Car Loan or Ola & Uber Cab – Which Helps You Save More on a Ride?

₹21 Lakh or ₹26 Lakh? Which one would you like to pay for your day-to-day commute over a period of 7 years? No prizes for guessing, you would vouch for the former, won’t you? The cost of ₹21 lakh is the result of a 7-year car loan. On the other side, the rides via taxi aggregators like Ola and Uber can pinch your wallet to the tune of as much as ₹26 lakh.

The cost details of both car loans and cab rides are shown below. But before that, let’s just quickly go through the recent developments which make car loans win more points over cab services in terms of overall savings.

The savings with a car loan, of late, have enhanced in the wake of interest rates falling to as low as 8.75% per annum. Coupled with the processing fee waivers at few banks such as State Bank of India (SBI), the balance is tilting much in favour of a loan-backed car ownership as opposed to cabs.

Ganesh Sharma Sits to Decide Between Car Loan and Cab Rides

Ganesh Sharma, like many, is mulling the options of a car purchase via loan and cabs (Ola & Uber) to commute to and fro from his home to the office. The distance between his home and office stands at 20 kilometres (Approx.). He is a marketing professional in a New Delhi-based publishing house and earns ₹60,000 net in a month consisting of 25 working days.

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Let’s Introspect Car Loan Case First

Based on his salary, Ganesh can choose from a growing list of cars including the top models of Maruti, Hyundai and Volkswagen. He is contemplating to buy either Hyundai Elite i20’s Sportz 1.2 Petrol variant or Volkswagen Vento’s Highline 1.6 Petrol version. The former model commands an ex-showroom and on-road price of ₹6.46 lakh and 7.20 lakh, respectively. On the other hand, the latter’s ex-showroom and on-road price stand at an estimated value of 10.08 lakh and 11.80 lakh, respectively.

Assume Ganesh receives a loan of ₹6 lakh for Sportz and ₹10 lakh for Highline at an interest rate of 8.85% per annum in each of the cases. Then, what will be the EMI for a 7-year loan tenure? Find it out in the tables below which also display other details.

Costs on a 6-Lakh Loan

ParticularsDetails
Loan Amount₹6,00,000
Interest Rate8.85% p.a.
Tenure7 Years
EMI₹9,608
Interest Outgo₹2,07,058
Total Outgo (Including Principal & Interest)₹8,07,058
Down Payment₹1,20,000
Processing Fee₹9,000+1,620 (18% of 9,000) = ₹10,620
Petrol Cost ₹4,20,000
Maintenance Cost₹70,000-1,40,000 (10,000 x 7 - 20,000 x 7)
Total Cost Over 7 Years₹14,27,678 - 14,97,678

Costs on a 10-Lakh Loan

ParticularsDetails
Loan Amount₹10,00,000
Interest Rate8.85% p.a.
Tenure7 Years
EMI₹16,013
Interest Outgo₹3,45,097
Total Outgo₹13,45,097
Down Payment₹1,80,000
Processing Fee₹9,000+1,620 (18% of 9,000) = ₹10,620
Petrol Cost ₹4,20,000
Maintenance Cost₹70,000-1,40,000 (10,000 x 7 - 20,000 x 7)
Total Cost Over 7 Years₹20,25,717 - 20,95,717

Note – Ganesh will have to make a down payment, which you see in the table, to the car dealer. The difference between the on-road price and loan disbursal amount leads to the figure of down payment.

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The processing fee is calculated at 1.5% of the loan amount + 18% GST. However, if Ganesh applies before the end of 2017, he could be exempted from paying the fee as banks like SBI and few others are offering a waiver under their festive season campaign.

Petrol costs are calculated on a daily average price of ₹200. In a month’s time, Ganesh would end up incurring a cost of ₹5,000, taking 25 working days into consideration. And by the end of 7 years, the petrol cost could reach up to ₹4,20,000 (5,000 x 84 months).

Besides, the maintenance costs for 7 years are calculated by taking an average annual payout of ₹10,000-20,000.

What’s in Store for Ganesh with Ola & Uber?

While commuting via cabs like Ola and Uber, Ganesh would have to pay the base fare, distance fare and the applicable taxes on a daily basis. The average base and distance fare can range from ₹60-80 and ₹10-15 per kilometre, respectively. Keeping these into account, the daily base fare comes out to be ₹120-160, while the distance fare is estimated to be ₹400-600 per day.

In addition, the cab aggregators would also charge a ride time fare (RTF) at ₹1-2/minute. Since it is a 20-kilometre journey from one side, the ride would take around an hour each (home to office and office to home). In that case, the RTF comes out to be ₹120-240 per day. Besides, there will be a 5% GST levy on the overall fare along with an MCD toll of about ₹100 on a 1-way journey. The MCD costs would thus amount to ₹200 on a daily basis.

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Check out the table below to find out how much Ganesh is likely to shell out while commuting via cabs.

Estimated Cost of Commuting Via Cabs

ParticularsAmount (In ₹)
Base Fare (2-way Trip)120-160
Distance Fare (2-way Trip)400-600
Ride Time Fare (2-way Trip)120-240
Total Fare in a Day (Exclusive of Tax)640-1,000
Total Fare in a Day (Inclusive of 5% GST)672 - 1,050 (640 x 1.05 - 1,000 x 1.05)
Total Fare in a Month (Inclusive of 5% GST) (25 Working Days)16,800 - 26,250 (672 x 25 - 1,050 x 25)
Total MCD Toll in a Month5000
Total Fare in a Month Including MCD Toll 21,800 - 31,250
Total Fare Over a Period of 7 Years (Inclusive of 5% GST & MCD Toll)18,31,200- 26,25,000

So, after examining every single detail, a car loan emerges an outright winner against the cab rides. Even with a higher loan quantum of ₹10 lakh, Ganesh’s overall liability comes out to be ₹20,95,717, lower than the maximum cost of ₹26,25,000 to be borne with a cab ride for 7 years. Despite years of interest repayment, fuel and maintenance costs, the overall outgo is estimated to be lower than the cab rides. Besides cost savings, a car loan gives you the ownership of a physical asset along with the conveniences enjoyed by the fellow 4-wheeler riders.

 

Personal Loan Interest Rates May 2018
Bajaj Finserv 10.99% - 16.00%
Fullerton India 14.00% - 33.00%
HDFC Bank 10.99% - 20.99%
ICICI Bank 10.99% - 18.40%
IndusInd Bank 10.99% - 16.00%
Kotak Bank 10.99% - 20.99%
RBL 13.00% - 18.00%
Standard Chartered Bank 10.99% - 14.49%
Tata Capital 10.99% - 18.00%
Home Loan Interest Rates May 2018
State Bank of India/SBI 8.35% - 8.90%
HDFC 8.40% - 9.10%
Bank of Baroda 8.40% - 9.40%
LIC Housing 8.45% - 8.90%
PNB Housing Finance 8.40% - 8.99%
ICICI Bank 8.45% - 8.95%
Axis Bank 8.40% - 8.75%
Citibank 8.40% - 9.25%
Indiabulls Housing Finance Limited 8.45% - 9.75%
Kotak Bank 8.35% - 8.50%
DHFL 9.00% - 10.00%
Reliance Home Finance 8.75% - 10.00%
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