How To Make Smart Financial Decisions When Buying A Car

By | June 15, 2016

How to make your car purchase a smart financial decision?

Are you planning to buy a new car? Have you decided on which car you’re going to buy? We’re sure that’s going to be easy with the wide choice of models across segments. What’s even better is the array of attractive financing options available if you’re planning to take a loan to purchase your car.

But purchasing a car is a crucial financial decision and you have to consider many factors before taking the call. Remember, a car is more of a liability than an asset (though we all consider it an asset) as it only depreciates in value almost as soon as you drive it out of the showroom. Let us help you buy a car without making it a financial liability.

Additional Reading: Things To Think About When Buying A Car

New or Second-hand?
Before buying a car, you should first decide whether you want to go for a new car or a second-hand one. If the car will be seeing more of your garage than the road, then you should get a second-hand car. But remember, even if the buying cost of a used car is low, its servicing costs will be higher. Ensure that you do a diligent inspection of the used vehicle before buying it if you don’t want to have regrets later. Get a mechanic to assess the engine condition and drive the car before you choose to buy it.

Taking a Loan
Are you planning to take a loan to purchase the car? If yes, then are you aware of the financial burden that EMI repayments can put you under? If you’re taking this huge loan amount for the first time, then you should be well aware of the financial burden that follows. Already paying other EMIs? Make sure that you won’t be spending more than 40% of your income to clear all your debts in case you opt for a Car Loan.
Consider this: You want to purchase a car with an ex-showroom price of Rs. 8,00,000 and the Car Loan interest is 10%. You choose a tenure of 84 months. Your EMI will come to Rs.13,281 per month. Your actual interest pay-out will be Rs. 3,15,600. If you choose a tenure of 60 months, your EMI will Rs. 16,998 but you will save Rs. 1 lakh on the interest. So, choose wisely.

Maintenance Costs
Unlike bikes, car maintenance is a costly affair. Are you financially ready for this? Ask yourself! Besides this, you’ll have the cost of fuel added to your monthly expense too.
So, what should you do? Calculate your monthly expense budget by including these costs. Check if you can manage the new monthly expenditure budget in the long run. If you’re sure that you can, then you can go ahead and buy yourself a car.

Service Network
Buying a car from a brand that has a wide and reputed service network will save you a lot of trouble. You won’t face any trouble finding a service station even if you shift to another city or a smaller town, perhaps. Better servicing also allows you to derive maximum value from your car.

Selling Your Car
Will you be selling your car after a few years? This is another question that you must ask yourself before you buy a car. If yes, then you should go for brands which have a good resale value. Above this, you need to take good care of your car if you want to upscale its resale value. You should also keep all your car documents safe to avoid any trouble when selling it.

Additional Costs
Consider additional costs such as insurance and fancy upgrades you may want for your vehicle while evaluating your finances to buy a car. Car Insurance premiums will easily be anywhere between Rs. 7,000 and Rs. 25,000 every year. You also need to ensure that it is a comprehensive policy with third-party liability cover and personal accident cover. Zero depreciation is good to have too to help avoid paying through your nose at the time of claim settlement. Additionally, you may want to install a fancy music player or alloy wheels, or get paint protection film or even a custom paint job for your car. You have to be financially prepared for these extra costs.

Additional Reading: Top 5 Premium Hatchbacks 2016

A Piece of Advice
We suggest that you wait for the right time to buy yourself a car. This is not a decision to be made in a hurry. Save money by investing in SIPs (small amounts will do) of Mutual Funds. Once you have enough money, then go ahead and buy the car. Till then, there’s always public transport or cabs to help you get around.

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