Using public transport is a excellent way for commuters to save funds even though assisting to enhance the atmosphere. However, if you are keen on commuting by your personal automobile, specifically in view of the Covid-19 pandemic, nation’s pathetic public transport program or merely due to the fact the new car or truck of your neighbour has caught your eye, you should initial attempt to figure out no matter if you will definitely be in a position to afford that car or truck or not.
For, you should not decide your affordability just by hunting at the EMI of any car or truck. The truth is the EMI is just one modest element of the total expense of car or truck ownership, and extra costs may well even be larger than that. To decide your affordability, for that reason, you want to locate out the genuine expense of owing a car or truck, that is, the expense required to upgrade from public transport to a car or truck.
But how to decide the genuine expense of owing a car or truck? We want to know that automobile costs fall into 3 categories. First is one-time expense. Second is ongoing expense, and the third is emergency expense. Purchase cost, registration charge, sales tax amongst other individuals are the one-time charges of any automobile. Ongoing charges incorporate insurance coverage, routine upkeep, fuel, expense of driver and depreciation, amongst other individuals. Costs like towing and repairs fall into the category of emergency charges. All these charges need to be taken into account even though arriving at the genuine expense of automobile ownership.
Suppose for a Rs 8.5-lakh car or truck, you are preparing to take a Rs 7-lakh car or truck loan @ 7.5% per annum for 5 years. In this case the EMI of your car or truck will work out to about Rs 14,027 (assuming all other charges to be zero).Then suppose your month-to-month costs on fuel, parking and driver are probably to be Rs 3,000, Rs 1,500 and Rs 10,000, respectively. Add to these the month-to-month typical of upkeep and depreciation, and the sum total of all these costs will be about Rs 29,000. Again suppose you invest Rs 10,000 on public transport (like auto). So the expense to upgrade to car or truck from public transport in this case will be Rs19,000 per month, that is the distinction among the total month-to-month expense connected with owning a car or truck and applying public transport.
No doubt, the expense of car or truck ownership will go down in case you make a decision to raise the tenure of the loan. For instance, if the tenure is elevated to, say, 7 years, the EMI will come down by Rs 3,290 a month to Rs 10,737, but your total interest payable will raise by Rs 60,297 to Rs 2,01,891.
Likewise, if you make a decision to drive on your personal, you will once again save on the driver’s expense. Still the expense of owing a car or truck will be substantial compared to commuting by public transport, and this expense will raise additional if you program to purchase a costlier car or truck. But that depends on your affordability.
The other issue is the distance to be travelled day-to-day. Sometimes the distance to be travelled is so lengthy that you may well choose travelling in your personal car or truck. Modes and frequency of public transport is also significant. Thus, if you are living in a remote location exactly where there is shortage of public transport, you may well place in additional up-gradation expense for your comfort.
Whatever be the case, economic professionals say that shopping for a car or truck is one of the most substantial moments of our lives. Hence, “one must exercise caution before going ahead with this big-ticket purchase. If your income channels have not been impacted by the pandemic, and you’re planning to buy a car on loan, ensure your total debt commitments (i.e. your car loan EMI+ other loan EMIs put together) do not exceed 40% of your monthly household income. You can do so by not breaching your budget, or going for a cost-effective vehicle or even a pre-used car. Such pragmatic steps would go a long way to ensure you continue enjoying the car without exerting undue pressure on your finances,” says Adhil Shetty, CEO, BankBazaar.com.
That becoming stated, you should realise vehicles are depreciating assets which involve a quantity of periodic costs apart from EMIs, like insurance coverage premiums, fuel, upkeep and parking charges which could be each fixed or variable in nature.
To recognize the total month-to-month costs of owning a car or truck, let’s once again take an instance. We’ve assumed a Rs 15-lakh petrol car or truck bought with a 10% car or truck loan covering 80% LTV for 7 years. Do note the actual variable figures could vastly differ based on your life-style, and the usage, variety and situation of your car or truck amongst other considerations like applicable fuel costs, parking and upkeep charges, and so on.
And we are however to incorporate other charges such as the expense of depreciation and driver’s salary, if you want to employ a driver!