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Car ownership highly expensive as payments go beyond EMIs

Car Loan

Do you know what is a mirage? it is a fallacy of eyes that shows something which is not actually there. Same goes for the blown out of proportion advertisements that show consumers the mirage which sometimes ends up burning a hole in their pockets. Don’t get moved by the sales pitch of banks saying car ownership is affordable as you just have to pay equated monthly instalments (EMIs). The reason being other costs such as depreciation, fuel costs, interest payment, taxes, maintenance cost, etc. These costs, when add up to the price, makes car ownership an extremely expensive proposition. So, while buying the car, you must focus not only on the EMI, but also other costs stated above. Doing the same will help you assess your car ownership as well as make you prepared to deal with the expenses that will arise in the future. Below are the list of expenses that go hand-to-hand with car.

Taxes – Some car loan schemes do not cover taxes such as RTO tax and octroi. These taxes add 1%-6% to the showroom price of the car.

Depreciation – As a car owner, you can’t take your eyes off from depreciation, which leads to a drop of nearly 30%-40% in the car value during the first year itself. Interestingly, most cars lose almost 10% of its value moment they go out of the showroom. Hearing this may give you sleepless nights, but it’s true.

Cost of fuel – Even though petrol and diesel prices have remained under control due to slide in crude prices internationally, but it’s still a thing that inflate your car ownership. Cost of fuel, in recent times, has probably come at par with your EMI payment.

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Interest payment – With EMIs, you not only pay the principal amount but also the interest  that accrues on the loan. And if you keep a longer tenure for car loan, the interest payment will be much more compared to when the loan tenure is kept shorter. Interest rate on car loan ranges between 9.5%-15%. So pick the lender offering you car loan at an affordable interest rate.

Scheduled Maintenance – Indian cars need scheduled service twice in a year on an average. The service cost of most cars will be Rs around Rs 2,000 per visit. But with luxury cars like Mercedes, your outgo will increase to the estimated level of Rs 15,000. Only few cars in India get the cover of service plans offering regular maintenance.

Unscheduled Maintenance –Often air conditioner compressor or a fuel pump of car models like Maruti, Hyundai and others fail, taking out more from your pocket towards the replacement of the vehicle parts.

Accessories – In today’s times, most car buyers are installing anti-theft alarms, custom alloy wheels, body kits, upgraded music systems. These accessories will add up to your overall cost of car ownership.

Insurance – Car insurance, which is must for every car buyer, does add to your vehicle ownership. Currently, rates for comprehensive insurance range between 3%- 4% of the book value of the car.

So now I believe you would have become aware of the factors which collectively work on the expense for your new car. It’s good to want something, but it’s always better to know all the facets into play before making any moves.

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Personal Loan Interest Rates October 2021
Fullerton India14.00% - 24.00%
HDFC Bank10.25% - 17.00%
ICICI Bank10.50% - 17.50%
IndusInd Bank11.00% - 23.00%
Kotak Bank10.75%
RBL17.50% - 26.00%
Standard Chartered Bank11.00% - 12.50%
Tata Capital10.49% - 14.25%
Home Loan Interest Rates October 2021
Axis Bank6.75% - 7.20%
Bank of Baroda6.75% - 8.25%
Citibank6.65% - 7.40%
HDFC6.70% - 8.00%
ICICI Bank6.70% - 7.55%
Indiabulls Housing Finance Limited8.65%
Kotak Bank6.50% - 7.25%
LIC Housing6.66% - 7.90%
Piramal Capital & Housing Finance9.65%
PNB Housing Finance7.20% - 8.90%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI6.70% - 6.90%
Tata Capital6.90% - 8.75%