Total Ownership of a Car
Owning anything is not that simple. There’s always a ton of burden that tags along with ownership. With so many different types of vehicles on the market, it is now much more straightforward for car enthusiasts to buy a vehicle. Every month, automakers release many low-cost automobile models, attracting individuals to buy their vehicles, from economical family vehicles to affordable sedans. With more and more Indians getting their cars, low-cost vehicles have genuinely transformed the Indian auto industry. While this option has made it possible for people from different socioeconomic backgrounds to realise their dream of owning a car, several other considerations still need to be taken care of. The cost of owning a car is one important aspect that should be carefully considered. While the majority of people believe that a car's purchase price reflects its true cost, the reality is very different. Other expenses come along with the price of the car.
The estimated cost of owning an automobile over time is called TCO (Total Cost of Ownership). This accounts for costs incurred for items like fuel, maintenance (repairs, services, etc.), insurance, loan fees, and loss in automobile value (depreciation) throughout the ownership time.
Why is it Necessary?
When evaluating a new car with a used car, the total cost of ownership analysis might be very crucial. If a used automobile needs a lot of maintenance while the new car has a three-year guarantee that may cover repair costs, the used car that initially seems like a fantastic deal may
have a higher total cost of ownership than the new car.
Components Involved in TCO of a Car
- Buying Cost
The price a buyer pays to purchase a car on the marketplace is referred to as the purchase cost. The net on-road price of the car set by the car dealer after all discounts are what is referred to as the buying cost or upfront cost of the car purchase. One might think of this as the only cost needed to own a car, there are more. For a used car, the purchase cost may be less. - Depreciation Cost
Cars are known as depreciated assets as their value goes drastically down. Buying a used car is not an asset and reselling the car would fetch almost nothing. - Cost of Accessories
Although extra accessories aren’t mandatory, an owner might need them to make their cars look striking. These costs may not be significant but they do contribute to the TCO.
- Tax
There are a lot of taxes we ought to pay as a vehicle owner, whether the car is new or used. Major taxes are the road tax and the insurance tax. Some used car owners do pay for the insurance. - Servicing and Maintenance Costs
Among the additional expenses of car ownership that are unavoidable are all those related to maintenance and servicing. As long as you own a vehicle, you will be responsible for paying for this type of expense. Yet, the cost of service and maintenance is somewhat influenced by how you use your vehicle. Although having a durable and strong body, modern cars are nonetheless susceptible to damage from accidents. The cost of repairs will be very significant if you accidentally damage the body or engine of your car while you own it. For a used car, service costs may be more as they’ve been passed on. - Fuel Cost
One of the most essential costs incurred by a car owner while it is being driven is fuel. The cost of fuel is something that all automobile owners, whether they drive petrol or diesel vehicles, should budget for and factor into their initial budget list. The price of fuel is always rising in India, and the expense of diesel and petrol may really burn a hole in a car owner's wallet. Only the price of fuel, and particularly the price of petrol, can match the EMI payment you make each month. - Car Financing Cost
Usually, loans aren’t used as a financing mode for used cars as many lenders do not provide loans for them. But in case we avail of a loan, EMIs are a part of the TCO and are a major currency drain after fuel costs.
It is important to know about the total costs one incurs before buying a new or a used car. The above costs are the ones an owner might have to face if they decide to go for a used car.
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