What can feel better than going to a New Car showroom and driving out on a new set of shining wheels?
That blue sedan or the red hatchback which you always wanted to buy…is now yours! Wow! But just hold it. Have you considered the real and total cost of owning a New vehicle? Did you know that the highest depreciation of a new car is in the first few months. If a month later you decide to get rid of your car, be ready for a 40% discounted price!
Here is a checklist :
1. Do you have enough money to make a down payment? – If you have a decent form 16 today your banker is more than willing to give you an auto mortgage. However the higher the down payment that you do make, the better the terms that you can get from the banker.
2. Have you considered the price of fuel: The latest price hike in India has been almost Rs. 8/ l. This is not insignificant by any stretch of imagination. Also consider the future price of petrol and be willing to pay out say Rs. 3-4000 per month on fuel. This could be as high as your auto EMI.
3. Consider the cost of Insurance: A comprehensive insurance on your car will cost you about 5% of your vehicle costs. If you think this is high, welcome to US. Insurance is about 10% of the cost of the vehicle. Even in India expect insurance rates to GO UP, not down.
4. Other ‘friendly’ users: If you have a new set of wheels will your friends want to take it for a spin? Please provide for friends, brother, sister, brother in law….wanting to borrow. Here the costs of depreciation, fuel, RISK, …all of this could hurt you, hope you have considered it.
5. If you are a new driver be ready for tickets for traffic offences.
6. Sadly I do not think we have a TCO kind of a site which tells you the REAL TOTAL COST OF OWNERSHIP of a car….so you need to use your own past data, guesswork, etc. to know the exact cost.
7. As a thumb rule add 30% to your fuel costs + emi as a ‘load’ while considering a car.
For example if you are paying Rs. 5000 as EMI, and Rs. 4000 as fuel charges, your monthly outgo could be 5k+4k +2700 = 11,700p.m however,
For example if you are paying Rs. 20,000 as EMI, and Rs. 20,000 as fuel charges….you may end up paying about Rs. 8000 …
However your own past data might be far more useful…
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