[Romins]

Just to give an idea about the cost of ownership of a 10-15lac car: I have a 13yr old i20 diesel and it needs ~Rs 10 per km, including everything - fuel, maintenance, insurance, Fastag, traffic challans, wheel alignment, tires, battery, PUC, parking fee etc- yes, everything that needs to be spent to run a car. In this, Rs 4.9 is for fuel and the rest is for other things. This is the average of 45,000km over a period of 3years, I bought a used car from TBhp classifieds.

[karthis91]

Originally Posted by antz.bin

The video is too pessimistic.


The other thing he did not consider was the alternative. What is the alternative to not buying the car? Uber? Has anyone done TCO analysis on your car (including resale value) and the same for an Uber ride? Don't tell me that the alterative is an Activa/Pulsar. What happens if you save 10 lakh from not buying a car and then die in a traffic accident from being hit from behind by a German sedan being driven by an intoxicated driver?

There are loads of Finfluencers who have done cost analysis and concluded that Uber is cheaper. What these guys don't understand is the comfort factor that a personal vehicle offers. They don't consider the inflation factor of cabs too. For example, they did the analysis 4-5 years back when there was oversupply of cabs and cost was cheaper.

I've had issues getting Uber/Ola at various time frames. On a Sunday evening when there was 3-4X surge and there was no alternative. At times when it rains, no cabs are available even if you are ready to pay 4-5X. Once I had a headache to arrange a cab for my parents who had to catch a train and it was raining outside. It is not just the cost, but the mental peace that owning a car brings too. I can go out with my family anytime I think of, without worrying about cab availability/surge.

[ashis89]

Originally Posted by antz.bin

The video is too pessimistic.

Calculating 25k in maintenance per year over and above the insurance for a new car? Seriously? Average annual service cost on my first car has been 4500/yr for the first 5 years. I changed the battery after 4.8 yrs (5k) and a set of tyres (20k). That is less than 50k in 5.5 yrs. Annual cost is <10k/yr. This estimate is off by 2.5x! This guy here is talking about cars in the 15 lakh bracket if I remember correctly.

Depending on how many KMs one is doing every year, 25k in annual maintenance is not unreasonable, even for a new car.

If one is doing 12-20k per year, the car requires two services - 6-8k each. A set of tyres will cost 35-40k and will last 3-4 years. A battery will cost 6-7k and will last 3-4 years. Apart from this, any expenses towards car cleaning, accessories or non-warranty repair/replacements only add to the bill.

These are average estimates for a car costing 10-15L today.

And I don't believe one should prefer Uber to owning a car.

[GS2323]

The video is great for the intended audience, i.e., the normal ones where blood is flowing through the veins and not something measured in octanes. Its about priorities actually, there are many on the forum who live in houses where prices are lower than than what they have spent on the garage.

Coming to think of it, nobody really talks about what kind of travel on should do with what salary or what kind of clothes one wears, how much should one spend on eating out every month but for some reason, cars do come under attack from the influencers lobby as they seem to be an easier target with govt. putting these insane taxes on car purchase and the fuel to be used for running them which makes owning, running and maintaining cars a financial nightmare.

What I personally feel is one should buy whatever car they think they can afford without considering the show-off value, i.e., one should analyse what their needs are and buy accordingly. For instance is someone if someone wants something which is fun to drive, now this can be achieved using something like a Virtus 1.5 also, or something like an m340i also - now if you can afford the 340 easily, go for it, in case you cant, go for Virtus 1.5, going even lower, if affordability or willingness to spend is not there, a 10 year old city can also serve the purpose with its creamy 1.5 i-vtec. Yes, I know in terms of raw performance, the 340i is leagues ahead of the others I have mentioned but how will one extract the maximum out of it in our conditions without braking rules or putting lives at danger.

An even better example would be the Jimny and something expensive like the Defender, in terms of capability, the defender is leagues ahead but if we are talking about having fun while off-roading, its going to be almost the same. The Jimny will put you closer to the nature and that for me is more fun than having a mammoth SUV road-rolling the terrain.

So, essentially, its about what you are looking for in a car and what your financial affordability or willingness to spend is

[itsbaman]

For me, the new car on-road price should be less than my annual income after tax. Also, avoid loans as much as possible, as personal car loans don't save taxes. That's exactly what I did both the times I bought a new car. Now I don't have to worry much about running costs.

I guess the problem starts when someone starts buying cars for the world to see, not for himself/herself.

Well, I have a query here. As in the video, it was assumed that annual income after tax is INR 10 lacs and on-road price is INR 16.25 lacs, which is roughly around 1.625 times the annual income. What should be the max. on-road price of new car (ex-showroom+road tax+insurance) as compared to the annual income after tax?

[Chetan_Rao]

Originally Posted by GS2323

...cars do come under attack...

Cars get the most scrutiny, because for most people, a car is the most expensive thing they buy which has extremely low utilisation. Most personal cars spend upwards of 90% of their entire lifespan standing idle. A 10-15L item doing that is obviously going to raise more eyebrows than say a pair of shoes or item of clothing costing 10-20k or a watch costing a 50k-1L sitting idle in your wardrobe.

People are free to buy what they want, it's their money, but asking oneself if they're really getting any tangible returns for the money spent is one (not the only) way to look at it.

[shankar.balan]

Originally Posted by Chetan_Rao

People are free to buy what they want, it's their money, but asking oneself if they're really getting any tangible returns for the money spent is one (not the only) way to look at it.

I think the analysis and various replies are based more on the question of ‘affordability’ when viewed through the lens of common sense, rather than a ‘judgement’ about what people should or should not buy.

There is that school which goes for the product which ‘serves the purpose’. And there is that section who stretch a bit in order to go for that ‘panache’.

Prima facie, no harm done.

The human mind and its innate proclivities towards ‘desiring the seemingly unattainable’ is exactly what all brands and marketeers feed on.

A cool and desirable car, is in this sense, like a modern day ‘Golden Fleece’ and the usurious Financiers will absolutely ‘Fleece’ the modern day ‘Argonauts’ on their journey to attain said ‘Fleece’.

Our whole new age economy seems to have done an about turn and become like America of the 1960’s -1970’s where every single thing more or less, is bought on credit, hire purchase and the ‘never-never’.

The statistics on ‘bad debts’ and ‘delinquency’ in present day India, need to be viewed and analysed in order to make a reasonable assessment of how deep this has gone.

[LakeWalker]

Originally Posted by itsbaman

Well, I have a query here. As in the video, it was assumed that annual income after tax is INR 10 lacs and on-road price is INR 16.25 lacs, which is roughly around 1.625 times the annual income. What should be the max. on-road price of new car (ex-showroom+road tax+insurance) as compared to the annual income after tax?

I have the same question, because I think most of the formulas used by finfluencers are outdated or not suitable for our car market (I feel many of these formulas are created as per American car prices and salaries, where more often than not, a person's first car is a used car when you are a student).
As per the current car prices and incomes in India, many of these "formulas" don't make sense.
I would love to know what the experienced folks here have to say about that.

[shankar.balan]

Originally Posted by LakeWalker

I have the same question,
As per the current car prices and incomes in India, many of these "formulas" don't make sense.
I would love to know what the experienced folks here have to say about that.

Approx 20-25 years ago, a ‘good’ paycheque for a senior exec was about 24-27 L.

Those were the days of prestige segment, company provided cars, like Toyota Corolla and Hyundai Elantra which used to cost about 8 odd lacs.

A brand new Mercedes C Class or BMW 3 Series used to cost about 30-34 lacs at the time which was somewhat ‘unattainable’ for most folks. Only the super-top C+ level execs got one of those. In the early 2010’s more folks entered the prestige segment because company car leases became more common.

Around the mid to late 2010’s was the time of rising incomes after the 2014 elections and thats when these cars became more affordable to a wider segment. At that time these ‘marques’ were priced around the 42Lmark.

Post Covid came the crunch. All the big ‘prestige marques’ started offering severely watered down entry level cars but the prices became stratospheric.

It is now completely mad that a base entry level Mercedes or BMW or Audi or Mini Cooper is now priced at 58-65-70 lacs. They are (in my view) not at all worth that kind of price.

And while incomes may have risen, so has inflation.
And the present value of money has decreased in direct proportion with the passing of the years.

As an analogy, nowadays one needs to pull out a 100 Rupee note to buy what 6 years ago, could be bought with a 50 Rupee note.

And that does not bode too well for those who are either retired or about to reach the age of retirement, unless they have stashed away plenty, which statement now allows us to segue neatly into that retirement planning thread.

[TorqueLord]

Originally Posted by shankar.balan

A brand new Mercedes C Class or BMW 3 Series used to cost about 30-34 lacs at the time which was somewhat ‘unattainable’ for most folks.
It is now completely mad that a base entry level Mercedes or BMW or Audi or Mini Cooper is now priced at 58-65-70 lacs.

I would actually argue that these luxury cars have become more affordable with times, though the absolute prices can still give a sticker shock. If a 3 series was say 35 lacs 20 years ago, today a 330Li is around 70lacs (got offered one around 63lacs during the March end discount period) - it means that the prices have only doubled in the last 20 years, i.e a CAGR of 3.5%, which is far less compared to the inflation of 6-7% and salary hikes are generally around the 10% mark at minimum in most corporates.

Yes, the prices have gone through the roof post Covid, but it also implies that for the period from 2005-2020, the prices were more or less stagnant and the OEMs are now using the demand-supply mismatch to finally drive home some bottom line. Which seems like a reasonable call for any corporate in a similar situation. Airlines, hotels are doing the exact same thing now and hence airfares and room tariffs are through the roof.

About the topic at hand of what car at what salary, I am afraid there is no single right answer and it's a deeply personal call to take. In my humble opinion, it depends on a couple of things 1) background while growing up and 2) being a millenial/GenZ. Please note that what I am about to say next are anecdotal based on my experience, and not thus not a wide enough sample set to make a generalization.

Background while growing up: Many of us have come from middle class backgrounds, and find it hard to spend money even after we attain a reasonable net worth/income profile and are stuck in the "saving mode". I am in my late 30s, and while I can afford an entry level German with relative comfort, I just can't get myself to mentally spend 50-60 big ones on a depreciating asset like a car, when I know I can earn more through my investments. And while earlier there used to be job security till the 60s, these days "40s are the new 60s" with layoffs targeting folks in this age range. Hence it becomes imperative to secure the financial future of the family before splurging on cars.

I have seen some of my colleagues from well-to-do backgrounds find it much easier to spend more on an expensive car as they don't have some of the aforementioned constraints - for instance, they have a cash generative family business, or family wealth in real estate etc, in addition to their regular jobs, or live with families and don't need to purchase homes/pay rent etc.

Age/GenZ: A close relative in his early 20s (now he is 25) got a job paying 40k/month and he is also from a "regular middle class background". When his first salary hit his bank account, he literally went to the Hero showroom and booked a Hero Xpulse worth 1.6lacs or so with minimum down payment and the rest through EMIs. The family was aghast and everyone counseled against the purchase, but he said YOLO and purchased the bike. And he is not alone, many in his peer group did something very similar. He did this with a bike when he was 22, I won't be surprised if he did something similar with a car when he is in late 20s and gets married etc. And I have seen something similar with the early-mid 20 somethings in my office who are very comfortable with leverage for things ranging from vehicles to gadgets etc.

Hence I am afraid there is no right answer to the original question. Though the "sleep at night" framework of decision making has often guided me through some of the tougher purchase decisions in my life. If a purchase keeps me up at night thinking about the EMI (can I pay it if I lose my job and if takes time to find a new one), or what happens if I scratch it, or if there is an accident etc then the product (house/car/fancy gadgets) is not worth the trade-off in mental peace. Otherwise go for it - YOLO - as my young relative said!

[shankar.balan]

Originally Posted by TorqueLord

Airlines, hotels are doing the exact same thing now and hence airfares and room tariffs are through the roof.

I just can't get myself to mentally spend 50-60 big ones on a depreciating asset like a car, when I know I can earn more through my investments.

I have seen some of my colleagues from well-to-do backgrounds find it much easier to spend more on an expensive car as they don't have some of the aforementioned constraints -

, but he said YOLO and purchased the bike. And he is not alone, many in his peer group did something very similar.

If a purchase keeps me up at night thinking about the EMI (can I pay it if I lose my job and if takes time to find a new one), or what happens if I scratch it, or if there is an accident etc then the product (house/car/fancy gadgets) is not worth the trade-off in mental peace. Otherwise go for it - YOLO - as my young relative said!

A superb point of view. Really resonates with me.

1. Indeed, an Economy Class Ticket to EU zone used to cost 45K on 2018-2019. It now costs 85K and all flights seem to be overbooked.
2. A Resort like The Serai in Kabini nowadays charges 40K per night. A JLR Resort charges 25K a night.
3. All of us who had to make our own way in the world would have had those friends from well off homes who could buy anything they wished with minimum fuss where the rest of us had to pull ourselves up the achievement ladder to be able to do the same. Personally Im happier to have been a part of those who had to ‘work’ to ‘get there.’
4.YOLO is a fantastic motivator. And you need to follow YOLO when you’re young and healthy and strong. Most of us have missed that bus because we are imprisoned by our fears of the unknown.
5. I have made one decision. If I buy an expensive car, it will be second-hand. I have until date never spent more than Rs 19.5 Lacs on road for any car Ive bought and owned. Thats the max. And frankly I see no value in all these cars being priced so high for what they offer. And Im definitely not buying.
6. Wherever you go these days, whatever you buy, they are flogging the Buy Now Pay Later EMI concept and incentivising adoption. I’d rather not go that path.

[horseblood]

Meanwhile, here I am in my late 20s looking to buy a 10 year old commuter bike for ~20k with my first paycheck of ~1 lakh! I guess those years of unemployment really taught me something.

[itsbaman]

Originally Posted by horseblood

guess those years of unemployment really taught me something.

At least you are not buying an iPhone 16 Pro Max for 1.5 lacs on EMI.
You are doing better than 95% of the Indians in addition to being smart.

[krishnadevjs]

Financial planning with respect to cars is a very subjective topic.
The reason for that is how much emotional emphasis one puts on a vehicle varies from person to person.

For example, I care a lot about the car I drive. It gives me confidence, and makes me feel much better when I drive a better car.
Financial prudence and a pure utilitarian view would dictate that one doesn't need any car more than say, a Kushaq. But with cars, it's much more of an emotional decision for me.
The difference is so stark that I actually make it a point to drive the M340i to office on days when there's an important or challenging meeting versus the Tiago EV on regular days.

On the other hand, I find buying an apartment (especially in Mumbai), an absolute waste of money, given the appreciation/rental yields, initial cost and liquidity challenges.
My annual rent is 2.6% the purchase price of the apartment I stay in. And 15% of the rent is monthly maintenance - so the owner doesn't even get that.
A friend who owned and later sold 4 apartments in various parts of Mumbai recently told me that his average returns, including rental yield was on average 4.3%.

No matter how optimistically I do the math, it always turns out that investing in a Mutual fund and renting makes more sense financially than buying an apartment.
For many folks, buying a house is an emotional decision - one that gives security - but I don't find it economically prudent.

And given this difference in the way people are wired, I think we have people who stretch to buy cars versus stretch to buy homes. Yes, a car is a depreciating asset whereas a home is an appreciating asset (albeit slightly) - but humans are emotional beings, and not all decisions are rational.

For me, a rough thumb rule is that the OTR of the car I buy should be lesser than my annual CTC. I try and maximize the loan amount - because my investments (after tax) yield higher returns than the loan interest rate.
I take care to see that the EMI outflow doesn't impact my lifestyle or my monthly savings too much.
Then, as and when I get bulk inflows (eg. bonuses, sale of old car), I close the loan fast, to satiate the emotional aspect of not having any financial burdens.
For the M340i, I took a 40 lac loan and closed it in 13 months.

[shankar.balan]

Originally Posted by krishnadevjs

Financial planning with respect to cars is a very subjective topic...

Another fantastic set of points.

Homes:
1. For many years Ive been an advocate of renting. And it has worked well for me. And you are absolutely correct that the ROI on a home bought on loan, is very poor. When buying a home it is better to live in it and enjoy it rather than sit and calculate rent and appreciation and all that.
2. If possible buy a home without a loan. This is really very hard considering the horribly inflated prices across India and the abject inability of a normal working person to raise the wherewithal.
3. Conventional wisdom and familial and peer initiated push-pressure causes people to buy homes which they may not be able to afford.


Cars:
1. These are passion projects in many cases and if possible best bought cash down, but if a loan is inescapable, better to be bought with a shorter loan tenure.
2. Its a very good idea to do a Company Lease where possible and take some tax benefits.
3. I think it is much better to buy a nice car second-hand as I've earlier remarked.

Problem is that all this world-weary wisdom usually comes to most of us normal people very late in life.

Financial prudence, personal financial planning and the workings of money should be taught actively right from school.

This will help children learn so much better and perhaps not make mistakes that earlier generations may have made.