Buying Car Vs House

prkothan · 10th March 2006, 13:52

Hi all,

At chennai, housing sector at its peek. Sq ft shooted just from Rs 1800 to 2800 in main areas. In the area I am living its from 1400 to 2300 right today. One year back I bought a car (Palio) thinking that I cannot afford a house now (EMI would br around Rs 16000) because various other family commitments. Hmmm...I wrong.

Following is the reason.

1. Got a car Loan for 2 lacs and paying Rs 5000 as EMI.
2. Spending on petrol Rs 2 to 3k per month. So my total expense due to car is Rs 7.5K.

If I had booked new house 1 year back,the cost the house would 15 lacs and 2 lacs for registration etc which I have to bear. I could have taken a personal loan for 2 lacs and housing loan for 15 lacs.
The EMI I am paying for car loan, I would have paid for personal loan. The money I am spending on petrol I could have used it for pre-EMI.

Still if I need a car I could have gone for early 90 model maruti and lived modestly. My inlaws were saying that they will buy a car for me, but my ego didn't let it to happen and bought a Palio.

By next year I would have occupied the house and saved TAX around Rs 6000 per month and Rent Rs 6000. My company would have paid Rs 4150 as housing loan allowance. So my net saving is Rs 16000. So I will spending nothing for housing loan.

Right now for the samehouse cost Rs 25 lacs. I could have saved 8 lacs. I could have bought a new Palio 1.6 sports/Getz/Fiesta or my lovely OHC Vetc 2002 model for Rs 5 lacs. If I get a new car my company would have paid me Rs 1300 as car loan allowance (no allowance for 2nd hand car). My monthly EMI on car would be just 6000. Petrol charges extra which I could have managed because my salary has gone up by then

What a short sightedness

Guys, please console me

tsk1979 · 10th March 2006, 14:16

I console you.............................

himanshugoswami · 10th March 2006, 14:21

Hmmmm.....

I have another take on this

And this may solve ur dilemma.

Sell the Palio, forget about the house.

buy a tempo traveler (6 L i think), give it to DC. He will customise it for about 2 L into a motor home.

VOILA, U have a house and car rolled into one for about 8L...Now tell me, can u get a better deal than this?

nitrous · 10th March 2006, 14:29

Awww, don't worry prkothan.U'll definitely get a dream home.

Take it easy.Property Investments in Chennai these days have sky-rocketted.

Public seem to have money ONLY FOR PROPERTIES.But, this is chennai.

goldie_malhotra · 10th March 2006, 14:37

hey prkothan, i was in the same predicament as you were sometime back - with real-estate in delhi shooting up ...

but, unless one knows how to manage money really well - it is tough to plan out such complex schemes in advance.
in hindsight, though, it seems like a piece of cake ...

RX135 · 10th March 2006, 15:07

Prasanna,

a) I wonder, how would you save 6000 in tax per month? IT deduction is capped at 1.5L on House loan interest, which means at most you can save 50K per year, which is 4000 per month.
b) House Loan allowance from company is confusing. Isn't company paying this amount from your CTC? And if it is allowance, it is taxable. I am confused.

May be situation is not as bad as you are looking at it.

Surprise · 10th March 2006, 15:34

Quote:

Originally Posted by prkothan

My company would have paid Rs 4150 as housing loan allowance.

Is it your Company pays extra for the guys who had availed the housing loan? i.e CTC will be increased by 4000+ if housing loan was taken

deepakhon · 10th March 2006, 15:46

I think he is probably speaking about the company car lease plan.

I was in the same predicament three years back and did exactly the opposite to whatever you have done. I bought a house in B'lore for around 20l and a year and a half later, bought a Palio 1.2. Because of the housing loan committment, I could not afford anything more than this car. Now, if I sell the same house, I can get around 40-45l easily. When I bought it, I paid around 1200 per sqft, but now the value has now trippled.

But it was a family decision. I know I have benifitted from it, but if I were to take the decision, I would have done exactly the way you did. "D**n the house, go for the car", would have been my Mantra.

tsk1979 · 10th March 2006, 15:52

thats called rubbing salt on wounds

prkothan · 10th March 2006, 16:19

Surpise and RX 135,
Here the answers for your question.

1. My company willl give me exactly Rs 4150 as housing loan allowance only if I avail housing loan for more than Rs 10 lacs. Yes it will increase my CTC and it is subject to TAX.
2. Regarding tax, IT deduction applies for 1.5 Lacs in loan interestand upto 1 lacs for principal. Assume that I pay just Rs 30,000 for principal which will be part of EMI I will get Rs 6000 IT rebate every month.

sbasak · 10th March 2006, 16:20

Usually car price depreciates while house price appreciates!

prkothan · 10th March 2006, 16:21

Still I wonder why I didn't thought about buying house at that time.

I was so obcessed with car first later with Palio.

kuppan · 10th March 2006, 17:13

Atleast for you it went from 15 to 25L....

Hope my story will make you feel better

6 Months back a pent house was around 45L - same street where i live for rent in adyar...I thougt 45L for an apt??? and bought the car for 4.5L

Now... the same costs for whooping 67L

Leave out owning a house..Man... If i booked and sold the same by now... 20L Profit in 6 Months...I could be riding in a Merc

Now running around velachery.

...in search of a house...

paharino1 · 10th March 2006, 19:21

Quote:

Originally Posted by sbasak

Usually car price depreciates while house price appreciates!

That is the key difference

House --> Biggest Asset Investment you will make in your life

Car --> Biggest Liability Purchase you will make in your life

Wheeliej · 10th March 2006, 19:27

please console me

[/quote] conider yourself consoled

10th March 2006, 13:52	#1
prkothan BHPian Join Date: Jan 2005 Location: chennai Posts: 180 Thanked: 39 Times	Buying Car Vs House Hi all, At chennai, housing sector at its peek. Sq ft shooted just from Rs 1800 to 2800 in main areas. In the area I am living its from 1400 to 2300 right today. One year back I bought a car (Palio) thinking that I cannot afford a house now (EMI would br around Rs 16000) because various other family commitments. Hmmm...I wrong. Following is the reason. 1. Got a car Loan for 2 lacs and paying Rs 5000 as EMI. 2. Spending on petrol Rs 2 to 3k per month. So my total expense due to car is Rs 7.5K. If I had booked new house 1 year back,the cost the house would 15 lacs and 2 lacs for registration etc which I have to bear. I could have taken a personal loan for 2 lacs and housing loan for 15 lacs. The EMI I am paying for car loan, I would have paid for personal loan. The money I am spending on petrol I could have used it for pre-EMI. Still if I need a car I could have gone for early 90 model maruti and lived modestly. My inlaws were saying that they will buy a car for me, but my ego didn't let it to happen and bought a Palio. By next year I would have occupied the house and saved TAX around Rs 6000 per month and Rent Rs 6000. My company would have paid Rs 4150 as housing loan allowance. So my net saving is Rs 16000. So I will spending nothing for housing loan. Right now for the samehouse cost Rs 25 lacs. I could have saved 8 lacs. I could have bought a new Palio 1.6 sports/Getz/Fiesta or my lovely OHC Vetc 2002 model for Rs 5 lacs. If I get a new car my company would have paid me Rs 1300 as car loan allowance (no allowance for 2nd hand car). My monthly EMI on car would be just 6000. Petrol charges extra which I could have managed because my salary has gone up by then What a short sightedness Guys, please console me
	() Thanks

10th March 2006, 14:16	#2
tsk1979 Team-BHP Support Join Date: Feb 2005 Location: San Jose, CA Posts: 23,717 Thanked: 22,825 Times View My Garage	I console you.............................
	() Thanks

10th March 2006, 14:21	#3
himanshugoswami Senior - BHPian Join Date: Oct 2004 Location: !!!! Posts: 2,303 Thanked: 2,619 Times	Hmmmm..... I have another take on this And this may solve ur dilemma. Sell the Palio, forget about the house. buy a tempo traveler (6 L i think), give it to DC. He will customise it for about 2 L into a motor home. VOILA, U have a house and car rolled into one for about 8L...Now tell me, can u get a better deal than this?
	() Thanks

10th March 2006, 14:29	#4
nitrous Senior - BHPian Join Date: May 2004 Location: UAE/Lon/Madras Posts: 6,965 Thanked: 325 Times View My Garage	Awww, don't worry prkothan.U'll definitely get a dream home. Take it easy.Property Investments in Chennai these days have sky-rocketted. Public seem to have money ONLY FOR PROPERTIES.But, this is chennai.
	() Thanks

10th March 2006, 14:37	#5
goldie_malhotra BHPian Join Date: Nov 2005 Location: New Delhi Posts: 757 Thanked: 12 Times	hey prkothan, i was in the same predicament as you were sometime back - with real-estate in delhi shooting up ... but, unless one knows how to manage money really well - it is tough to plan out such complex schemes in advance. in hindsight, though, it seems like a piece of cake ...
	() Thanks

10th March 2006, 15:07	#6
RX135 Senior - BHPian Join Date: Dec 2004 Location: pune Posts: 2,106 Thanked: 75 Times	Prasanna, a) I wonder, how would you save 6000 in tax per month? IT deduction is capped at 1.5L on House loan interest, which means at most you can save 50K per year, which is 4000 per month. b) House Loan allowance from company is confusing. Isn't company paying this amount from your CTC? And if it is allowance, it is taxable. I am confused. May be situation is not as bad as you are looking at it.
	() Thanks

10th March 2006, 15:46	#8
deepakhon Senior - BHPian Join Date: Oct 2004 Location: Bangalore Posts: 1,441 Thanked: 65 Times	I think he is probably speaking about the company car lease plan. I was in the same predicament three years back and did exactly the opposite to whatever you have done. I bought a house in B'lore for around 20l and a year and a half later, bought a Palio 1.2. Because of the housing loan committment, I could not afford anything more than this car. Now, if I sell the same house, I can get around 40-45l easily. When I bought it, I paid around 1200 per sqft, but now the value has now trippled. But it was a family decision. I know I have benifitted from it, but if I were to take the decision, I would have done exactly the way you did. "D**n the house, go for the car", would have been my Mantra.
	() Thanks

10th March 2006, 15:52	#9
tsk1979 Team-BHP Support Join Date: Feb 2005 Location: San Jose, CA Posts: 23,717 Thanked: 22,825 Times View My Garage	thats called rubbing salt on wounds
	() Thanks

10th March 2006, 16:19	#10
prkothan BHPian Join Date: Jan 2005 Location: chennai Posts: 180 Thanked: 39 Times	Surpise and RX 135, Here the answers for your question. 1. My company willl give me exactly Rs 4150 as housing loan allowance only if I avail housing loan for more than Rs 10 lacs. Yes it will increase my CTC and it is subject to TAX. 2. Regarding tax, IT deduction applies for 1.5 Lacs in loan interestand upto 1 lacs for principal. Assume that I pay just Rs 30,000 for principal which will be part of EMI I will get Rs 6000 IT rebate every month.
	() Thanks

10th March 2006, 16:20	#11
sbasak BHPian Join Date: Nov 2005 Location: CCU-LTN Posts: 608 Thanked: 14 Times	Usually car price depreciates while house price appreciates!
	() Thanks

10th March 2006, 16:21	#12
prkothan BHPian Join Date: Jan 2005 Location: chennai Posts: 180 Thanked: 39 Times	Still I wonder why I didn't thought about buying house at that time. I was so obcessed with car first later with Palio.
	() Thanks

10th March 2006, 17:13	#13
kuppan Newbie Join Date: Feb 2006 Location: CHENNAI Posts: 9 Thanked: Once	Atleast for you it went from 15 to 25L.... Hope my story will make you feel better 6 Months back a pent house was around 45L - same street where i live for rent in adyar...I thougt 45L for an apt??? and bought the car for 4.5L Now... the same costs for whooping 67L Leave out owning a house..Man... If i booked and sold the same by now... 20L Profit in 6 Months...I could be riding in a Merc Now running around velachery....in search of a house...
	() Thanks

10th March 2006, 19:27	#15
Wheeliej BHPian Join Date: Mar 2006 Location: Bangalore Posts: 284 Thanked: 47 Times	please console me [/quote] conider yourself consoled
	() Thanks