Read this.
When i was planning to buy a car, I was struck between choosing petrol or diesel. I did a calculation myself.
1) If I opt for diesel, and if you opt for car loan (with base payment remaining fixed), my car loan amount would increase by 1Lakh for a diesel car. If you apply a rate of interest of 11.5% for a 5 year car loan, the EMI increases by approx Rs 2600 (This is approx number, obviously it will be much higher) for that additional Rs 1Lakh. That means u will pay an additional Rs 2600 for 60 months. Assuming - diesel car gives 15kmpl in city (with AC), petrol give 12 kmpl in city (with AC), Diesel cost = Rs 44 per lite, Petrol = Rs 70 Per litre, total run for a month = 1250 KM (15000 KM per year). The running cost for a diesel car comes to Rs 3700 and for a petrol car Rs 7300. So with diesel car you spend 3700 + 2600 = 6300 every month and with petrol car you spend Rs 7300. So you save Rs 1000 every month with diesel car.
2) However I missed to mention that you spend Rs 2600 additional as EMI on disel car while you save Rs 1000 with the same. That means Rs 1600 (2600 - 1000) is something you invest extra for diesel car every month. Lets assume, that you opted for petrol car and run the same number of KM as explained above. Thereby lets say i put this amount (Rs 1600) as recurring fixed deposit for 5 yrs with simple interest of 7%. At the 5th year u might get Rs 96000 (Rs 1600 * 6) and Rs 16000 (approx interest u obtain for 5 yrs. Not an accurate number) as interest (which is tax exempted). Thus ur saving bcos of recurring deposit at the end of 5th yr with petrol car is 96000 + 16000 = Rs 112000 which is Rs 1800 per month.
3) Thus if u consider points 1 and 2, you save Rs 1800 per month with a petrol car. Let me add Rs 10000 as additional maintenance cost for 5 yrs when u own a diesel car and Rs 5000 more for 5 yrs of insurance with diesel car. At the end of 5 yrs, your savings with petrol car comes to Rs 123000 (1800 * 60 + 10000 + 5000).
4) If you sell your car at the end of 5th yr, a diesel car might fetch Rs 50000 more (gracious assumption by the way) than a petrol. You will still see that u save more with a petrol car.
5) If you perform the above calculation, with a car loan tenure of 5 yrs but u end up keeping the car for 6 yrs, u will see a diesel car brings u more savings than petrol. This means u breakeven and start earning profit with a diesel car if u keep it for 6 yrs or so. assuming that you increase the base payment amount by Rs 1 Lk when u opt for a diesel, u will see that Diesel car will easily bring lot of savings. Assuming you are not going to car loan at all and making complete investment from your pocket, u will see that diesel easily saves lot of money.
So in essence, what really boils down is that car loan. That additional Rs 1Lakk car loan for a deisel car plays a crucial role in determining ur profit at the end of 5th yr.
Of course I might have missed lot of factors.
A similar calculation assuming u r going to keep the car only for 3 yrs would give u different results.
So when I bought a car, i naturally had to go for a car loan and had decided that i will keep the car for 5 yrs. I kind of knew that i will not end up driving 15K KM per year. My calculation favored me to chose a petrol car. In a way after more than 1.5 yrs of buying the car, I think i made a fair decision. My car has run only 9000 KM in last 18 months.
Now if you have made a decision to go with petrol and ur budget is Rs 5.5 lakh or less, i will suggest u to go with i10. If you stretch ur budget by 1 lakh more, u can chose the car in following order - i20, new swift, Polo
Now if you have made a decision to go with diesel, choose the car in following order - Ford Figo, New swift.
