Why is there a huge difference between ex-showroom and on-road prices? Know

Why is there a huge difference between ex-showroom and on-road prices? Know

by with No Comment Car Review

Ex-Showroom vs On-Road Price: Everyone dreams of buying a new car, but when we go to the showroom, the mathematics of the budget changes completely. There is a huge difference between the price shown in the advertisement and the amount deducted from the pocket. The main reason for this difference is the difference between 'Ex-Showroom' and 'On-Road' price.

Actually, the ex-showroom price is the basic amount at which the company sells the car. This includes only factory cost, dealer profit and GST. But to drive the vehicle legally on the road, many mandatory taxes and charges have to be paid. This is the reason why there is a huge gap of 15% to 25% between the showroom price of a car or bike and the final bill, which often surprises the customers. Let us know where the middle money goes?

What is the difference between ex-showroom and on-road?

When you buy a new car, there are various government and non-government charges added on top of the base price. Let's understand where every penny of your bill goes:

1. Road Tax / RTO Fees

This is the largest part of this gap. State governments collect road tax on every new vehicle to fund road maintenance and infrastructure. This tax can range from 6% to 20% in different states depending on the price of the vehicle, engine capacity (cc) and type of fuel (petrol/diesel/electric). Apart from this, registration fees and number plate (HSRP) charges are also included in this.

2. Vehicle Insurance

It is legally mandatory to have insurance to drive on the road in India. Third party insurance has been made mandatory. According to government rules, it is necessary to take third-party insurance for 3 years for a new car and 5 years for a two-wheeler. Apart from this, people also take 1 year comprehensive insurance to cover the loss of their own vehicle. By combining these two, the insurance premium becomes a huge amount.

3. TCS – Tax Collected at Source

According to the rules of the Income Tax Department, if the ex-showroom price of a vehicle is more than Rs 10 lakh, then the government charges TCS of 1% on it. Although you can claim this later while filing your Income Tax Return (ITR), it increases the on-road price at the time of purchasing the vehicle.

4. Fastag & Green Cess

Fastag is mandatory for every new vehicle to pass through the toll plaza on the National Highway, for which around Rs 400 to 600 is charged. In many states, in the name of controlling environmental pollution, additional green cess is imposed especially on diesel vehicles.

Dealer's hidden charges

There are some expenses which are not necessary, but the dealers include them in the on-road price list. It is very important for customers to know:

  • Logistics or Handling Charges: Cost of bringing the vehicle from the yard to the showroom. The Supreme Court has declared it illegal, so you can demand its removal.
  • Accessories Kit: Dealers add things like car mat, seat cover, chrome garnish in advance. If you wish, you can refuse to take them.
  • Extended Warranty: Apart from the company's standard warranty, you can also get additional years of warranty removed, which is optional.

Work advice: Next time you go to buy a car, ask for an item-wise breakup of the on-road price from the dealer. You can also get the insurance done cheaply from any other company from outside, for which the dealer cannot force you. By being smart, you can save thousands of rupees in on-road prices.

Source link

90% people do not know the real truth of zero down payment offer! Know before you get stuck

90% people do not know the real truth of zero down payment offer! Know before you get stuck

by with No Comment Car Review

Be it the festive season or the end of the year, the offer of 'Zero Down Payment' shines the most in the advertisements of car dealers. Who wouldn't be attracted by the dream of taking home a gleaming new car without keeping a single rupee in your pocket? For middle class families this offer seems like a lottery.

But there is a simple rule of the financial world, nothing comes for free. What you think is a 'great opportunity' without having to spend money out of pocket may actually be a well-planned trap to drain your pockets in the long run. Signing this deal without knowing the bitter truth hidden behind the glamor of the advertisement can cost you a lot. Let us try to find out what is the real truth behind it?

everything is not what it seems!

When a dealer says that you do not have to make a down payment, it does not mean that the price of the car has been reduced. This simply means that the bank is giving you a loan of 100% of the on-road price of the car.

In a normal loan, you pay 15% to 20% of the cost of the car yourself and take the rest as a loan. But with zero down payment, your loan amount (principal amount) becomes very big. The larger the loan, the higher will be the total interest charged on it. That is, you will return more money to the bank in the form of interest in the next 5 to 7 years than the money you are saving in the beginning.

Hidden troubles: processing fees and hefty interest

There are many financial complications behind this tempting offer, which dealers often hide in the fine print –

High interest rates: Banks consider giving loan without down payment as 'high risk'. To compensate for this risk, they charge 1% to 3% more interest than normal auto loans. This difference may seem small, but on a loan of 5-7 years it becomes an additional burden of lakhs of rupees.

Huge processing fees: 'Zero down payment' schemes often have very high processing fees and documentation charges. Many times dealers add this money to your EMI itself, due to which you may not realize it immediately, but your pocket keeps getting cut.

Mandatory Accessories and Insurance: To avail this offer, dealers often impose a condition that you will have to buy insurance and expensive accessories from them only, which are much more expensive than the market price.

Shock of 'depreciation'

As soon as a new car leaves the showroom, its resale value directly reduces by 10% to 15%. If you have taken a 100% loan, then in the first 2-3 years the situation is that the market value of your car is less than the amount of loan you have to repay to the bank. In financial language it is called 'upside-down loan'. If the car meets with an accident during this period or you want to sell it, your entire bank loan will not be repaid with the amount of the insurance claim.

How to avoid this trouble?

If you really want to save money, then keep these things in mind-

  • Must make 20% down payment: This will reduce your loan amount and you will get the loan at a lower interest rate.
  • Talk to the bank yourself: Go straight to the banks and compare their regular car loan with the dealer's offer.
  • Understand Total Cost: Write down from the dealer how much money (principal + total interest + fees) you will pay till the loan expires.

Summary: ''Zero down payment' is just a marketing tool. Buy a car only when you are in a position to make a decent down payment, so that your new car becomes a joyous ride and not the mental stress of debt.

Source link