Buy vs Rent: Buying or leasing a car in the Indian market is a big decision, especially when it comes to a popular compact SUV like the Tata Nexon. Nexon is known for its 5-star safety, stylish design, strong performance and good resale value. But amidst rising inflation, fuel cost, maintenance and depreciation, many people ask – is it better to buy for 5 years or use it on monthly rent?
In this article, we make detailed calculations for 5 years taking the example of a mid-variant Tata Nexon (Petrol). We will compare keeping in mind the actual market data, average running (12,000-15,000 km/year), fuel, insurance, servicing and resale value. The result will clearly tell you what suits your needs. Own your own car or choose flexible rental options. Let us all try to understand.
5 Year Complete Maths: Buy or Rent?
The biggest difference between buying a car and leasing it is the responsibility of ownership, initial down payment and maintenance. Let us understand both the options in detail-
Tata Nexon(Buying Option)
If you choose a mid-to-top variant of Tata Nexon, whose on-road price is around ₹ 13,00000, then the 5 year expenses will be like this-
- Downpayment: Let's assume you make a downpayment of ₹3,00,000.
- Loan and EMI: If you take a loan for the remaining ₹ 10,00000 at an interest rate of 9% for 5 years, then your monthly EMI will be approximately ₹ 20,758. In 5 years you will pay a total of ₹ 12,45,480 only as EMI.
- Other expenses: Insurance renewal, periodic servicing, tire replacement and maintenance will add up to an additional expense of at least ₹1,50,000 over a 5-year period.
- Resale Value: When you go to sell the car after 5 years, you can get back around ₹ 5,50,000 due to the strong resale value of Tata Nexon.
- Total Net Expenses: ₹3,00,000 (Downpayment) + ₹12,45,480 (EMI) + ₹1,50,000 (Maintenance/Insurance) – ₹5,50,000 (Resale Value) = ₹11,45,480
Subscription option
The monthly rental (inclusive of all taxes, insurance and maintenance) for mid-size cars like the Tata Nexon on leading car subscription platforms works out to be around ₹26,000 to ₹28,000 per month for a long tenure of 5 years. Come, let us understand the complete details-
- Initial expenses: There is no huge down payment required, only a refundable security deposit of ₹ 30,000 to ₹ 50,000 has to be paid.
- Monthly Rent: If we assume an average rent of ₹ 27,000 per month, then the total rent for 5 years (60 months) will be ₹ 16,20,000.
Benefit: During this period, you do not have to pay the expenses of insurance, road tax, periodic servicing or any kind of mechanical breakdown, all that is included in the rent amount. However, after 5 years you will not have any ownership rights on the vehicle and you will not get any resale value.
| means of expenditure | Buying a car | Subscription |
|---|---|---|
| Downpayment / Deposit | ₹3,00,000 (downpayment) | ₹40,000 (Refundable Deposit) |
| Monthly Expenses (EMI / Rent) | ₹20,758 (for 5 years) | ₹27,000 (average monthly rent) |
| 5 years total payment | ₹12,45,480 (EMI total) | ₹16,20,000 (Total Rent) |
| Insurance and maintenance expenses | ₹1,50,000 (additional to be paid) | ₹0 (included in fare) |
| Resale value after 5 years | ₹5,50,000 (will come back) | ₹0 (must return the vehicle) |
| 5 year total net expense | ₹11,45,480 | ₹16,20,000 |
What's right for you?
It is clear from the calculations that financially buying Tata Nexon is much more economical than taking it on rent. By purchasing at the end of 5 years, you have a saving of around ₹ 4.5 lakh to ₹ 5 lakh, because in the end the car becomes your asset which can be sold and the money can be recovered.
Who should buy the car?
If you are keeping the car for a long time (5+ years), have the budget for a down payment and want to own the car, then choose the blind buy option.
Who should rent?
If you have come to a city on transfer only for 2-3 years, want to stay away from the hassles of servicing and insurance, or you like to change your vehicle to a new vehicle every few years, then taking a car on rent or subscription would be a wise decision for you.
