Buying a car isn’t an investment

If you have some cash in hand and want to invest it in a car then that is the worst thing you can do. Most of the people think that a car is an investment but it’s the other way round. A car only depreciates in value. But yeah, a car can boost your social value to a great extent depending on the car but it, in any terms isn’t an investment. The real cost of owning a car is much more than the EMI’s alone, infact it can even be 2 times the EMI depending upon the car.

I’m writing this article to create some awareness among people about the hard-earned money they are spending on their car. Firstly you have to pay the intial amount of 10%  or so depending upon the amount of loan you take(usually 90%). Everyone is aware of this. Apart from that you have to pay the insurance which is around 4-5%, the taxes such as octroi & RTO taxes which account for another 5-6% depending upon the city. Remember, all these aren’t convered by the loan and you have to shell out money from your pocket. After all this, you finally get your car out of the showroom and BOOM you have just lost 1lakh if you bought a ten lakh car, that’s what you call “depreciation”. A car constantly depreciates in value. It’s value depreciates 10% the moment you take it out of the showroom and 25-35% in the first year itself, depending on the cost of the car. The more the cost of the car, the higher is the depreciation.

Next in the list is the fuel costs & the monthly EMI you have to pay for the car. If, it is a petrol car, with the current petrol prices & the uncertain future, you can expect your bank balance to take a hit everytime you refuel your car. Consider a petrol car giving a decent fuel efficiency of 12 and you travel a modest 1000km per month. So, thats 84 litres of petrol which equals to 6050Rs per month just for fuel. Now comes the maintenance, thanks to the modern engines, they are far more reliable and need not visit the workshop regularly apart from the scheduled services. Even if the car visits 2 times per year, expect to pay around 3k-15k per service depending upon your car. A Mercedes-Benz would cost you 15k per service while a Maruti 2-3k. Also be prepared to pay for accidental damages, though the modern cars are reliable, they cost you heavy in case of any accident, be it minor or major.

Now comes the upgrades you want to do for your car like Music system, alloy wheels, sun-films, horn, better head-lights and the list goes on and on until your bank balance becomes zero. So, these are the real costs associated with a car which one should consider before buying. Also, you would have to pay some miscellaneous charges for parking, toll gates, traffic tickets, etc.

I did not write this article to discourage people from owning a car but just to educate them about the costs they have to bear in future and thus select a car which suits them and fits into their budget. I have seen a lot of people who end up buying the wrong car and get frustrated as they can’t sell it because the asking price is too low neither can they keep it because of the high maintenance costs.

So, good luck and keep all these points in mind before purchasing a new car. An article on the ownership cost of different cars in India is coming up soon, do keep checking.

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