[oxyzen]

Well the recent price hike is not helping much to the sales of petrol cars. Just out of curiosity I decided to dig a bit deep into the total cost of ownership and take a pragmatic approach to calculate the minimum kms needed to go for a diesel.

The reason for creating a new thread here, is to ask fellow BHPians for their opinion about this approach. I know there are a lot of loopholes and I am willing to rectify in case I missed something of considerable interest.



Basic Assumptions:

• Interest on investment is calculated at 8% compounded annually.

• Petrol costs = 70/Lt FE=12
• Diesel costs = 42/lt FE=15

• Assumed that the car is bought on full down payment. I have omitted Emi as that made the sheet highly cumbersome.

• Fuel costs:

1. The money spent on fuel is supposed to earn 8% annually if invested in FD (for ex).
2. The fuel costs (for both petrol & diesel is expected to increase by 8% annually)

• The same goes for (maintenance+ insurance + repairs) as well.

The values shown are cumulative. And it shows the amount by which you could have been wealthier, in case you invested the money at a regular 8% interest, after certain years.

So 27L may sound a lot now. But after 10 years is will not be that huge.

Conclusion

• To get to break even, a mere 450km/month is enough. (Time frame not important)
• It is wrong to try to offset just the difference in initial cost using fuel bills. Depreciation is hardly anybody's concern. In case you sell the car early you get back most of the amount you paid extra for the diesel. (Highly not recommended)
• What should be compensated is mainly the interest / investment opportunity lost in the price difference.
• But even with 900km/month running, the extra cost incurred in petrol is only 10% of the total cost of ownership. So for those who are obsessed with petrols motors only need not .
• With 1500km/month the extra cost is approximately 20%. Thats just a footstep towards the next segment.

Bottomline:
People crib about higher running costs in a petrol.
But not in going up a segment higher.


The excel file is attached for you to fiddle with the values.
Petrol vs diesel.xlsx
Sorry for making it too complex.

[Aroy]

I carried out a similar analysis, but the aim was different.

What is the cost of travelling by Taxi compared to a personal vehicle with a driver? The conclusion was, that unless you drove a lot every day, Taxi is cheaper. Public Sector Companies came to the same conclusion, when a lot of them stopped using Staff Cars, and hired cars instead.

In my calculations the per kilometer costs (~500km/month) of ownership of 5 year period, for a 6L car are
1. Capital cost : Rs.10
2. Fuel : Rs.3-5
3. Maintenance : Rs.1-2
Salary of driver is extra
Nett Rs.14-17/km, as much as a good AC cab, and much more if cab is taken on monthly basis (10hr/80km/day limit)

Of course the social status of owning a vehicle with a permanent driver is one thing that financial analysis does not reveal, but my experience has been that persons working from home are better off with taxis.

In case you are sick and tired of finding Taxis each time you travel, a way out is to hire them by the month. My neighbourhood taxi stand is extremely accommodating in this respect.

Driver : Assuming a salary of 8K, you are paying
. 16/km for 500 km/m
. 8/km for 1000 km/m
. 4/km for 2000 km/m
So a driver is as expensive as the whole cab where fuel is included, if you travel less!

[oxyzen]

Originally Posted by Aroy

Nett Rs.14-17/km, as much as a good AC cab, and much more if cab is taken on monthly basis (10hr/80km/day limit)

Yup that is true. If you buy a pretty expensive car and dont drive it that often, the cost per KM might even shoot up to 30Rs/km.
I agree regarding "social status of owning a vehicle " but then, it is better if a second car can be avoided (if possible).

[shankar.balan]

good analysis oxyzen
this is one of the reasons why Ive consistently stuck with Diesel for the last several years. Plus the fact that we have only one vehicle which is an all purpose beast. with my average running of 1300-1500km per month it works very well indeed.
now even when I take the plunge into the next segment, I am going to be sticking around with Diesel only - a large lumbering SUV is better powered by Diesel than by Petrol in my opinion - more torque and slow speed luggability in the engine for one thing and better price advantage with Diesel for another.
the financials work quite well for me in this respect, particularly given what Im looking for out of my vehicle.

[noopster]

I agree with your proposition in principle but have a slightly different, less mathematical take on it. My opinion is that once you've paid for a car, it's a sunk cost and psychologically you've made peace with what you've paid. This is literally true if you buy a car for cash, in which case there is no recurring/running component but even in case you've taken a loan the same principle holds (for example, I barely notice the EMIs flowing out in terms of home loan repayments, insurance premia etc.)

But galloping fuel costs put all your plans is disarray and can make a HUGE impact in the way you view the outgoing money. If I bought a car when petrol was around 50/litre and it is currently 75/litre, that's a 50% higher running cost, which hits me very badly in real terms.

Another example- not too long ago, a 2000-km roadtrip even in a petrol car would set me back by about 8,000/- or so. Today it will cost me 12,000 (at current prices). God knows at the rate at whch petrol prices are going up, it may become even 15 or 20K someday not in the distant future.

It oesn't hurt as much if we all pay the price equally. But the way public sentiment runs in this country, it's inevitably the petrol user who bears the brunt of fuel price hikes. Diesel car owners also shell more but not to the extent that us petrolwalas do.

I have no intention of making this a fair-versus-unfair debate: that is just pointless. If anything, the solution (price discrimination in diesel) will be worse than the problem. But as a buyer entering the market today, I would certainly think twice about buying a gasoline-powered vehicle. I would certainly never buy a petrol car as a second car (if my first is als a petrol, that is).

When it comes to retaining a car/ trading it in for a diesel alternative, my thoughts are: as long as I love my cars and can afford it, let me! To be honest, I've not driven a diesel car much and the thought of getting rid of a much-loved friend for an unknown quantity is not very appealing. But at some point these price hikes need to stop!

[phamilyman]

Originally Posted by noopster

But at some point these price hikes need to stop!

Very shortly, my friend - VERY shortly.

Seen the sensex lose its senses today?

But yes, so will salary hikes if the recession hits real bad!

[xingamazon]

Oxyzen, thats good analysis good work man. I am guessing you are doing all this stuff to replace your current vehicle. Am I right?

Even I am going thro lots of such brain racking numbers for helping my decison on replacing a car.

But I gave it up because of two reason:

1. Petrol prices are increasing unpredictably, I mean those prices that we had discussed to be absurd few months back are no seeming like reasonable prices. So 2-3 yrs from now you never know how will things be, no point in taking current numbers into consideration.
2. On a frank note, Diesel prices though are less now, are sitting on a timebomb. you never know when govt will free up diesel price. Then all the calculation will go for a toss.

So how I conclude is go for what fuel you prefer. How I am decide is I think of diesel engines being better (being turbo ones) and provide better mileage. So just take that into consideration.

Bottomline: Assume petrol and diesel will be same price in few months from now, think of what you will do then and take decision based on that

[naj]

Hi!

With the near 27 INR difference between petrol and diesel , buying an oil burner makes more sense vis-a-vis the high initial cost of a diesel mill. Infact diesel tech is more greener too and more efficient.

One will see more of small diesel mills being introduced on the lines of the Beat.
There was a very interesting analysis in Times of India a week ago when the petrol prices were raised and dismissed the Government claim that common will not be affected.At the same time there were quite a few news articles wherein the car manufactures were at cross roads seeing surge in the demand for diesel cars.

cheers,
naj

[oxyzen]

Originally Posted by xingamazon

I am guessing you are doing all this stuff to replace your current vehicle. Am I right?

Nope. we have already replaced our cars. Our 13 years old Zen is relpaced witha Vento TDi. And we had to buy a second fiddle in the form of Beat.

Originally Posted by xingamazon

1. Petrol prices are increasing unpredictably, I mean those prices that we had discussed to be absurd few months back are no seeming like reasonable prices. So 2-3 yrs from now you never know how will things be, no point in taking current numbers into consideration.
2. On a frank note, Diesel prices though are less now, are sitting on a timebomb. you never know when govt will free up diesel price. Then all the calculation will go for a toss.

Cant argue with that for sure.
But incresing diesel price is a bit tricky. Dual pricing willl be a disaster. And increasing the price of Diesel as a whole will not be taken lightly by public.
BTW petrol prices goes up when
1. $ in barrels increase
2. Rupee devaluates
3. Govt de regularise costs
But none of these are reversible.
Are most of us aware that, around 50% of petrol price in in various taxes & surcharges.. Govt. never thinks of reducing these. Never!
So may be petrol prices will continue till it reaches a century. It is no Tendulker. Diesels on the other hand, is difficult to predict.

Originally Posted by xingamazon

Bottomline: Assume petrol and diesel will be same price in few months from now, think of what you will do then and take decision based on that

The next car due for replacement is my 2002 Palio. Will take the dicision accordingly after 3-4 years.

[Aroy]

Though it has been discussed to bare bones, still I repeat
. Diesel engines have a better FE
. Diesel engines last at least twice as much as petrol engines
. Diesel engines have a lot more low end torque, making city and hill driving easier
. Diesel at least in India, will be lower priced than petrol, for quite some time to come
. Modern diesel cars are catching up with petrol cars in performance. Though there are high performance petrol cars, they use expensive fuel - 93, 97 or higher octane ratings which can be any where between Rs.10 and Rs.30 more than the normal petrol. Add to that dismal FE, such performance petrols will cater to an insignificant clientel.

Considering all the above points, barring very small frugal cars, there is no justification for avoiding Diesel Cars. (Till date I own only small petrol cars, but may soon switch to diesel if a larger vehicle joins the stable). With coming of Bio-Diesel, the migration will be even faster.

[akshay4587]

Originally Posted by Aroy

Though it has been discussed to bare bones, still I repeat
. Diesel engines have a better FE
. Diesel engines last at least twice as much as petrol engines
. Diesel engines have a lot more low end torque, making city and hill driving easier
. Diesel at least in India, will be lower priced than petrol, for quite some time to come
. Modern diesel cars are catching up with petrol cars in performance. Though there are high performance petrol cars, they use expensive fuel - 93, 97 or higher octane ratings which can be any where between Rs.10 and Rs.30 more than the normal petrol. Add to that dismal FE, such performance petrols will cater to an insignificant clientel.

Considering all the above points, barring very small frugal cars, there is no justification for avoiding Diesel Cars. (Till date I own only small petrol cars, but may soon switch to diesel if a larger vehicle joins the stable). With coming of Bio-Diesel, the migration will be even faster.

Any Stats to prove this?

[Aroy]

Originally Posted by akshay4587

Any Stats to prove this?

Have yet to come across a petrol engine lasting 2+ lakh km without major overhaul (normally it is 1-1.5L), but there are plenty of Innovas, Qualis and trucks which regularly cross 3L km before major overhaul.

The diesel engine has to be mechanically sturdier, and most of the components are heavier, in order to bear the stresses of the diesel combustion cycle. Thus the block, head, connecting rods, crank shaft and all the other parts are heftier. The robust construction ensures that a normal diesel engine will outlast the lighter petrol engine. The robust construction also means that the parts can be repaired (and machined) more times before becoming too flimsy to be of any use.

[neo45007]

The question is : Considering the Petrol Vs Diesel Prices now;

should people like me who own 1-2 yr old Petrol car - replace their cars by diesel version ?

When I am driving 1500 Kms a month, running costs for me with Petrol Car are very high today.

Any suggestions ?

[mayankjha1806]

Originally Posted by neo45007

should people like me who own 1-2 yr old Petrol car - replace their cars by diesel version ?

My view is you should not, as the loss in terms of funding a replacement would be significant. I have a seven year old Baleno, i could replace it but it still has good number of years of good life left in it hence i don't feel the need to burn cash now which can possibly be burnt later. Also the charm of running an EMI free car is too good to resist. The way we manage rising petrol expenses is by reducing running in various ways.

[oxyzen]

Originally Posted by neo45007

The question is : Considering the Petrol Vs Diesel Prices now;

should people like me who own 1-2 yr old Petrol car - replace their cars by diesel version ?

When I am driving 1500 Kms a month, running costs for me with Petrol Car are very high today.

Any suggestions ?

Depends----
Which segment?
How much can you get for the current car?
How many years do you plan on retaining that?
Do you like driving a diesel?