Old vs New Car: Are you thinking about buying a car?rnrnBuying a car cannot be considered an investment because it declines over time. Its value begins to decline from the next day you buy a car. Therefore, you should evaluate profitability while making this decision. It's usually more economical to buy a car if you're commuting a medium or long distance rather than a shorter one. Likewise, if you are buying a used car, then you should consider the cost of maintenance that will come with it, which is much higher compared to a new car.rnrnIn this topic, we will discuss the pros and cons of buying a new and used car.rn
Advantages of buying a new car instead of an old one
rn-The maintenance cost of a new car is much lower than the old one.rn-Technology is developed in new cars, which saves fuel costs and battery life. New cars are equipped with the latest safety measures, which is necessary to consider before buying.rn-The interest rate for buying a used car is higher than for buying a new car.rn-Maintenance cost is relatively low in the early years of a new car.rn
Disadvantages of buying a new car instead of an old one
rn-Additional cost for registration, road taxes, etc., payable at the time of buying a new car, which does not apply when buying an old carrn-The depreciation rate for new cars is the highest in the first three years.rn
The cost side buying an Old vs New Car.
rnWe've seen the advantages and disadvantages of both options. Now let's look at the cost aspect of choosing any of these options.rnrnLet's take an example from Udit to understand it better. Udit, 30, wants to buy a car. He saved 2 lakh rupees for the down payment, the rest will be financed as a car loan. You are considering the best option: buying an Old vs New CarrnrnWe will consider the cost of purchase, as well as maintenance and use of both options.rn
New Car Purchase
rn New Car PurchasernrnThe cost of a new car will be 7 lakh rupees. Udit will pay a down payment of Rs.2 lakh and take a loan of the remaining Rs.5 lakh for 5 years at the rate of 9% per annum. EMI for 5 lakh rupees per month will be around 10,379 rupees per month. Registration and other taxes will amount to 50,000 rupees, which will be a one-time cost.rn
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Cost of buying a new car
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Amount
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Down-payment (i)
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Rs 2 lakh
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Loan Amount
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Rs 5 lakh
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EMI
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Rs 10,379
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Amount payable to bank in 5 years (ii)
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Rs 6.20 lakh
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Registration and taxes (iii)
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Rs 0.50 lakh
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Total cost of buying a new car (i+ii+iii=A)
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Rs 8.70 lakh
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Cost of running a new car:
rnTherefore, the total cost of the car for 5 years will be reduced as follows:rn
Fuel cost:
rnThe cost of fuel depends on the number of kilometers you drive. Suppose your car delivers a mileage of 12 km / litre traveling an average of 700 km per month. Therefore, your total trip in the next five years for business purposes will be about 42,000 km.rnrnTaking into account the average fuel cost of Rs.100 per litre, the fuel for a new car will be Rs.11/km. Therefore, the total cost of fuel will be Rs.4.62 lakh in 5 years.rn
Cost of Insurance and Maintenance:
rnSuppose the total cost of insuring the vehicle will be Rs.80,000 for the next five years. The monthly maintenance cost will be around Rs 15,000 on average for a new car i.e. Rs.75,000 for 5 years.rn
The cost of miscellaneous expenses
rnEstimated at Rs.15,000 in 5 years.rnrnThe resale value of the vehicle in good condition is assumed to be Rs.3 lakh.rnrnTherefore, the total cost of the car for 5 years will be reduced as follows:rn
rn Old Car PurchasernrnIf we consider buying a used car of a similar model, it may cost Rs.4 lakh (about 3 years). Since Udit has already saved for the down payment, you will get a loan for only Rs.2 lakh. The interest on used car loans is usually higher, between 14% and 15%; We assume it is 14.5% per year. The EMI of a used car will be around 7,058 rupees per month.rn
rnMaintenance cost: The cost of maintaining the Old vs New Car will be higher than the cost of maintaining the new one. So let's consider that the cost of maintaining an old car in the first year is Rs.18,000, while it continues to increase by 10% every year, which is Rs.1.09 lakh for 5 years.rn
Fuel cost:
rnEven if the old car is in good condition, the average mileage of a 3-year-old car will be lower than a new car. Suppose the average mileage of a used car is about 7 km / l. Taking into account the same travel distance, 700 km per month i,e 42000 km in 5 years. With an average fuel cost of Rs.100 per litre, the fuel cost per kilometer would be around 14/km. Therefore, the total cost of fuel will be Rs 5.88 lakh in 5 years.rn
Miscellaneous expenses
rnEstimated to be the same as the cost of a new car i.e. Rs.15,000 over 5 years.rnThe resale value of the used car will be less than the value of the old car, which is estimated at Rs.1.5 lakh.rnThe premium for an old car is usually higher than for an Old vs New Car. Presumably the same is Rs.1.10 lakh for 5 years.rnrnTherefore, the total cost of the car for 5 years will be reduced as follows:rn
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Cost of Car Purchase (5 years)
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Amount for 5 years
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Car Maintenance cost
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Rs 1.09 lakh
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Add : Car Insurance cost
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Rs 1.10 lakh
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Add: Petrol/diesel cost
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Rs 4.31 lakh
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Add: Misc. expenses
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Rs 0.15 lakh
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Less: Car Resale price
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Rs 1.50 lakh
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Total cost of running old car (B)
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Rs 5.15 lakh
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Total expenditure of Old car in 5 years (A) + (B)
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Rs 10.39 lakh
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Comparison
rn Old vs New CarrnrnAs shown in the table above, the expenditure on the Old vs New Car is almost the same. The cost of buying an old car is more expensive than buying a new one based on the example above. The cost of buying a new car is 10.30 lakh rupees, while buying an old car costs 10.39 lakh rupees for 5 years.rnrnThe profitability of both options must be evaluated to arrive at a decision. In the event that you have an offer to buy an old car at a very reasonable price, you can go ahead with the old one.rnrnRead More: Know how second-hand cars are valued to get a good price
New Car PurchasernrnThe cost of a new car will be 7 lakh rupees. Udit will pay a down payment of Rs.2 lakh and take a loan of the remaining Rs.5 lakh for 5 years at the rate of 9% per annum. EMI for 5 lakh rupees per month will be around 10,379 rupees per month. Registration and other taxes will amount to 50,000 rupees, which will be a one-time cost.rn
Old Car PurchasernrnIf we consider buying a used car of a similar model, it may cost Rs.4 lakh (about 3 years). Since Udit has already saved for the down payment, you will get a loan for only Rs.2 lakh. The interest on used car loans is usually higher, between 14% and 15%; We assume it is 14.5% per year. The EMI of a used car will be around 7,058 rupees per month.rn
Old vs New CarrnrnAs shown in the table above, the expenditure on the Old vs New Car is almost the same. The cost of buying an old car is more expensive than buying a new one based on the example above. The cost of buying a new car is 10.30 lakh rupees, while buying an old car costs 10.39 lakh rupees for 5 years.rnrnThe profitability of both options must be evaluated to arrive at a decision. In the event that you have an offer to buy an old car at a very reasonable price, you can go ahead with the old one.rnrnRead More: Know how second-hand cars are valued to get a good price
