The Real Cost of Car Ownership
Did you believe the enthusiastic salesman when he said, “Sir, your equal monthly installment is just Rs.10,000 a month – surely, you can afford that!” If so, I hope you took a moment to think twice.
The equal monthly installment (EMI) is just a fraction of what you’ll spend on a car; the real expenses stretch far beyond that simple figure. While a car might be a personal asset, it is never a financial investment, as its value only depreciates over time. Here’s a breakdown of the actual costs involved in owning a car in India.
Depreciation
Depreciation is the single biggest cost of owning a car.
- A brand-new vehicle loses nearly 10% of its value instantly once driven off the showroom floor.
- Within the first year, depreciation typically climbs to 30–40%, depending on brand and usage.
This sharp loss in value means that resale or trade-in value will almost always disappoint.
Fuel Costs
Fuel is a daily drain on your wallet.
- In India, fuel prices—especially petrol and diesel—have consistently risen.
- For frequent drivers, monthly fuel expenses can match or exceed the EMI, especially in urban traffic conditions.
This cost varies based on the car’s mileage, driving habits, and fuel type.
Interest
Interest inflates the EMI beyond just the vehicle price.
- Loan repayments include both the principal and interest, with rates commonly between 6% and 14%, depending on your credit profile.
- Over the loan tenure, this adds a significant financial burden to the total cost.
Taxes
Taxes are often overlooked in loan discussions.
- In cities like Mumbai, octroi and RTO taxes can add up to 5.5% or more to the car’s cost.
- These are generally not covered by car loans, making them an upfront expense.
Scheduled Maintenance
Regular servicing is unavoidable and gets costlier with time.
- Most vehicles require maintenance twice a year, with costs starting from Rs.2,000 per visit.
- As the car ages, these costs increase significantly, and luxury cars like a Mercedes may cost upwards of Rs.15,000 per visit.
Few vehicles come with comprehensive service plans, making this a recurring out-of-pocket expense.
Unscheduled Maintenance
Unexpected failures can be both rare and ruinous.
- While modern cars are more reliable, components like an AC compressor in a Maruti or a fuel pump in a Honda can fail.
- Replacing such parts is expensive, and can occur even in well-maintained vehicles.
Insurance
Insurance is a legal and financial necessity.
- A comprehensive policy typically costs 3–4% of the vehicle’s book value annually.
- As the vehicle ages, insurance might get cheaper, but claim histories and rising premiums can still hit hard.
Repair Costs
Accidents and damages are a costly reality.
- Even with careful driving, minor collisions or engine issues can result in steep repair bills.
- Spare parts and body repairs, especially for modern cars, are costlier than ever.
Accessorizing
Personalization isn’t cheap.
- Many owners opt for extras like music systems, anti-theft devices, or alloy wheels.
- These add-ons can easily inflate the initial and ongoing costs of the vehicle.
Miscellany
Everyday usage brings its own price tags.
- From parking charges and tolls to traffic fines, miscellaneous expenses are frequent and often unavoidable.
- These seemingly minor costs can accumulate significantly over the car’s lifespan.
Understanding the true cost of ownership helps you make a more informed decision. A car is more than a monthly EMI—it’s a rolling bundle of financial responsibilities.
