end car.
Although car loans are easily available today, it becomes important to plan for this purchase.
Remember, the equal monthly installment (EMI) is just one small part of the total cost of car ownership; additional expenses can double the EMI. This article explains all the costs you should budget and prepare for as a new car owner.
The real cost of owning a new car includes:
1. Vehicle On Road Price
The vehicle on road price includes several components. The major component is the Ex-showroom price followed by Road Tax, Registration Charges, Additional Warranty, Basic Accessories and more.
2. Interest/Financing Cost
Your EMI includes not only payments towards the original loan, but also the interest due on it. The interest rate and the length of your car loan affect your total cost of financing.
For example, Swift ZXI variant ex-showroom price is INR 6,50,839 in Bangalore. So interest for a loan amount of INR 520671 at the rate of 10 p.a for 5 years will be INR 1,43,092.
That’s nearly 27 percent of actual car’s value. On extending it to 7 years, the charges shoots to 40 percent.
3. Fuel Cost
Do you use petrol or diesel? What kind of mileage does the car get? How much you are gonna drive every month? These are the questions you need answer to find out your fuel cost.
Considering real life mileage for petrol as 14 Kmpl and diesel as 17 Kmpl, the fuel cost for 70,000 Kms in Petrol and 1 Lakh in Diesel will be nearly 3.5 Lakhs Rupees – considering Average Petrol Price as Rs. 70 for Next 7 Yrs and Diesel at 20% less than Petrol. This is equal to 50 percent of actual car’s value after 7 years.
4. Insurance premiums
Insurance is another unavoidable cost of car ownership. It is mandatory aspect and is advisable to protect your hard earned asset from theft, accidental Repairs. After 1st Year Insurance – Its estimated that 6 Premiums (with 2 Claims and rest NCB) will cost around 15% value of original car as purchased.
5. Scheduled Maintenance
On average, Indian cars require scheduled service once a year. Expect to pay from 4000 rupees per visit, but this amount will increase as your cars ages and some luxury cars like Mercedes can cost 25000 rupees per visit. Very few cars sold in India are covered by service plans that include routine maintenance.
For Swift petrol, considering 70,000 Kms driven over 7 years and services at at interval 10,000 KMs), the estimated cost of scheduled service would be Rs. 28,000. It will be higher for Diesel Car at 65 paise per Km – considering 1 Lakh Kms. (without taking inflation into account)
6. Repair Costs
Car comes with so many moving parts and there are chances of wear and tear. Change of Battery, Tires, Clutch Plate Assembly, Brake Pad Replacement, AC Servicing, Shocker Replacement are few to consider. These items are not included in scheduled maintenance.
Accidental repairs along with unaccounted maintenance is always an important part of car ownership.
Depreciation is far and away the biggest expense of motoring. Your shiny new car will lose almost 10% of its value as soon as you drive it off the showroom floor, and 30 to 40% in the first year of ownership alone.
Most car buyers opt for optional extras such as upgraded music systems, anti-theft alarms, body kits, custom alloy wheels etc. Accessories also add to the overall ownership cost.
9 . Miscellaneous
Parking costs, tolls, and tickets are just some of the additional charges that you will need to be prepared to pay for as a car owner. Additionally, some apartments and societies charges nearly 1-2 Lakhs for car parking slots.