'Rs 15 lakh car is not really a Rs 15 lakh decision': CA shares a financial checklist most buyers skip

Buying a new car can feel like a straightforward calculation: check the price, work out the EMI and decide whether the monthly payment fits your budget. But the actual cost of owning a car extends far beyond the loan instalment. CA Nitin Kaushik has shared a financial checklist for prospective buyers, urging them to look beyond the EMI and consider the purchase’s impact on savings, investments and other financial goals.

Don’t look at the EMI alone

CA Nitin Kaushik took to X and shared that buyers should ask themselves a more important question before purchasing a car: whether they can afford it “without compromising everything else”. He pointed out that a Rs 15 lakh car is not necessarily a Rs 15 lakh financial decision because the purchase involves several additional expenses that buyers may overlook.

Start with on-road price

According to Kaushik, buyers should calculate their budget using the on-road price, rather than the advertised ex-showroom price. The final amount can include road tax, RTO registration, HSRP, insurance, TCS and other applicable charges. For instance, a car advertised at Rs 10 lakh could cost around Rs 12 to 13 lakh on-road, depending on the state and variant. He also advised buyers to examine the invoice carefully and not automatically accept dealer handling or logistics charges.

Don’t drain your savings for the down payment

While banks may finance around 80 to 90% of a car’s cost, Kaushik cautioned against automatically taking the maximum loan available. A down payment of around 20 to 25% can provide greater financial breathing room and reduce the possibility of owing more than the car is worth. However, buyers should also avoid putting their entire savings into the down payment. Maintaining an emergency fund after purchasing the car remains important.

The EMI is only one part of the cost

A Rs 25,000 EMI does not mean the car costs only Rs 25,000 a month. Buyers also need to account for insurance, fuel, servicing, maintenance, tyres, parking, tolls, repairs, accessories and other running expenses. Kaushik’s broader point is that a car should be financially comfortable enough to maintain without repeatedly dipping into investments.

A longer loan can make an expensive car look affordable

Seven-year car loans can make monthly EMIs appear more manageable, but Kaushik warned that a lower EMI does not necessarily mean a cheaper car. He gave the example of a Rs 10 lakh loan at around 9.5%, explaining that extending the tenure from five to seven years may reduce the monthly EMI by only a few thousand rupees while substantially increasing the total interest paid.

Since the car is a depreciating asset, buyers also end up servicing the loan for longer while the vehicle continues losing value. Kaushik advised comparing the total repayment amount, rather than focusing only on the monthly instalment.

Get your own loan quote

Buyers should also avoid accepting the first financing option offered at a dealership. Kaushik noted that dealer-arranged financing can sometimes cost more because dealers may receive a commission from the financing arrangement. He recommended obtaining a pre-approved quote from a bank or another lender before negotiating with the dealership. Buyers should compare processing fees, foreclosure charges, documentation costs and other loan terms alongside the interest rate.

Understand the insurance and depreciation costs

Third-party insurance is mandatory, while new cars have a different insurance structure because of the mandatory long-term third-party cover. Kaushik advised buyers to look beyond the premium and compare the IDV, deductibles and add-ons. For a new or expensive vehicle, Return to Invoice cover can also be considered. Subject to policy terms, RTI can help bridge the difference between the depreciated IDV and the original invoice value in cases such as theft or total loss.

Depreciation is another cost buyers should factor in. Kaushik noted that a new car can lose roughly 20% of its value in the first year, with depreciation continuing over subsequent years. A small down payment combined with a long loan could therefore leave buyers owing more on the loan than the car is worth.

Stress-test the purchase before booking

Before buying, Kaushik suggested considering how the purchase would hold up if income stopped for six months. Buyers should ask whether they could continue paying the EMI, maintain the car, keep their SIPs running and meet other financial priorities. As a rule of thumb, he suggested keeping EMI, insurance, fuel and maintenance at around 15% of monthly take-home income, while ensuring total EMI obligations remain manageable.

The central distinction, according to Kaushik, is between a car the bank is willing to finance and one the buyer can comfortably own without sacrificing other financial goals. The right car, he suggests, is not necessarily the most expensive vehicle one can get approved for, but one that can be enjoyed without constant financial pressure.