Smart Way to Budget for a Car: Use This Free Tool First

Purchasing a car can be thrilling, but it can also lead to financial difficulties if the budget is not well-planned. Here are some of the most common mistakes committed by Indian buyers and the ways to avoid them:

• Non-consideration of the Total Cost of Ownership
  Do not only stick to the ex-showroom price. Registration, taxes, insurance, FASTag, and handling fees are on-road costs that can be 10–15% more than the ex-showroom price. Additionally, consider the costs of insurance, fuel, maintenance, parking, and tolls for the year.
• Underestimating Running and Maintenance Costs
  Fuel prices and regular upkeep add up. Monthly fuel can cost ₹7,000–₹8,000. Insurance costs range from ₹10,000 to ₹25,000 per year. Maintenance varies by car type, and unexpected repairs can be costly.
• Overstretching EMIs
  Avoid taking a loan that pushes your EMI beyond 10–15% of your monthly income. Make a down payment of at least 20% and keep the loan tenure under 4 years to manage payments comfortably.
• Choosing the Wrong Loan Tenure or Interest Rate
  Longer tenures reduce EMIs but increase total interest paid. For example, a ₹10 lakh loan at 10% for 7 years costs nearly ₹2 lakh more in interest than a ₹10 lakh loan at 10% for 4 years.

Use tools like the JezzMoney Car Planning Calculator to estimate your total costs, plan down payments, EMIs, and loan tenure before you buy.

When you purchase a car, it is a significant financial decision that requires careful planning—not only for the car's price but also for future expenses that will be affected by inflation and your savings strategy. The JezzMoney Car Planning Calculator is a free, user-friendly tool that guides you through the process of effectively planning your car purchase.

What This Calculator Does
Rather than just calculating your loan EMI, this tool provides a broader perspective. It takes into account the car's current price, predicts its future price due to inflation, and illustrates how your savings or investments—whether through monthly SIPs or lump sums—can accumulate over time, considering expected returns.

What You Need to Input
To get a detailed plan, you'll provide:

• Number of years you plan to save or finance the car
• Current cost of the vehicle (the on-road price you expect today)
• Future cost of the car (estimated price after accounting for inflation)
• The monthly SIP amount you intend to invest regularly
• A lump sum amount that you can invest upfront
• Inflation rate (annual rise in car prices, typically around 6–10%)
• Expected rate of return on your investments (based on your portfolio or mutual funds)

What You Get in Return
The calculator then gives you a comprehensive summary showing:

• How much your car's price might increase over the years due to inflation
• How your monthly SIPs and lump sum investments could grow with compound returns
• Whether your planned savings are enough to meet the future car price
• Insights on how to adjust your savings or loan plan to afford the car comfortably

This calculator not only determines your financial readiness to buy a car today, but it also assesses your readiness for future car purchases. It empowers you to stay away from unexpected events, such as higher-than-expected prices or insufficient savings, thereby allowing you to make informed decisions and buy your car without financial worry.

Planning to buy a car is more than just being able to pay the EMI. It is also about confirming that the vehicle can be comfortably accommodated within your total financial setup. Here are some helpful tips to help you budget wisely and avoid financial stress later.

Follow the 20/4/10 Rule
This popular budgeting rule is simple but highly effective:

• 20% Down Payment: Pay at least 20% of the car's on-road price upfront. This reduces your loan amount and lowers your overall interest.
• 4-Year Loan Tenure: Aim to repay the loan within 4 years to avoid paying too much interest.
• 10% of Income for EMIs: Your car EMI should not exceed 10% of your monthly take-home income. This keeps your monthly budget balanced and manageable.

Always Include Running Costs
Don't just plan for the EMI. Monthly fuel, maintenance, insurance, and servicing can add ₹5,000–₹10,000 or more, depending on the vehicle. Include these in your monthly car budget from the beginning.

Leave Room for Emergency Repairs
Unexpected expenses, such as tire replacements, battery failure, or mechanical breakdowns, are common—especially after the warranty has ended. Keep a small emergency fund aside for such situations.

Consider Resale Value While Planning
Not all cars lose their value at the same rate. Brands like Maruti, Toyota, and Hyundai are known for high resale value. Choosing a model with good resale potential will make it easier to get a better return when you decide to sell or upgrade later on.

A careful budget plan enables you to enjoy your car without compromising your financial situation. These easy tips might be the turning point for you to make a decision that is both clear and sustainable, rather than just emotional.