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How Much to Spend to Buy a Car in India?

This article delves into the various factors that affect the cost of buying a car in India, providing guidance on striking the right balance between needs, preferences, and financial capabilities.

  • 04 Dec 2023
  • 3 min read

Buying a car in India is not just about acquiring a mode of transportation; it's a significant financial decision and a symbol of pride and achievement. With many options available, determining the appropriate budget for your new vehicle is a crucial step in the process. Here, we will delve into the factors to consider when deciding how much should I spend on a car when purchasing it in India. Here, you can get insights to help you make an informed and financially responsible choice.


Factors to consider while calculating car budget 

When establishing your car budget in India, several factors come into play. Here are essential considerations to keep in mind when you can't decide how much to spend on a car:

  • Annual Income: Your annual income is a pivotal starting point. The rule of thumb is not to allocate more than half of your yearly earnings to a car purchase.
  • On-Road Price: Consider the car's on-road price, including taxes, registration fees, and additional accessories or services, as it represents the final cost.
  • Loan Affordability: If you plan to finance your car, follow the 20/4/10 rule, making a 20% down payment, selecting a loan tenure of up to four years, and keeping monthly payments (including EMI and maintenance) within 10% of your salary.
  • Car Size: Choose a car based on your family size and usage requirements to avoid overspending on a larger vehicle.
  • Luxury vs. Affordability: Align your car brand choice with your financial situation. Avoid overspending on luxury cars, which can lead to future financial instability.
  • Depreciation: Understand that cars depreciate; overspending results in higher interest payments.
  • Cost of Ownership: Account for fuel economy, service, spare parts, maintenance, and car insurance premiums when calculating the budget.
  • New vs. Used Car: Consider buying a used car for a value-for-money proposition and explore online and offline markets.
  • Discount Opportunities: Timing your purchase can lead to attractive discount offers, typically available during special occasions, festival seasons, or year-end months.
  • Savings and Down Payment: Ideally, contribute 50% upfront to minimize interest payments on the loan, ensuring that you have sufficient savings before buying the car.

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Determining how much to spend on a car in India is a nuanced decision influenced by various factors. Your financial health, requirements, car usage, and personal preferences all play a role in setting the right budget. Following this article's guidance, you can make an informed decision that aligns with your financial plans and ensures a satisfying car-buying experience. Remember, the key is to avoid unnecessary overspending, which can jeopardize your financial future.

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