BUY A CAR OR RENT ONE?
While making important decisions like buying a car, its important to
analyse the economics of owning a private vehicle and exploring
other alternate options and then taking the right decision.
Owning a car might seem to be a correct decision, emotionally
satisfying and a status symbol but, let’s look at pros and cons of both
sides and then decide for ourselves.
Assume that you bought a car for Rs. 5,20,000 today which has a
mileage of 17km/litre. Assuming that the monthly km is 1000 and the
fuel price is Rs. 75 at present, the monthly fuel cost would be
somewhat around Rs. 4500. Adding up other costs like maintenance
and insurance, parking etc would cost around Rs. 3000 per month or
even more.
On the other side, if we rent a car assuming the same monthly KM,
and approx. per km cost of Rs.12 (including the surge) the monthly
fare would be Rs.12,000
now, evaluating the data over a course of 3 years and assuming the
resale value of the car to be Rs.3,20,000 we’ll see if we would have
invested the lumpsum amount instead of buying a car and hired a car
for our needs instead, the total savings could have been around
1,50,000.
please refer the data below for details.
For owning a car :
(in reference to the above assumed figures)
3 Year Cost: ₹266,824
Resale Value: ₹320,000
Cost of Car : ₹200,000
Total Cost of Ownership in 3 years: ₹466,824
For a hired car:
(in reference to the above assumed figures)
Interest Earned on Lumpsum (7% post Tax): ₹117,022
Total Cost of renting for 3 years: ₹314,978
If the same is calculated over a period of 5 years with the same data,
Rs.180,000 could be saved by opting to not buy a car
Buying a car could be convenient, ensure privacy and security and is
definitely helpful in emergencies, but thinking financially is less cost
effective. Whereas hiring a car can strike out problems like
navigation efforts, maintenance, drink and drive problem, parking
problems etc, and most importantly be financially profitable.
To rent a car for few hours, months or Years, download the LetzRent
app now.
