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The real cost of owning a car

If you are a heavy user, it could be even three times its original price.

As crazy as it sounds, the cost of owning a car is more than the value of the car itself over a five-year period. If you are a heavy user, it could be even three times its original price. 

Before you own one, be aware of its various costs.


Notes:

* 20% below its estimated mileage of 18.9 KMPL as per ARAI. Petrol price Rs 75 per litre.

^ A mid-range hatchback (petrol) (base model) at Bengaluru price

^^ Building parking cost of Rs 2 lakh over its 40-year life

1. Depreciation

Drive the car from the showroom and your car starts depreciating. On an average, a car depreciates by 15% a year. A Rs 7 lakh car will be worth only Rs 3.1 lakh after five years. When you sell it, it might fetch even lower.

2. Fuel

Depreciation along with fuel costs make up a large component of overall costs. If you are a frequent user – driving 100 km a day– fuel costs more. At a mileage of 15 km per litre, you will incur Rs 9 lakh as fuel costs for a petrol car over five years (See table). While diesel cars could be cheaper, there are also additional costs in the form of maintenance and higher purchase price. 

3. Finance

If you are taking a five-year car loan (at 80% financing), interest payments will total to Rs 1.5 lakh. Additionally there is the opportunity cost for the down payment made at the time of purchase. 

4. Insurance

Third-party insurance is compulsory under the Motor vehicle Act. It compensates you for death, disability, injury or property damage to any third-party. Most people however go for a comprehensive car insurance which also includes cover for damage to their car. For a Rs 7 lakh car, total premium could mount to Rs 1.04 lakh over a five-year period. Any accidents in the intermittent period could further jack up premium.

Conservatively, all these costs could eat up Re 1 for every km of vehicle driven. On an average, Rs 60,000 could go in servicing and replacements over a five-year period.

5. Maintenance and wear-and-tear

Every six months or on driving 10,000 km, you need to send your car to the garage for its servicing and maintenance. Along with regular oil change, some parts like clutch plate, brake pad, filters, radiator components, battery and tyres might need to be changed due to wear-and-tear. 

Conservatively, all these costs could eat up Re 1 for every km of vehicle driven. On an average, Rs 60,000 could go in servicing and replacements over a five-year period.

In addition, there are incidental costs in the form of car cleaning and parking charges. 

The Learning

The more you drive, the lesser is the cost per km (not absolute costs however). On the higher side, it costs Rs 33 per km for a frugal user driving about 6,000 kms a year. And it falls to Rs 19.5 per km for those driving 12,000 km a year. 

For a user driving 100 kms a day, the costs come down to Rs 10.5 per km. Frugal users are better off renting cabs. Cab-renting apps charge anywhere between Rs 10-15 a km (for now); it’s much cheaper than owning a car.

Most users would benefit from using public transport like buses. It could drastically bring down cost of commuting to about Rs 1.5-3 per km. If you are doing odd shifts or can’t access public transport, consider the car pooling option. 

Takeaway

Owning a car means more than the EMI expenses. Know the total costs before deciding to buy one.  

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