CAR AND ITS ECONOMICS

POSTED BY Dinesh Saboo ON February 24, 2012 2:41 pm COMMENTS (10)

Hi

I want to buy a car . My budget is Rs 5 lac .
Should i buy petrol or diesel car ??
i dont understand car economics ie depreciation rate + should buy petrol or diesel car (my total run per day is 30 km ) + how resale value is calculated over the years etc .

I request Manish to simplify and elaborate the total concept for young people who do not understand these topic properly. (Can anyone supplement me with an excel sheet for this )

regards
Dinesh Saboo

10 replies on this article “CAR AND ITS ECONOMICS”

  1. georgemcbride says:

    hello, I would advice you to purchase diesel engine car. A diesel engine car is more preferable over petrol engine cars because of several reasons. A diesel engine is generally referred to as CI (compression ignition) power plant. In a diesel power plant, air is compressed through the pistons within a closed chamber by the process called adiabatic compression. Due to severe compression, the temperature of the oxygen rises to very high levels inside chamber.

    Petrol engines, in contrast, is an Internal Combustion engine by having an entirely different working theory. Inside a petrol power plant, fuel and air are mixed in a very chamber and compressed progressively. You can know more about the comparison between diesel engine cars and petrol engine cars at http://dieselgrossisten.no/.

  2. rightcar says:

    Hi Dinesh,
    Try to buy a Volkswagen XL1, it gives more mileage, when compared to other cars. It’s a new innovation in Volkswagen. It reduces oil dependency costs and also increases energy sustainability.

  3. Dev says:

    Dear Dinesh,
    I am a car dealer from kolkata.
    i dont know much about finance & economic.but i can tell you how u can save money on buying & using car.
    As per ur uses is concern (30km per day) its not good enough for buying a Diesel car.
    I will suggest u buy an second hand petrol car,not much old for eg between 2010-11 registration.very old second hand car will not give u good milage.
    Dont go for second hand diesel car bcoz it will attract a lot of maintenance & diesel car spare parts cost higher than any petrol car,also there are many issues related to diesel car’s.

    a petrol car i ideal car first time car owner’s its hardly have any maintenance except the regular service , oil & lubricants change.

    now which car u shoud u buy? it is entirely ur choise,but as ur thinking economically & ur budget is arround 5lac.i will suggest u some models.

    maruti & Hyundai is very well know for there low cost maintenance.

    in maruti u car go for SWIFT , Wagnor & aulto k10 this three cars are very fuel efficient specialy aulto k10 but swift & wagnor is very comfortable com-pair to aulto k10.

    In Hyundai u can go for santro,i10,i20.
    I20 is a very good car & also very comfortable & luxurious u will get a descent fuel economy in i20.
    i10 is best in terms of driving & fuel economy.

    but remember u should buy a car not more then 2yrs old.this models also have very good resell value.
    for eg:if u buy an second hand i10 2011 model(sportz or magna) arround 3 to 3.75lac depending on condition & use it for another 3 to 4yrs,u will able to sell the car arround 2 to 2.5 lac so ur deprecation will be arround 1.5lac.& ur buying almost a new car in a deprecated vale.so what ever ur saving on fuel & purchase price ur also going to save in deprecation value bcoz ur buy a scond hand car which is already depreciated.

    so good luck & have a safe drive.

  4. Deivasigamani says:

    Just as how jagoinvestor helped me to enrich my knowledge in personal finance, team-bhp has helped me to expand my knowledge about indian cars. There are lot of discussions on that forum regarding this concept (petrol vs diesel cars) and i feel if you go through all the posts in the below link and you may get an idea yourself.

    http://www.team-bhp.com/forum/indian-car-scene/101507-attached-fuel-cost-calculator-including-comparison-between-petrol-diesel.html

    Team-BHP recommends to test drive the vehicle before you purchase and I also ask you do the same, as you are going to put your hard-earned money here…

    Deiva

  5. Dear Dinesh, I’m trying to simplify the nos. provided by other people.

    Your daily commuting of 30Km, means an mly commute of around 900-1000 Km or Yly commute of 11-12K Km. For such low running, Petrol car is the answer. In case your yly running is going to be from 18-20K Km then only Diesel car make any sense.

    From your query, I assume you are talking for a Diesel Car costing around 5L Rs. The Petrol model of same car ‘ll cost around 4-4.1L Rs. So there is a direct cash saving of 90K Rs. at least. @ 69-70 Rs. per Lt./ price of petrol, the quantity you may purchase from these 90K Rs. ‘ll come out around 1300 Lt. @ 15 Km/Lt mileage, you ‘ll be able to run your car around 19.5-20K Km. which is about 22 months running of your Car. Or in simple words, near about 2Y your Petrol car ‘ll run free.

    Actual break even of Diesel car ‘ll come late.

    Yes in case you want to get full benefit of Diesel car, you have the option to purchase a 2nd Hand Car. In this case, you ‘ll get the benefit of highly depreciated price with a good mileage figure & reduced money outgo.

    Thanks

    Ashal

  6. bharat shah says:

    i think, more important is to think whether the car of rs. 5 lacs is affordable than to select petrol /diesel/ cng for fuel, considering your income level. my rough estimate for rs. 5 lacs car for its finance cost + depreciation apart from fuel +maintenance would not be less than rs.125000/- per year. for cheaper fuel, apart from calculation on normal running, one may find it cheaper for long journey with family, and you would choose it!

  7. 1 more thing to consider from a Personal Finance perspective:

    Diesel cars easily cost 1 lac more than Petrol cars. If you take a car loan for 5 years you are paying interest on that additional 1 lac at 12-13% on the reducing balance. This will easily add up to 45-50k over 5 years. Alternately if paid by cash this 1 Lac invested in a combo of Debt and MF averaging 10% post tax each year, compounded, will 60k, simple interest will be 50k. The gap thus narrows.

    Each hal yearly service costs upto 2k more so that adds another 10-12 k in costs.

    Again if the usage decreases due to a future job change near home etc,. then the benefits are reduced.

    Especially given the current trend of changing cars at least every 5 years and considering all the above said by Banyan – in reality – Diesel cars barely score over petrol cars. There may be numerous views on this but the numbers dont make the cars stand apart very widely.

  8. TheZionView says:

    Great explanation…i was thinking about this..thanks.

  9. BanyanFA says:

    Hi Dinesh,
    You have raised a very interesting point – answer to this requires a bit of understanding about Cars vs Finances πŸ™‚

    A few pointers may help you taking the decision :
    1. Diesel cars are generally expensive than Petrol.
    2. Diesel fuel is cheaper than Petrol;
    3. Diesel cars give more fuel economy than Petrol.
    4. Service cost of Diesel is slightly more than Petrol.

    Benefits of Diesel cars over Petrol is only if you are driving your car regularly. Looking in your case, you may benefit by buying Diesel car as over the life of car (assuming 5 years), you may drive it for approx 40,000 kilometers. A petrol car would consume around 2,600 litres of fuel (assuming a mileage of 15km/l) and Diesel may consume 2,200 litres (assuming a mileage of 18km/l). You can tweak the litres based upon your Mileage. Assuming Diesel cost as 40 and Petrol at 65, the overall cost of Petrol is approx 170K in 5 years and 88K for Diesel. Diesel hence scores approx 80K more than Petrol in operations. The more you drive, the more this difference would be. Compare the price difference between Petrol & Diesel car and you have your answer !

    Hence it all depends upon your Driving. Happy Driving !

    Regards
    BFA

    1. Ramesh says:

      Very nicely explained.
      Thanks. Ramesh

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