Thinking of a new car?
When should you buy a car, and how?
- Loan now, 20% down first, or cash
- What each way costs you
- How much car your pay fits
Can you afford it?
- Fits the 20/4/10 rule
- Your budget stretches to it
- More than your budget
- At least 20% down20% from savings
- A loan of 4 years or less5 years
- Car costs within 10% of take-home17% · ₹24,801 a month
- Fits your monthly budget₹10,199 to spare
Checked for buying today with your savings as down payment and a 5-year loan. 20/4/10 is a rule of thumb, not a bank limit.
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What this means
- Waiting 2 yrs 4 mo leaves you ₹4.76 L richer by 2034, about ₹16,993 for each month without a car.
Why?
A loan today adds ₹2.08 L of interest, and the car starts losing value 2 yrs 4 mo sooner. Waiting costs cab fares and a price that rises 4% a year. Whether a car now is worth that much a month is your call.
- A loan today costs ₹2.08 L in interest, on top of the price.
Why?
₹16,801 a month for 5 years at 9.5%. The 20/4/10 plan's shorter loan costs ₹1.65 L.
- After 5 years the car is worth about ₹5.28 L, 47% less than you paid.
Why?
A car loses value from the day you drive it out. It's a cost to keep low, not an investment.
- The 20/4/10 rule points to a car up to ₹3.48 L, ₹6.52 L less than this one.
Why?
Put at least 20% down so you never owe more than the car is worth, borrow for 4 years at most, and keep all car costs (EMI, fuel, insurance, service) within 10% of your take-home pay.
- Running it costs ₹96K a year, however you pay for it.
Why?
Fuel, insurance, service and parking. They go on after the loan ends, and rise as the car ages.
More details
When your savings catch the price
Your budget minus cab fares goes into savings at 7% a year, while the price rises 4% a year.
Three ways to buy it
- Buy now on a loan5-year loan₹23.49 L in 2034 · car today · ₹2.08 L interest
- Save 20%, then borrow4-year loan₹23.66 L in 2034 · car today · ₹1.65 L interest
- Save up, pay cashMostNo loan₹28.25 L in 2034 · car in Feb 2029
What you own: savings plus the car's resale value, minus the loan. Shading shows who is ahead.
Every plan spends the same budget each month. Waiting trades time without a car for money.
How it's calculated
Every plan spends the same monthly budget for getting around. Until you own the car it pays for cabs and transit; after, it pays the EMI and running costs. Whatever is left is saved at your savings return.
- Buy now: your savings go into the down payment today and a loan covers the rest.
- Save 20%, then borrow: you buy as soon as savings reach 20% of the price then, with a 4-year loan.
- Save up, pay cash: you buy when savings cover the whole price then. The price rises every year while you wait.
- What you own is your savings plus the car's resale value, minus the loan still owed. The car loses a fixed share of its value each year.
The 20/4/10 rule: at least 20% down, a loan of at most 4 years, and all car costs within 10% of take-home pay. Tax on interest earned while saving is not counted.