Can You Really Afford A Car?

A car is commonly classified as an asset.However,any person who is reasonably financially sophisticated will understand it’s not that great an asset as it quickly depreciates in value.

Unless you are running your vehicle as a taxi and turning a profit,your personal car is a liability that loses value and saddles you with expenses related to maintenance,repair,parking,storage,fuel etc.So in many ways,owning and using a car is most often more about convenience,comfort,status and vanity.

Adrian has an interesting post on how much to spend on stuff like your cars:Link.I recommend it to you.

Based on its experience of lending money country-wide,the State bank of India,has recently increased the eligibility limit for loan issuance for salaried individuals for car purchases from 2.5 lakh per annum to 6 lakh per annum for non-SBI bank account holders. And for  SBI account holders, the limit has been raised to 4.5 lakh p.a.

The wisdom of buying a car on a loan is questionable.But rushing to purchase one without a pucca source of income bringing in 4-5 lakhs a year is asking for trouble.Think!The bank is just interested in your ability to pay EMIs. Your car related expenses are much more.If fuel prices stop you from driving often,your car is likely to deteriorate by standing idle,So your garage expenses will rise.So you are likely to find yourself in a no-win situation.

Affording a car is not just a matter of paying the ticket price or being able to service a car loan but about being able and willing to pay the associated costs of car ownership.Check to see that your car doesn’t force you to compromise on your other other life- goals and investments.