I am an automobile engineer and was always interested to decide the best Car buy based on facts and figures. After studying a lot of ways and doing considerable calculations to decide between Petrol and
Diesel I have come to a certain conclusion on which the following review is based. Decision is based on Financial viability only. (Please make your own excel sheet for calculation purpose its the only way to get your answers fast and allow for iterations)
Suppose two persons purchase car on the same day
1diesel (CAR A) and the other
petrol car (CAR B). As per your requirement decide at what kilometers you will sell the car, Say
85000 kms( kms of car ownership).
There are two calculations required for deciding-
One is finding out the Breakeven kms and the other the Final cost of the car for 85k kms.
(Note its necessary to take the Car A as diesel car in the following calculations and Car A price should be more than Car B, otherwise it will give wrong results. The basic funda in following calculations is to break each cost on per kilometre basis)
Calculation 1: Find Breakeven point or Breakeven kms
As one has already paid more money for the Diesel car, At what kms will the Diesel car start giving gains as compared to petrol. Make a equation: Let
Y be the breakeven kms, At Y kms the total cost of CAR A will be equal to Total cost of CAR B
Solve following equation to get Y kms which will decide the no. Of kms to be driven for a diesel vehicle after which it will start making profits compared to a petrol car.
Equation:
Total cost of Car A + Per km running cost of Car A * Y kms = Total cost Car B + Per km running cost of Car B * Y kms.
Total cost of CAR A= Purchase cost of CAR A + Interest + Depreciation
Interest: Interest on the amount: [Purchase cost of Car A minus Purchase cost of Car B] for N no. Of years of car ownership. (Say 8.5% Interest on 1 lakh rs difference for 8 years)
N no. Of years = 85k kms/ Kilometer covered by car in 1 year
Depreciation: Assuming 20% depreciation on the above amount (so 20000rs on 1lakh)
(Note: Don’t forget to add the above interest and depreciation which is very important for the calculation to get the true picture to come in front. People forget this and do wrong calculations)
Per km running cost = Per km fuel cost +Per km maintenance cost. Per km fuel cost = Fuel cost for 1 litre / Car mileage (in kms) for 1 litre of fuel. Per km maintenance cost = 1 Servicing cost/ Service interval in kms (For eg. service of car at every 5000 kms)
(Note: Earlier the service interval for a diesel car was 5000 kms and for petrol was 10000kms but now modern Diesel engines have less maintenance and are getting nearly equal to the Petrol Engines. But off course when Diesel Engines give way, they lead to costly repairs compared to petrol. People often forget the maintenance cost and get wrong financial calculations. For eg you can add Rs 16000 for Diesel Pump Calibration for a Indica Diesel engine at 70-80k kms so 16000/70000 becomes the additional maintenance cost per km for a diesel engine)
Calculation 2: Find Final cost of Car A and B.
Final Cost of Car A = Total cost of Car A (calculated above, Not Purchase cost)
+ Fuel cost for Car A *85000 kms
Final Cost of Car B = Total cost of CarB (calculated above, Not Purchase cost)
+ Fuel cost for Car B *85000 kms
Solution:
From Calculation 1 you will get breakeven kms, if breakeven kms are more than the kms at which you will sell the car, no use buying Diesel Car.
From Calculation 2 if the Final cost of Car A is greater than the Final Cost of Car B then no use taking Diesel. Carefully carry out the above two calculations and you will never make a wrong decision financially. If the Final cost of Diesel Car is only less by say 25000 rs as compared to Petrol Car it doesn’t make sense to buy Diesel car, because often Diesel engine due to more vibration give more work on suspension and alignment in long term.
Assumptions: 1) Depreciation on the total cost of both vehicles is not taken here to simplify the equation.
2) Resale value of both vehicles after 85k kms is also not considered. If you add the above points in the above equation you have a perfect evaluation whether to purchase a diesel or a petrol car.
If you have any more things to add to the above calculations, please mail me at
amit_purohit20@rediffmail.com or on my mouthshut id. I would be more than please to send a copy of the excel sheet I made for your calculation purpose.