Steer Clear! Avoiding Hefty Monthly Bills And Unsustainable Financing For Your Car

A car can be a necessity for some, a nearing goal for a few, while a distant dream for some others. This dreamy and (sadly) depreciating asset does not come at the price written on the poster but along with a lot more monthly bills than one might anticipate.

"Car buying is often an emotional decision than a practical one. There are larger decisions involved like understanding requirement," said Renuka Kirpalani, consulting editor of Autocar India & Mashable.

Owning a car is maybe a lifestyle goal in today's society but with consumers being spoilt for choice, picking the right model according to the requirement and planning the finances are the tricky part.

If you already own a car, then it is important to keep these monthly spends in check. These amounts should align with the amount that your income can sustain comfortably.

"The monthly expenses of a car should not be more than 7–10% of your income," said Nikhil Kothari, director of Etica Wealth.

If you are looking to buy a first or new car, it is important to parallelly consider the budget you have with the requirements that the model needs to have.

"Listing your requirements like distance, space and more that can help. This needs to be clear as consumers are spoiled for options and one has to sift through the confusion," said Kirpalani. One needs to ensure that the model they pick gives them the most value for the cost.

There are bills ones anticipates like the tyres needing replacement or getting car serviced and shiny once in a while. There are also other costs like insurance premium or paying for repairs that one might not account for.

"A lot of consumers are worried about resale value and maintenance. This makes and breaks a lot of brands in the market. The environment in our country makes service a necessity, so it cannot be an exorbitant amount," said Kirpalani.

The cost of maintenance, repair and other related spends needs to be considered. When you buy a car, budget at least 15% for these costs, according to Kothari.

An SIP as small as Rs 10,000 can get you to your dream car with significant step ups. Kothari illustrates with an SIP of Rs 5,000 along with a 10% set up and 12% returns for six years. This can get you a car and if you increase your SIP amount and restart your investment after the purchase, you will also be able to finance the next upgrade. This will bring financial discipline as well, said Kothari.

"There are lot of brands that bring financial plans that help you buy, step up loans and more," added Kirpalani.

Many consider loans to finance the purchase of a car. According to Kothari, a loan will make sense if you are a professional who can account for the monthly bills as cost to the business. It is better for salaried employees to make the purchase from their own capital.