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Total Cost of Ownership (TCO)

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Know the real costs of owning a car

The Indian automobile market is now inundated with a range of cars in all sizes, ranges, prices and types which in turn can be afforded by people across board. Today, cars starting from even INR 1 lakh are available. The low entry cost and the status symbol that comes with owning a car would lure several individuals at becoming first-time car buyers and making their first purchase. But the catch ends there – the actual cost of ownership is not just limited to the amount you pay to get the car home from the showroom.

Total Cost Of Ownership - TCO

Possession of a four-wheeler delivers comfort, security and safety when compared to public transport. But, it all boils down to that added facility, sometimes so noteworthy that it can cause the lower middleclass to rethink their decision. Although, the decision can be impacted by other factors like financial situations, transportation within the city, cost of living and infrastructure.

The expenses that come with a vehicle can be categorized into

Onetime costs which would be:
• Purchase price
• Sales tax
• Road tax
• Registration fees
• Any special tax or fees determined by the individual State.

Ongoing, continued, every day costs like:
• Fuel
• Vehicle Insurance
• Routine maintenance and servicing
• Car cost depreciation
• Cost of driver

Emergency costs like:
• Breakdown
• Accident
• Water damage
• Towing
• Repair charges
• Emergency, unexpected problems

The real ownership costs include all of these and all these costs have to be need taken into consideration to determine the TCO.

What is TCO (Total Cost of Ownership)?

TCO is an approximation of the Total Cost to own a car. This includes all expenses from fuel to insurance, maintenance, repairs, service, interest on loan and even losses incurred due to gradual depreciation.
The EMI payment that you make on a monthly basis is another aspect. There are ample other costs that you need to factor in before the purchase of a car. The EMI is just one part of the total cost of ownership; supplementary expenditures can increase the costs.

Frequently checked Make Model

1. Renault Kwid
2. Honda City
3. Maruti Suzuki Baleno
4. Mahindra KUV100
5. Maruti Suzuki Swift
6. Maruti Suzuki Celerio

Listed below are costs that you need to budget in and prepare for as a car owner:

• Depreciation: Largest expense of motor vehicles. The value of the vehicle comes down by 10% as soon as you drive it out of the showroom and by about 30-40% in the first year of owning it.
• Fuel costs: In India, fuel prices vary and are mostly, always on the rise. Depending on how you use your car – your fuel price can be cost-heavy and extremely high.
• Interest: The EMI not only includes the principal payment of the loan amount but it also includes the interest amount. The interest can vary anywhere from 6-14%.
• Taxes: Car loans don’t cover certain taxes like Octroi and RTO tax. This can be an additional 5.5% of the showroom price.
• Scheduled maintenance: Due to road conditions in India and the traffic, the car needs to be serviced at least twice in a year. The cost of servicing can vary depending on the model and make of the vehicle.
• Unscheduled maintenance: Most cars these days are made sturdy and rugged but there are chances that a car’s air conditioner can fail or the fuel pump can fail. Sometimes replacement parts can also be expensive.
• Insurance: An inevitable cost of car ownership is insurance.
• Repair cost: Damage due to accidents, natural calamities is expensive to repair. Though modern cars are competent and dependable, some accidents are unavoidable.
• Accessorizing: Accessories can swell the overall cost. Some buyers may select non-compulsory add-ons and trimmings like anti-theft alarm, music system, body kits, custom alloy wheels etc.
• Miscellaneous: Costs like parking costs, tolls, tickets are some of the surplus costs that you need to be ready to pay for.
• Wear and tear items: Charges on items such as battery, brake pad, clutch plate assembly, shocker replacement etc. can accrue occasionally which you need to be ready for.

One must take into consideration certain factors like after sales service, resale value and wear and tear calculations which can make a difference while buying a new car. First and primary consideration should be the ownership/running costs. Looking at how much you drive around daily can help you choose between petrol, diesel and CNG. Once you consider the fuel type, the after sales service costs should be checked because a diesel vehicle has higher maintenance cost than petrol. Although, the running cost of diesel is much lower than petrol. On the other hand, CNG and LPG will save you a considerable amount. Therefore, determine which fuel option will suit you the best.

Before buying a car, looking at the resale value and the brand value in the country is a good idea. In this way, you gain knowledge about how much potential buyers are willing to pay in the future for a certain model etc. All in all, first you need to set up a budget, research about vehicles and then comes the ownership, after sales and resale cost and then you know which vehicle you want to buy and afford.

And thus

The primary focus of many car buyers is on the payment and the price, but there are multiple other costs which have an influence on the overall cost of ownership of a vehicle. It is vital to keep in mind the additional costs while deciding between different models, trim levels etc. There is ample information available on the IndianBlueBook website regarding vehicles, their costs, models, trims, new launches etc. You can use this information to help to make your decision on which car to purchase.

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