Buying a car? Here are 6
important questions you must answer first
Buying a car can be a major financial
decision. The choice of models and attractive financing options make the
purchase seem easy and enticing. But are you making a financially smart decision?
Here are 6 questions you should
answer to make sure your car purchase is a smart one.
- Am I prepared for the financial burden of
servicing a car loan?
Most of you will
probably go for a car loan to fund your vehicle purchase. It’s important that you
understand the financial pressure an EMI might put you under. This is all the
more important if this is your first time taking a significant loan burden.
If you are paying other EMIs, then
make sure that you are not paying more than 40% of your take home income
towards all EMIs combined.
- Am I prepared for the financial burden of
maintaining my car?
Cars are nothing
like a bike when it comes to servicing costs. The average cost of maintaining a
car can be upwards of three times that of maintaining a bike, in terms of
servicing costs. If you add fuel costs, then you are moving into a whole new
territory.
Make sure you are ready for these
costs which can increase your monthly expenses for travel by a factor of two,
at least.
- Would a second hand car make more sense?
Another key
consideration for you would be used or new. In India, we tend to think of a car
as an asset. A car is actually a liability, and you must try to make sure that
it is not an expensive liability.
A second hand car can cost less when
buying it, but more in terms of lifetime costs due to greater servicing
requirements. Make sure you have done a thorough check when buying a second
hand car. If you are going to use the car infrequently, a second hand car makes
more sense.
- Do I intend to sell my car some day?
If you are buying a
new car, you must ask yourself if you intend to replace it at some point of
time. Certain cars and brands have better resale value which comes in handy
later.
This also implies that the more care
you take of your car, the better value you will end up realizing from it when
selling. Take care of your car documents as well, because lost documents can
make selling a big hassle.
- Will I get good service?
It makes a great
deal of sense to buy from a brand that has a big service network and is known
for providing honest and effective service for your car. The better the quality
and availability of the service, better the value you will derive from your
car.
A big service network takes care of
scenarios where you might shift cities or when finding a service station for
your car.
- Am I considering every cost, including
insurance?
The insurance and
additional costs such as that for the music system you want to install or the
parking aids, all need to be factored in. While insurance premium per year for
a motorcycle would be less than Rs 1,500- Rs 2,000, insurance premium for a car
can easily be Rs 7,000- Rs 10,000.
The car company might be selling the
car with an installed music system but if you want something fancier, be
prepared for those costs which can again reach into the 5 figure range. You can
spruce up your car all you like, but be prepared for fixed or recurring costs
as a result.
A couple of smart hacks :
- In case you find it tough to save
for your car, you can invest small amounts in SIPs of mutual funds, to save up
for your future car. Scripbox can help you automate this.
- Till you have your own car, you can
use car rental services or app based cab services for important days when you
need a car.
Using RentalCars you can get the cheapest car hires from over 49,000 international locations.
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