Should you buy a car? | New car vs Second Hand vs Leasing a car | Buying car - YouTube

Hello! A car is not just an asset that provides us convenience and utility. We are also emotionally attached to our car.

And not only this, most of us, after buying a car, worship it first.

Earlier the car used to be a luxury but after COVID-19, there is a sudden disruption in India's mobility.

People today prefer to travel in their private vehicles due to social distancing.

Also, with so many different models and price ranges, today everyone can find a car of their choice and budget.

8% of India's population uses a car, and this number is increasing gradually.

Since buying a car is considered an auspicious event, car and automobile sales are at their peak during the upcoming festive season.

But as driving a car is an emotional decision, it is equally important to make a financial decision.

And that's why in this video we will tell you everything that you should know before you buy your car.

So let's start today's video.

The first question is, should you even buy the car or not?

A car is a depreciable asset whose resale value is less than its cost over time.

Testing 'want' versus 'need' can be an important decision. As we mentioned through statistics, owning a car in India is a rare and big deal.

Especially financially, it becomes a big decision for any middle-class family.

Considering the high price of the car in the market, most of your money goes towards paying the car loan and EMI.

But if you invest the same money somewhere, then maybe it can be useful in fulfilling your financial goal.

Yes, but if your car for commuting is a necessity or if you have to upgrade from a two-wheeler to a car depending on the size of your family, then the decision to take a loan is also advisable.

But, if your travel frequency is not high, you are able to travel conveniently through cabs from online aggregators like Ola and Uber instead of buying a new car or a second-hand car.

We considered the usage of the car here because even if your bought car is not in use, it will still incur maintenance costs.

Apart from this, even if you need to relocate in your job frequently, then Ola or Uber would be the better option for you.

But if you love car driving and you like to go for some short trips sometimes, then also have a solution for this.

Today there are many platforms dedicated to providing two-wheelers and four-wheelers for rent like Zoomcar.

So with this, you will not have to pay the upfront cost of buying a car and you can also enjoy driving the car.

Depending on the needs of your family and the number of members, you can comfortably choose the car of your choice.

But you should keep this thing in mind if you have to travel long distances on daily basis, owning a car may prove to be more cost-effective

as in the differential pricing model of Ola/Uber, cost increases per km over long distances.

So keep in mind all the options and factors in you and then decide whether you need to buy a car or not.

Now we have understood whether you should buy the car or not.

And if we see the answer as “yes”, and you've made up your mind to buy an "own car", then you should be aware of the cost of buying a car.

Whenever you go to buy a new car, you have to pay a lot of charges other than the cost of the car like registration fee, insurance cost, taxes, etc.

After which you finally reach the on-road price which is much higher than the ex-showroom price.

But now you will argue that this price will be only for buying a new car. But there are a lot of other such costs that even if you take a second-hand car, you can still had to bear.

a) The first and foremost cost is the interest cost.

Suppose you have made a plan to get a car worth 5 lakhs. So will you have enough capital to pay the full cost of the car comfortably and upfront from your savings?

If yes, then you do not need to take a loan. But most people finance their car by taking a loan.

Generally, 20% of the cost is to be paid as a downpayment.

That is, in our example, 20% of 5 lakhs is Rs 1 lakh. And now you will also be charged interest on the loan of 4 lakhs and will have to pay monthly EMI to repay it.

If you want to find out how much EMI you will have to pay on a car loan, you can use Groww's 'Car Loan EMI Calculator.

Going by our example, if a loan of 4 lakhs has an interest rate of 8% and a repayment tenure of 5 years, your monthly EMI would be around ₹8111.

And in the ongoing case after 5 years your total interest cost is coming out to be around ₹87000.

b) Next comes the fuel expense.

Some assumptions are taken here. If your daily journey is 50 km, that means the monthly journey will be around 1500 km.

Let the mileage of your car be 15 km. This means that monthly you will need 100 liters of petrol.

According to the average petrol rate today, if you take 100, then your monthly car fuel cost is Rs 10,000 and the year is around Rs 1.2 lakh.

c) the third is the maintenance cost.

You will also get to spend on your car in the form of maintenance every month or 2-3 months.

On average, if you charge maintenance charges for even 2000 a month, your annual maintenance expenditure will be ₹24000.

That means EMI of approx. 8000, the fuel of 10000 and maintenance of 2000, it becomes monthly running cost of your car around ₹ 20000.

Above this ₹4000 to ₹5000 will also go towards your motor insurance.

Now that we have told you about buying a car, now let's talk about some big decisions.

First, petrol or diesel? And second, a new car or a second-hand car?

a) Let's start with Diesel vs Petrol.

Generally, petrol cars are cheaper than diesel cars and their maintenance cost is also low. Petrol cars are also more eco-friendly.

But secondly, in the case of petrol cars, the cost of fuel is high and if your job or business involves traveling more, then diesel cars can prove to be economical.

Cars with diesel engines also generally have a longer life. So it depends on your case. If your car is going to run a lot, diesel cars will be economical in the long term.

But if the running is going to be very low or medium, then the option of petrol cars can be seen.

b) Now the point comes whether to get a new car or a second hand.

Although it is very subjective, we tell you the pluses and minuses of both. Whether to buy a new car or a used car, this decision will mainly depend on your budget.

There are many ways to get a new car. Talking about reliability, the new cars come with the latest technology and high-quality components.

Plus, new cars don't have much to maintain. Along with this, some auto companies also provide some free services for new car companions.

Moreover, new cars get loans at a lower interest rate than second-hand cars. Due to the depreciation, you can get a second-hand car at a very affordable rate.

But before buying a second-hand car, you should keep in mind that you will not get any warranty.

Second-hand cars can generally have reliability issues, due to which your maintenance costs can increase.

So, whether you want to get a new car or a second-hand one, will completely depend on your budget, personal preference, and usage.

And if you take a second-hand car, then you should decide to take the car only after thoroughly testing the car.

Now if you have made up your mind to buy a car, there is one financial rule that you should keep in mind. This is the 20/4/10 rule.

Accordingly, you should pay 20% of the cost of the car as a down payment. Your loan repayment tenure should be of 4 years.

And lastly, your EMI amount + the rest of the costs like fuel, etc should not exceed 10% of your monthly income.

If getting a car is your need and you are fulfilling all these criteria, then you will not have to face much financial stress in life after getting a car.

We have a pro tip for you.

If you want a car but avoid hassles like maintenance and insurance, then nowadays automobile companies are starting to give you cars on direct subscription-based models too.

An advantage for the owners in this model is that they do not have to pay any type of maintenance fee or down payment or registration fee.

With just one monthly rental, you can own the car for a specific period.

Let me tell you in the comments that companies offer subscription-based rental plans.

So that's all for today's video.

Our objective through the video is that the next time you buy your car, you are aware of all the options so that you are in a position to make an informed decision.

Hope this video was very helpful for you.

If you liked this video, don't forget to like the video and subscribe to the channel. Thank you, bye!