[selfdrive]

Originally Posted by aadya

What I have observed over the period of years and number crunching, I don't have exact statistics, cost of owning a vehicle per month is roughly 2% on road price of the vehicle. This 2% includes oppurtunity cost(of amount paid upfront), EMI cost, Repair/maintenance cost, Fuel cost and resale value.

This would be applicable for new cars in terms of the on road price. The same logic (or percentile points) would differ in the case of used cars depending on which car you buy.

Some could be depreciation disasters so bought cheaper but some others hold their value well so bought nearer to the on road price. I am keeping other variable conditions such as car condition, etc out of the picture for now.

[ani_meher]

Originally Posted by aadya

I don't have exact statistics, cost of owning a vehicle per month is roughly 2% on road price of the vehicle. This 2% includes oppurtunity cost(of amount paid upfront), EMI cost, Repair/maintenance cost, Fuel cost and resale value.

This sounds very reasonable. The ideal car's price should be 50 times of what you can spend every month. 2% indeed captures the variable costs quite well. Bravo! Haven't yet heard of this concept.

[n.devdath]

Originally Posted by aadya

So we should check whether this particular car is worth spending Rs.20000 for.

Pretty precise calculations I must say. I began doing the math and it added up quite well.
While this part is easy, the tough part is how does one define "worth"?

Is it the convenience of not depending on an Ola/Uber/Auto?

Is it the pleasure of owning a brand that you always wanted to?

Is it the something as simple as an ice cream trip late at night or something as exciting as a 8k km run to the hills to see some snow when you feel like it?

Is it that satisfaction you get when your friends compliment you on your 8 yr old showroom condition car?

Is it that special feeling when you bring you newborn home in your own car?

Food for thought...

[selfdrive]

Originally Posted by n.devdath

Pretty precise calculations I must say. I began doing the math and it added up quite well.
While this part is easy, the tough part is how does one define "worth"?

As some wise person said, that would be the difference between price and value.
For everything else, there is...

[rajushank84]

Originally Posted by n.devdath

While this part is easy, the tough part is how does one define "worth"?

This is definitely subjective, and varies from person to person, so I don't think anyone can answer this for everyone else. But what we *can* help with (which I think this thread does help) is, calculations to help decide that worth.

There is a lot of mis-information or I should say lack of calculation. I certainly made that mistake a lot. I looked at an old Maruti and decided I can afford it, it cost 1 lakh. My salary was less than Rs.20K then. But guess what, the petrol alone came to Rs.5K per month, and on top of that maintenance etc (being an 800 it was minimal maintenance, thankfully). I still kept the car, I loved it, but I wouldn't have bought it at that point of time if I had calculated correctly. So my point being, its not about the 1 lakh and whether I have it or not. I need to calculate what exactly it will set me off by in terms of running + ownership, and see if I can afford that.

This is a simple calculation I did (more fields are hidden in the sheet I set up - they include depreciation, fuel, maintenance, insurance etc). This may not be accurate, but its just to give a rough sense of what costs what per month.

[aadya]

Originally Posted by rajushank84

This is definitely subjective, and varies from person to person, so I don't think anyone can answer this for everyone else. But what we *can* help with (which I think this thread does help) is, calculations to help decide that worth.

Thanks for the insight and numbers. My calculation was based on moderate usage of a new vehicle. As you have pointed out a 1lakh maruti gave you an expense of more than 5% per month. These are uncommon situations for most middle class buyers. See the outlying variables - old maruti, heavily depreciated, but with higher resale probably, high usage, low income for the given situation etc., Typically a person with 20K salary would not require a car for personal use with high running.

P.S : I am not contradicting, but just carrying forward the insight.

[rajushank84]

Originally Posted by aadya

Thanks for the insight and numbers. My calculation was based on moderate usage of a new vehicle. As you have pointed out a 1lakh maruti gave you an expense of more than 5% per month. These are uncommon situations for most middle class buyers. See the outlying variables - old maruti, heavily depreciated, but with higher resale probably, high usage, low income for the given situation etc., Typically a person with 20K salary would not require a car for personal use with high running.

Totally agree! Yeah the calculation was more based on 1000 km a month, for some families that number is low and for some that is high. Also, some of the scenarios are combos (car + taxi etc) because practically, for example in my family - me being the only driver, my mom would still need an occasional taxi (or hourly driver) as I would be at work. Things like that.

[achyutaghosh]

My thumb rule has always been maximum on-road car price should be less than or equal to half my annual income

[drsingh]

Originally Posted by drsingh

Dollar assets dude. 😀. Look at the rental yields abroad. Rent out the property and use the income for foreign trips all over the world.

In light of the rupee going from 63 to 73/USD in a
short span of time,I'd like to take this opportunity to reinforce my point about the value of dollar assets.

[Lobogris]

Originally Posted by arit.mondal

I did some calculations. On a 1 lac loan for 3 years, total interest payout comes to 15k. If someone decided to pay 1 lac outright in cash, he would have let go of the opportunity to get ~17k in interest from deposits post 30% tax deduction. So a customer taking loan isn't just breaking even, he is making some extra bucks out of it compared to full cash payment.
So the loan route doesn't seem that bad. Or am I missing something here?

There is a flaw in your argument. You are not able to keep the entire 1 lac with you to invest for 3 years. The very first month you have to make a payment of around 3000 leaving you with 97,000 to invest. The following month you are left with 94,000 to invest and so on.

[rajushank84]

Originally Posted by Lobogris

There is a flaw in your argument. You are not able to keep the entire 1 lac with you to invest for 3 years. The very first month you have to make a payment of around 3000 leaving you with 97,000 to invest. The following month you are left with 94,000 to invest and so on.

I was thinking about doing the reverse of this.
While you own the current car, put Rs.10K or so in a 5 year SIP. Sort of like the monthly "car budget", mentally think of it as an EMI of sorts.

At the end of 5 years, (typically) come out with something like 20%-25% more than invested, after tax on gains. Take that money and buy a new car, cash. And continue doing this pseudo-EMI for the next car, and so on.
This way instead of paying Rs.10K EMI on a loan and losing money, make it grow first before using it.
Of course, this is subject to market risks. But then if the market dips, just hold on to the current car longer and wait for recovery. If still risk averse, there is always RD instead (with lower typical returns and higher tax though).

[silvercloud]

Originally Posted by silvercloud

However, the question, "How much EMI is fine?" is something that we need to consciously decide on.

I am attaching a small calculation sheet for this.

How to use the sheet

1. Fill in the grey cells in "Summary" sheet
2. Modify your expenditure in the "Expenditure" sheet

Excel sheet attached below

Attachment 1871287

Please feel free to make changes to the sheet if you need any changes

From a different thread but I feel is relevant to this one too.

[deepak_bajaj]

So many views and suggestions from learned bhpians so I will keep my theory and thoughts short. You live your life once and that is present only. Unless your loan EMI starts bothering you or makes you (will make you) check your account balance at the beginning of every month, you should buy the car your hear desires irrespective of the cost. VFM and cost vs requirement is a separate discussion in itself and I will not go into it. Similarly, I will not dwell into the life priorities here. That’s very individualistic.

So, an EMI, that you can simply forget after taking the loan, should decide the car budget.

[HammerHead]

My simple way of looking at any purchase is, buy what you always wanted to. No matter if its affordable or not in the financial condition you are in. Struggle for a year. Work hard to make it affordable. Move on to the next thing on your little checklist

I know this is not the best way of managing your financial life, but hey this always worked for me.

[armaan_singh]

I typically try and purchase 1 brand new hatchback and keep it for atleast 10 years, earlier I had a Santro, now I have an Spresso.

In addition to the frugal hatch, every 3-4 years I pick up pre-owned sedans which cost no more than half my annual income.

So I balance out the cost of the frugal new hatch in its long duration ownership, and every 3-4 years not more than 3-3.5 Lacs on something pre-owned and fun to drive.