Buying or renting a car is a big decision for a middle class family. Due to traffic, parking problems, rising inflation and vehicle prices, this question rotates in everyone's mind. The on-road price of a popular mid-size SUV like Hyundai Creta ranges from Rs 12 lakh to Rs 23 lakh in Delhi-NCR.
Buying involves the burden of down payment, long EMI, insurance, maintenance and depreciation. Whereas in renting or leasing, the monthly rent is fixed, which often includes maintenance and insurance, but this can prove to be expensive in the long run. Let us try to know whether it is right to buy a new car or it can be taken on rent.
5 year calculation
Looking at detailed calculations, the decision depends on your annual driving, budget, tax slab and future planning. Lease is more convenient for young professionals or those who drive short distances, while buying is cheaper for families who plan to keep the car for a long time. Ola, Uber or monthly subscription is fine for short term, but in the long term it is important to compare both the options. Thousands of rupees can be saved every month by making smart choices.
purchase cost
Suppose you are choosing Hyundai Creta petrol variant, whose on-road price in your city is around Rs 15 lakh. The calculation has been done assuming annual driving of 15,000 kilometers, petrol at Rs 100 per liter and mileage 15 km per litre.
Let us assume that at the time of purchase, the down payment has to be Rs 3 lakh (20 percent). The remaining loan of Rs 12 lakh is taken for 5 years at 8.5 to 9 percent annual interest rate. Monthly EMI comes around Rs 24,500 to Rs 25,000. In this way, the total EMI payment in 5 years will be around Rs 14.7 to 15 lakh, of which the interest portion is Rs 2.7 to 3 lakh. The total purchase cost including down payment reaches Rs 17.7 to 18 lakh.
Running expenses include fuel expenses of Rs 5 lakh for 5 years, maintenance of Rs 75,000 (average annual cost of Rs 15,000) and insurance of Rs 1.25 lakh (average average of Rs 25,000 annually). In this way the total outflow becomes around Rs 24 to 25 lakh. After 5 years, the resale value of the vehicle will be around Rs 7 to 8 lakh, because Creta keeps its resale value well. Net expenditure reduces to Rs 16.5 to 17.5 lakh. When you buy, the car becomes your own, you get freedom of customization and there is no limit on kilometers.
Lease or Rent Calculation
In case of lease or rent option, the monthly rent (in Ayvens or other companies) is around Rs 25,000 to 28,000 per month, which includes maintenance and insurance. The total rent for 60 months is around Rs 15 to 16.5 lakh. If we add the fuel cost of Rs 5 lakh, the total expenditure reaches Rs 20 to 21.5 lakh. There is no resale value here and the car has to be returned to the company after the expiry of the period. Kilometer limit is also fixed, which imposes additional charges if driven more.
Buying for 5 years is usually cheaper by Rs 2 to 4 lakh. If you are in the 30 per cent tax bracket and take a corporate lease, the tax savings on lease (up to 30 per cent on rent) make this option more attractive, bringing down the net expense by Rs 14 to 15 lakh. However, buying for personal use proves to be better in most cases.
If you drive less than 10,000 kilometers a year, like to change your vehicle every 3-4 years or want to maintain liquidity, then lease or rent is an easier option. Considering the traffic and parking problems in Delhi-NCR, short term rental is also good, but it becomes expensive in the long run.
| parameters | Buying a car | Rent |
| ownership rights | You have your own asset. | Is an asset of the company. |
| Maintenance | your responsibility. | Company's responsibility. |
| Flexibility | Difficult to change models. | You can change the car whenever you want. |
| Benefit | Inexpensive option for long term (7-10 years). | Better for short term (2-3 years). |
Our advice: The decision depends on your income, driving pattern and future plans. If you have a lot of driving, plan to keep it for 7-10 years and have the ability to afford capital, then it would be a good buy. Lease is better for flexibility and less capital. Do your calculations by checking EMI calculator, lease quotation and interest rates. Taking the right decision will not only save money but will also reduce stress.