Thinking of buying a car? Here is the actual cost of owning one

Did riding in your neighbor's lavish red car on the smooth a road tempt you to add your dream car to your wishlist? You might be making a lot of plans in your head - going for a long drive with your friends, taking out your girlfriend for a surprise and what not. Owning a car is like ticking off one item from your adulting to-do list and a status symbol at the best, isn't it?

But do you really know the economic value you will get out of your dream car? Well, if not, here is a simple eight point analysis of what is the actual cost of owning a car. 

1. ONETIME PURCHASE COST

Let's say you see a TV ad saying 'Get your hands on the new Maruti Swift for just Rs 5.92 lakhs!!!'. So you browse through Cardekho's website to find a car that will fit your budget of Rs 6 lakh. You find a Maruti Swift LXI (Petrol) model.  

When you browse through, you find that the final on-road price is not Rs 5.92 lakh but actually 6.92 lakh. The price they showed you on the TV ad was just the showroom price! Wait, how did that happen? 

As you noticed, when you get a car: 

1. You have to register it with the government and pay the on-road taxes. This forms a part of the RTO Cost of about Rs 69,000. 
2. You also have to mandatorily shell out car insurance costing about Rs 31,000.
3. Car manufacturers also install Fast-tag on your cars as it is a cheaper option than paying for tolls through cash. So that cost about Rs 600.
4. Also, manufacturers provide an optional extended warranty for your car costing Rs 12,000. 

Thus the total comes up to Rs 6,92,000.

2. Assuming that you buy a car and you pay a tax of 30%, your CTC in hand will have to be at least Rs 9.88 lakh. This will enable you to spend Rs 6.92 lakhs on a car and pay your taxes.

RECURRING COST WHEN YOU BUY AND KEEP A CAR FOR 5 YEARS

Considering the fact that you will actually use your car for at least five years, let's see how much the five-year cost comes up to.

3. INSURANCE COST 

Insurance costs depend on the value of your car. Since a car is a depreciable 'asset' (at least it is called an asset for namesake), your insurance costs will keep reducing over the years since the value of your car keeps depreciating. Let's assume your Maruti Suzuki depreciates by 5% every year (or check with your car guy). Thus insurance costs depreciate likewise ie. by 5% every year.  So your car insurance costs for the next 5 years will look like this: 

4. MAINTAINENCE COST

Your car cannot take care of itself and you will have to maintain it like your baby. This is a general assumption that annual maintenance like oiling, and keeping the parts running smoothly will cost about Rs 10,000 and will keep increasing over the years. 

5. FUEL COST

Say Suzuki claims to (but doesn't) give a mileage of 24 kms per litre. Now, this too will keep reducing over the years. Also, say your car runs for about about 1000 kms per month, thus about 12,000 kms a year. 

6. OTHER CHARGES 

If you have got a fancy car, you will obviously have to wash it regularly and maintain it in a decent parking space. Say the person washing your car charges Rs 250 per month per car and his charges go up by Rs 50 every year. Also, assume that your car parking charges are similar (though in real life, car parking charges are much more) 

7. TOTAL COST 

So if you tally just the recurring costs, the total comes up to Rs 6.04 lakh, which is more than the ex-showroom cost of your vehicle.   

8. WANT TO SELL? 

Even if you want to sell off your car 5 years later, check the valuation on Carwale's website. 

Any guesses on the value you will get? 

We haven't even added the Car loan interest (additional 7% to 8.5%) that one ends up paying if they buy a car via a loan. Buying a car for about Rs 6.92 lakh, spending about Rs 6 lakh to maintain it, and then selling it off for about Rs 3.94 lakh- does it really make sense to own a car? 

What do you think? I think I'd rather invest it in stocks of companies that manufacture cars.