smart way to buy a car

 Why I Chose Not to Buy a Car on Loan – and Why You Might Consider the Same

Many friends have asked me when I plan to buy a car. From the beginning, I've made it clear: I’m not against buying a car, but I prefer not to buy one using a loan. Here's why.

Before rushing into a car loan, it's important to understand three key reasons why buying a car on credit may not be financially wise:

1. A Car is a Depreciating Asset

Unlike property or investments, a car loses its value over time. The moment you drive it out of the showroom, its resale value drops—and continues to decline year after year.

2. Loans Bring an Extra Financial Burden

When you take a car loan, you're not just paying for the car—you’re also paying interest. That’s money going out of your pocket without adding any value.

3. Insurance and Maintenance Costs Add Up

Even after buying the car, ongoing costs like insurance, servicing, repairs, and fuel put a continuous strain on your finances—especially if you're already managing an EMI.

Let’s Break it Down with an Example:

Suppose you want to buy a car worth ₹12 lakhs and choose a 7-year loan with an interest rate of 9%. Your monthly EMI would be approximately ₹19,300.

Over 7 years, your total repayment would be around ₹16.2 lakhs—which means you pay ₹4.2 lakhs extra in interest alone.

A Smarter Alternative: Invest First, Then Buy

Instead of taking a loan, if you invest the same ₹19,300 per month in a Systematic Investment Plan (SIP) with an average CAGR of 12% for 5 years, your investment would grow to approximately ₹16.7 lakhs.

Now, with this money:

  • You can buy the ₹12-lakh car outright (no loan needed)

  • Use the remaining ₹4.7 lakhs for insurance, maintenance, and running costs for several years

The Bottom Line:

By simply delaying your car purchase for 5 years, you avoid:

  • Paying ₹4.2 lakhs in interest

  • The stress of EMIs for 7 years

And you gain:

  • Financial freedom

  • A fully paid car

  • Extra funds for maintenance

Buying a car with a loan might feel convenient, but buying it with planning is smarter.

Comments

Post a Comment

Popular posts from this blog

My daughter

  As parents, we often prioritize two main things: our children's education and earning money to support it. These days, education—especially in premier institutions like IITs and IIMs—has become a very expensive affair. It can strain even a well-planned financial life. When it comes to our children’s education, we must have a long-term vision. Studying at a top-tier technical institution is not the only path to success. Whether our children pursue technical or non-technical fields, what truly matters is that they excel in what they choose. Today, education is increasingly driven by the child's interests, not just the parent's expectations. Imposing our ambitions on them can sometimes suppress their creativity and turn them away from their true passions—and from us. I say this from personal experience. I made several mistakes regarding my daughter’s education. I had a singular goal in mind: IIT. I enrolled her in top coaching institutes like FIITJEE and Maharshi Vidya Mandi...
Read more

From Saving to Investing: Building a Corpus for Life’s Major Goals

 In our previous article, we recommended saving at least 20% of your monthly salary to gradually build a corpus fund for important life goals such as housing, education, travel, and retirement . While this is a great starting point, let’s be realistic — saving alone will not be sufficient in the long run. With the rising cost of living and growing inflation, the amount required for quality education, healthcare, retirement, and property has increased significantly. In today’s financial climate, simply setting aside 20% of your income in a savings account or fixed deposit will not generate enough wealth to comfortably meet these major expenses. Why Saving Alone Isn't Enough Consider this: traditional bank savings or fixed deposits offer an average return of 6–7% per annum . When adjusted for inflation (which can range from 5–6%), the real return is negligible — or even negative. This means your money is not really growing in value, and over time, it loses purchasing power. To...
Read more

women empowerment

  Recently, a friend of mine asked for advice about his daughter’s higher education. As part of the 2025 generation, I was surprised to hear that he was unwilling to spend much on his daughter’s education, yet he was fully prepared to invest more in his son’s. That day, we had a deep discussion about  equality . In my own family, my parents always treated sons and daughters equally. During my childhood, housework was shared — both boys and girls had to contribute. Education, work opportunities, decision-making — everything was given equal value. This upbringing shaped my belief that fairness should be the foundation of family life. In my own home today, my wife and I live by the same principle. I am proud to invest in my daughters’ education — I have already spent significantly on my elder daughter’s studies and am equally ready to do so for my younger daughter. My wife and I are both working professionals, and we respect each other’s independence. We have never had disputes o...
Read more