Planning to buy a car? Here's why you should not!
In the previous article, we spoke of why real estate may not be a good investment choice.
[In case you haven’t read the article, you can read it here]
This article now speaks about the mathematics of buying a car, and why, if your travel is limited, a car may be a bad choice financially.
We’ll talk about the cost for travelling by car, in 3 modes:
If you own your car (i.e it is purchased on loan and you’re paying an EMI)
If you travel by Uber/Ola
If you subscribe to a car using any subscription company or directly from the car manufacturer
I’ve created a table for you below, where we’ve done some basic calculations of the costs involved in owning a car. It shows the different kinds of costs which are associated with buying a car and using it over 5 years. I’ve divided the costs into 3 parts - Petrol, capital expenditure and other expenses:
Yes. For a car worth Rs. 6 lakhs, if you’re travelling 30 kms a day, you’re spending a whopping Rs. 15,177 every month. Most of us only calculate the petrol costs, and don’t take into consideration the other costs involved in buying and using a car. As you can see above, petrol/fuel costs are only 1/3rd of the total costs of running your own car.
So, you say, how do we travel then? Uber is pretty expensive!
Well, not really. I’ve taken an average cost of Rs. 13 per km for an Uber ride. Sometimes it’s 10 and sometimes it’s even 15. Also, Uber claims it is less, but we all know the rip-off during peak hours. So I’ve taken an average of Rs. 13 per km.
Based on this rate, I did a comparison of taking an Uber v/s buying your own car (based on the above calculations), and here are the results:
As you can see, lower your distance, more expensive is your own car. Only if you’re travelling more than 50 kms daily, does owning your car make sense. Otherwise, Uber is the way to go!
And in case you do fall under this category and want to buy your own car, buy a Diesel variant - gives a better mileage and lower cost of fuel (though not as environment-friendly).
Coming to the last part of subscription/leasing, while they advertise it pretty well, I couldn’t find any company that is leasing a car for any amount lower than Rs. 15,000-20,000 (petrol costs extra). In that case, either Uber or your own car becomes a better alternative anyway.
Subscribing to your own car may be a good way to begin if you have decided that you want to purchase a car, but want to experience driving for a month or two before you actually buy it (because you know, getting used to the traffic in Mumbai/Bengaluru/Delhi isn’t easy). In that case, go ahead, subscribe to a car and use it for 2 months and see if you find it fun to drive!
So we’ve established that for lower distances, Uber is always better. But like I had said with real estate, if this is an emotional decision, and you are passionate about driving, then go ahead and buy that car you want! I’ve done it myself because I love long drives, and I do not regret the decision at all!
But, as I always say, if you think buying a car will save you your travel money, that may not necessarily be the case!
The calculations above are based on certain assumptions. In case you want to customize it for yourself and see, I’ve prepared an excel sheet where you can simply input some values and see the numbers for yourself. To get the sheet, simply share this post on either LinkedIn, Twitter or Facebook and tag me on it after commenting with your email ID. You’ll receive the excel right away! :)
Hope this article somehow helps you to get another perspective on managing your finances better!
In case you have questions, please shoot it in comments, or reach out to me on ankurajhaveri[at]gmail[dot]com
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