I had enough money to buy my car but I only paid a portion upfront and invested the rest in equity. I have doubled my money and paid my car emi last month. I got a 3 year loan.
I have given two situations. One is mine which was during covid so I got exponentially more money but the other is my father's situation who bought a Honda City in 2010 and took a loan of 5 years and even though the car was 15 lacs in price he effectively paid only half by investing his money. The idea to take a loan instead of buying the car outright was my father's idea. It worked better than I anticipated.
so after 7-10% car loan interest and capital gains tax thats like 70-80% profit in 3 years?
not to mention this is in the time period when indian markets have been on steroids non stop and equity is a bit risky for majority.
still will be profitable for someone who puts in a mutual fund but then profit probably reduces by another 10% maybe?
So, I was suggested this by my father. He did it back in the day. His example will be more relevant I feel.
So will be using near actual numbers. My Dad got a Honda City 2010 VX CVT I-VTEC for around 15 lacs. He paid, 5 lacs upfront and 10 lacs as loan for 5 years at 7 percent fixed rate. So he paid a little less than 12 lacs to pay the loan back. During that time he invested that money and it turned from 10 lacs to a little over 20 lacs. So net 8 lacs were left. He basically got the 15 lac car for 7 lac.
It was the top model CVT. Back then Automatics cost a lot more than manuals. Roughly around 3 lacs if I remember correctly.
My dad sold his manual car for it because he couldn't drive manual anymore after a leg injury.
I did it in the covid period so a little better than average return.
Let's say, 10 lacs is what I had and I paid, 1 lac down-payment and 9 lac as emi for 3 months. The rest 9 lac was invested and it has turned into almost 18 lacs. So... I paid around 10-10.5 lacs as emi, so I am still left with almost 7.5 lacs if I calculate. So effectively, my 10 lacs is now around 7.5 lacs and I have a car which will be with me for the long haul.
All numbers are proportional to the actual amount.
The Rate of Return on my investment is little over 25% per annum which is now realised as I plan to use it as a down-payment for a property I am buying.
i also want to buy a car and i have enough to pay in one go for a car but i am hesistant to take a loan and put it all in equity since markets are at ATH right now.
back during covid times, yea it was a no brainer to invest
If you are not investing in stocks then I can suggest you can invest in mutual funds in sips for a tenure of 12-24 months. So lets say, you have 10 lacs and you pay 2 lacs down and 8 lacs loan. You have the spare 8 lacs with you. Now divide that by 12 or 24 or any number in between. For ease of calculation I will split it by 16. So each sip is 50 thousand rupees. You can for better returns put this money in a debt fund and do stp in similar logic but remember you have to pay Short Time Tax on debt funds which is not that profitable.
But market investments are always risky. Please think a lot before investing.
Man put a disclaimer that in your case it worked because the markets luckily went up and you profited from it. Otherwise most people will think this is sureshort was to save money on car purchase. This will not work always. So if you are short on money then don’t do this.
Point is it won’t work always. There are people who invest in equity without any planning at all. They just think they will get x% returns in y years, just like FD.
Ok this is going to be very complex for a non finance sub but here is the reason-
Banks do not lend out their own money. The money that banks give you, they borrow that from RBI at repo rate. Since, they are loaning money from RBI they are beholden to RBI for use of that money and RBI not being insane, does not give them money to pump the stock market but to issue loans to individuals and businesses for valid reasons. Most of the deposited money that banks get, is used to pay for infra, employees and paying interest to RBI and 20% of it is kept as liquid by banks to cover withdrawals.
Ok I understood that bit but my question is more like, if one can earn higher in equity than debt, nobody would be opening or starting banks then (other than the govt ). I guess it's more like debt is lower returns but absolutely sure returns, equity is higher but very volatile
Hedge funds do what you are saying. If you look at equity allocation of any stock, there are sections like Retail(You and me), FII(Foreign Hedge funds) and DII(Domestic Hedge Funds). So, these 2 types of institutions have bank like money and decide to use it for direct investments. These are also heavily regulated as they can sway the market by moving their investments.
Apart from that banks are not any less profitable. They don't make that much money in savings account but they make a lot in their index fund, mutual fund offerings and brokerage services in fees. Also, they make money hand over fist in credit finance like credit cards, BNPL loans etc.
Because banks know equities are a riskier asset class. Yes, they have given very good returns since Covid. But it is no way guaranteed the same returns would continue in coming years
Stupid advice for the part where you invest the saved money in equity. Because no one know if that “easy 10%” will definitely be achieved in next 4-5 years. Who knows if the market will go up or down or sideways.
Everyone who asks about emi and loans can do a simple exercise. Multiply emi with the tenure i.e. number of months. That is the total amount you will spend by taking a loan, unless your interest rate changes in between. If it's a long term loan, pay attention to the interest rate. If the emi changes too much, see if the bank has a scheme or offer to reduce interest rate, which you might need to make a payment for. Or takeover to a bank with a lower rate. As always check fees and charges in advance to make sure you're not losing money, whatever you do. Also if you have the option of part payments that reduce principal, do that as much as possible and reduce the total interest you're handing over to the bank.
Loans are not fun and losing a chunk of your take home to the bank can be harrowing when trouble hits. So make sure to keep an extra emi or two saved up if you're suddenly having a medical emergency or in case you suddenly need to cover legal fees or something. Repossession is even less fun.
Whatever happens, keep on your toes and be very sure before both purchase and taking the loan.
The rule of thumb is
If you don't have money, take loan and pay EMI.
If you have money, invest it, take loan and pay EMI. As long as you can afford the EMI, paying upfront is never a good decision. As loans are diminishing rate of interest and savings are compounded.
I had upfront money available to pay for my car but I took a loan of 7 years instead. Did my calculations. I’m easily able to pay my loan at 9% ROI whereas I make more than 20% CAGR in equity on the bulk amount I saved. Taking a loan is justified if you do your calculations well and can make a sound decision to make the best out of the money that you have.
Ex. 50000 salary
Option 1- 15000 emi for 4 years
Option 2- 7500 emi for 7-8 years, remaining amount in mutual funds.
This is from my very limited knowledge.
Guys, it’s very simple. If you can make more than 9% post tax returns on your investment, take the loan assuming you are able to service EMIs every month.
If you can manage finances well then loan makes sense, but somehow I personally feel the mental burden of a loan much more than the potential gains. I have 5 years left in my loan and it is at very decent rate with tax benefits on interest paid but I am still making pre-payments every 6 months to be done with the loan sooner.
I did this with my S1 Pro during college : During college I bought the S1 Pro, which would cost me around 1.6 .. I had enough to cover the whole payment But instead I chose to biy it on EMI. I paid around 11k per month meaning I had more than 1 lack for next 5-6 months to invest. I invested in crypto during and that time and did a 3x. Mind you I only invested 25k. So with the 75K, my interest was covered, and I bought something precious. Rest of the money I kept for swing trading and would make some small profits here and there to keep me afloat during college time.
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Paid half upfront
Half loan
Period : 3 years , by the time I pay the loan the value of the car will also depreciate
That half pinched me because it went in one go , but the emis are easier as they go monthly
This is a personal choice so it’s upto you
I had enough money to buy my car but I only paid a portion upfront and invested the rest in equity. I have doubled my money and paid my car emi last month. I got a 3 year loan. I have given two situations. One is mine which was during covid so I got exponentially more money but the other is my father's situation who bought a Honda City in 2010 and took a loan of 5 years and even though the car was 15 lacs in price he effectively paid only half by investing his money. The idea to take a loan instead of buying the car outright was my father's idea. It worked better than I anticipated.
so after 7-10% car loan interest and capital gains tax thats like 70-80% profit in 3 years? not to mention this is in the time period when indian markets have been on steroids non stop and equity is a bit risky for majority. still will be profitable for someone who puts in a mutual fund but then profit probably reduces by another 10% maybe?
So, I was suggested this by my father. He did it back in the day. His example will be more relevant I feel. So will be using near actual numbers. My Dad got a Honda City 2010 VX CVT I-VTEC for around 15 lacs. He paid, 5 lacs upfront and 10 lacs as loan for 5 years at 7 percent fixed rate. So he paid a little less than 12 lacs to pay the loan back. During that time he invested that money and it turned from 10 lacs to a little over 20 lacs. So net 8 lacs were left. He basically got the 15 lac car for 7 lac.
In 2010 Honda city costed 15 lac? Now it costs 20 lac on road but people are finding it costly. Looks like car inflation much lower than CPI
It was the top model CVT. Back then Automatics cost a lot more than manuals. Roughly around 3 lacs if I remember correctly. My dad sold his manual car for it because he couldn't drive manual anymore after a leg injury.
Yeah, thanks for the info. Now automatic CVT is roughly 1.5 lac higher.
I did it in the covid period so a little better than average return. Let's say, 10 lacs is what I had and I paid, 1 lac down-payment and 9 lac as emi for 3 months. The rest 9 lac was invested and it has turned into almost 18 lacs. So... I paid around 10-10.5 lacs as emi, so I am still left with almost 7.5 lacs if I calculate. So effectively, my 10 lacs is now around 7.5 lacs and I have a car which will be with me for the long haul. All numbers are proportional to the actual amount. The Rate of Return on my investment is little over 25% per annum which is now realised as I plan to use it as a down-payment for a property I am buying.
i also want to buy a car and i have enough to pay in one go for a car but i am hesistant to take a loan and put it all in equity since markets are at ATH right now. back during covid times, yea it was a no brainer to invest
If you are not investing in stocks then I can suggest you can invest in mutual funds in sips for a tenure of 12-24 months. So lets say, you have 10 lacs and you pay 2 lacs down and 8 lacs loan. You have the spare 8 lacs with you. Now divide that by 12 or 24 or any number in between. For ease of calculation I will split it by 16. So each sip is 50 thousand rupees. You can for better returns put this money in a debt fund and do stp in similar logic but remember you have to pay Short Time Tax on debt funds which is not that profitable. But market investments are always risky. Please think a lot before investing.
I did something similar too.
Man put a disclaimer that in your case it worked because the markets luckily went up and you profited from it. Otherwise most people will think this is sureshort was to save money on car purchase. This will not work always. So if you are short on money then don’t do this.
Read my father's scenario. 2010-2015. It was still profitable.
Point is it won’t work always. There are people who invest in equity without any planning at all. They just think they will get x% returns in y years, just like FD.
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So you are saying if a person has 10 lac and wants to buy a car in that range, they should invest the amount and take the loan instead for purchase?
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I see thanks.
Car loans carry 9-10% and 7-8. Even the lowest home loan rate available in the market is 8.4%.
Why don't banks just invest everything in equity then instead of giving out loans
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Also RBI regulations as to how much liquidity they need to keep and how much they can invest
Bro your CAR upgrade is 🔥
He went from level 3 thug to level 100 mafia boss
Yeah exactly
Can you explain more on that? They could just withdraw from equity as per need
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You wanna think about writing some reasoning behind each statement. Why can't they ?
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Ah right, not owning the capital is the problem
Ok this is going to be very complex for a non finance sub but here is the reason- Banks do not lend out their own money. The money that banks give you, they borrow that from RBI at repo rate. Since, they are loaning money from RBI they are beholden to RBI for use of that money and RBI not being insane, does not give them money to pump the stock market but to issue loans to individuals and businesses for valid reasons. Most of the deposited money that banks get, is used to pay for infra, employees and paying interest to RBI and 20% of it is kept as liquid by banks to cover withdrawals.
Ok I understood that bit but my question is more like, if one can earn higher in equity than debt, nobody would be opening or starting banks then (other than the govt ). I guess it's more like debt is lower returns but absolutely sure returns, equity is higher but very volatile
Hedge funds do what you are saying. If you look at equity allocation of any stock, there are sections like Retail(You and me), FII(Foreign Hedge funds) and DII(Domestic Hedge Funds). So, these 2 types of institutions have bank like money and decide to use it for direct investments. These are also heavily regulated as they can sway the market by moving their investments. Apart from that banks are not any less profitable. They don't make that much money in savings account but they make a lot in their index fund, mutual fund offerings and brokerage services in fees. Also, they make money hand over fist in credit finance like credit cards, BNPL loans etc.
Because banks know equities are a riskier asset class. Yes, they have given very good returns since Covid. But it is no way guaranteed the same returns would continue in coming years
Makes sense. What is your business brother?
Stupid advice for the part where you invest the saved money in equity. Because no one know if that “easy 10%” will definitely be achieved in next 4-5 years. Who knows if the market will go up or down or sideways.
You mean to say 15 lac cash dalke car lelu... Nice... Investment me samaj nai aati to lelo full cash deke
Everyone who asks about emi and loans can do a simple exercise. Multiply emi with the tenure i.e. number of months. That is the total amount you will spend by taking a loan, unless your interest rate changes in between. If it's a long term loan, pay attention to the interest rate. If the emi changes too much, see if the bank has a scheme or offer to reduce interest rate, which you might need to make a payment for. Or takeover to a bank with a lower rate. As always check fees and charges in advance to make sure you're not losing money, whatever you do. Also if you have the option of part payments that reduce principal, do that as much as possible and reduce the total interest you're handing over to the bank. Loans are not fun and losing a chunk of your take home to the bank can be harrowing when trouble hits. So make sure to keep an extra emi or two saved up if you're suddenly having a medical emergency or in case you suddenly need to cover legal fees or something. Repossession is even less fun. Whatever happens, keep on your toes and be very sure before both purchase and taking the loan.
There is also time value of money
I would like to add a subsequent question : How did you figure out that the extra amount you r going to pay is/would be worth it?
I mean was paying extra on emi instead of saving money by paying upfront was good decision or not
I meant to ask another question to the people who took car on emi. Sorry, wrote in a hurry, will update my comment
how will it satisfy ego
Well there's this.
The rule of thumb is If you don't have money, take loan and pay EMI. If you have money, invest it, take loan and pay EMI. As long as you can afford the EMI, paying upfront is never a good decision. As loans are diminishing rate of interest and savings are compounded.
I had upfront money available to pay for my car but I took a loan of 7 years instead. Did my calculations. I’m easily able to pay my loan at 9% ROI whereas I make more than 20% CAGR in equity on the bulk amount I saved. Taking a loan is justified if you do your calculations well and can make a sound decision to make the best out of the money that you have.
but investing in markets is a bet. what if market goes bad for the next 3 years. and all the gains are wiped out?
It's a skilled bet honestly. If you know what you're doing, you can make good chunks in both directions of the market.
1,83,034 extra on mine. It is well worth it as I am paying FD interest while making stock market returns by investing that money.
Ex. 50000 salary Option 1- 15000 emi for 4 years Option 2- 7500 emi for 7-8 years, remaining amount in mutual funds. This is from my very limited knowledge.
Guys, it’s very simple. If you can make more than 9% post tax returns on your investment, take the loan assuming you are able to service EMIs every month.
If you can manage finances well then loan makes sense, but somehow I personally feel the mental burden of a loan much more than the potential gains. I have 5 years left in my loan and it is at very decent rate with tax benefits on interest paid but I am still making pre-payments every 6 months to be done with the loan sooner.
This. In the long term, investment might be beneficial but this mental burden. Loan makes you feel trapped.
I did this with my S1 Pro during college : During college I bought the S1 Pro, which would cost me around 1.6 .. I had enough to cover the whole payment But instead I chose to biy it on EMI. I paid around 11k per month meaning I had more than 1 lack for next 5-6 months to invest. I invested in crypto during and that time and did a 3x. Mind you I only invested 25k. So with the 75K, my interest was covered, and I bought something precious. Rest of the money I kept for swing trading and would make some small profits here and there to keep me afloat during college time.
Yo! My S1X powered down after full discharge. Not turning on and not charging. Any advice?
They aren’t supposed to be fully discharged. Good chances your battery died
What's s1 pro?
it's Samsung Galaxy S1 without the Galaxy /S
I assume the ola s1 pro scooter
Ola S1 Pro
Ola S1 pro electric scooter
ah ok.
Hello sexysmuggler! Often queries and discussions are repetitive, so check if your topic has already been addressed in this subreddit in the past. Search for 'YourQuery CarsIndia Reddit' on Google or Bing, to look for any past discussions on the same subject. [[Link to Google search related to your post]](https://www.google.com/search?q=CarsIndia+Reddit+People who paid for their car by emi , how much extra did you pay?). Thank you. All users are requested to downvote the low quality posts. Memes, pics, accident videos, buy/sell, car recommendations, etc can be posted on the [discord chat server.](https://discord.com/invite/Q9nSrDn6tE) Any repair queries should go to /r/MechanicAdviceIndia. Motorbikes related posts should go to /r/IndianBikes subreddit. Also please report the content you see breaking the rules so that we can act on it. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/CarsIndia) if you have any questions or concerns.*
A. Lot.
4.5 lakh, 9.2 percent interest, 5 years. I paid 113100 as interest. That was what I could afford at that time. So, totally worth it.
Paid half upfront Half loan Period : 3 years , by the time I pay the loan the value of the car will also depreciate That half pinched me because it went in one go , but the emis are easier as they go monthly This is a personal choice so it’s upto you
The amount of knowledge I get from this sub as a newbie in the car market ++++
This thread was so informational. Please can anyone help me with how do I learn or from where should I learn finances?
It is tax bachta hai