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TSIVipul 16th May 2012 06:33 PM

Buying Your Car On Finance – The Complete Guide.
 
Disclaimer:Neither I am a financial planner nor I am a CA hence before taking any of the steps mentioned it will be better for you to contact your CA/Income tax advocate and then proceed in your financial process.The study has been done considering a married guy having a normal living standard in Delhi.[:)]

Hello friends,are you planning to buy a new car? If yes,then I am quite sure that you are now collecting your relevant documents are are in mood of running to the bank for getting the finance done.

First of all,why finance?Simple it is:-
  • For paying additional amount.
  • Income tax issues because your CA told it to you.
  • You are an investor and invest your own cash and buy cars etc on finance.

Some days back I have done a small survey meeting the managers of some banks and talking them about the condition of car loans now a days and the results of the survey were:-
  • Most of the people taking car loans over 5 lacs were young employees of private companies.
  • Most of the guys buying cars above 6 lacs were the private job doers and were young guys.
  • Most of the guys whose installments halted due to some reasons or financial problems were youg boys from private jobs.
  • Smallest loans were taken by the government officials and were paid back within 2-3 years of taking.
  • There was negligible halt in the EMIs paid by the government officials.
  • Most of the cars taken by the bank were owned by young guys/girls and were not even a year older.
  • 8 out of 10 private employees were unable to maintain the installments regularly.
  • Most of the vehicles sold and re-loan for smaller cars were taken by the young employees.

Now leaving all that aside,as the thread title says “Buying Your Car On Finance – The Complete Guide.”.What we are going to discuss here is,’what steps should be taken for happy ownership of the car in case you are getting it financed and your finance must never become a load for you’.Now here are some tips for getting the loan and getting it right.The points we are going to discuss are as follows:-

  • Chapter 1: Plan it out.
  • Chapter 2: Your set of wheels?
  • Chapter 3: Do you really need a finance?
  • Chapter 4: How much loan you need?
  • Chapter 5: Get your loan insured.
  • Chapter 6: Status of your bank account must be.
  • Chapter 7: Which way to go(The bank thing at last).

So, let’s proceed now..

TSIVipul 16th May 2012 06:39 PM

Re: Buying your car on finance?What and how to do..
 
Chapter 1:Plan it out.

As the chapter name suggests,’PLANNING’ is to be done before anything.As we say “A person who moves ahead without planning finds the problems at his/her doorstep”.

So how does the planning goes on:-
  • Take out your salary slip in fact the salary slip of spouse too.
  • Now make a list o all your mandatory monthly expenses like house rent/home loan EMI,school fee of kids,fuel expenses and all and now add 10% to it just on the name of inflation.Now make a list of all your expenses and all and add it up.Now again make a 10% increment in the net sum you have got.Now you have got a sum which can be called your expenses and now it’s the time to get your money which can be spent on your car.
  • Now,subtract this amount from the salary you people are having on your salary slip and now you will get the amount.
  • Now,comes the biggest mistake that most of the people do.What the mistake is?People consider this amount as the money they can spend on their car,but the most crucial step comes now.Now you have to divide this amount by 2 and hence you get half of the amount.This is the pure amount which you can spend on your car at most per month including the running,maintenance etc etc.You can only manage this by changing your down payment.Here is one example:-
Suppose you have a salary of 35k and your expenses are about 20k per month and you have 10k as savings.
Now 10/2=5,which means this last 5k is the maximum amount you must spend monthly on the car loan EMI and running of the car.Rest if the amount goes below this limit then it is even better.And the remaining amount is your emergency cash which you may need anytime else let it go to savings which can at the end of the day give you the opportunity to invest and earn from it.

Always remember,the expenses always increases by two folds of that of a single person with addition of a new adult member in family.And by one fold for a kid.

For example:-

For a single guy living in Delhi,the monthly expenses can be about 6k for maintaining a normal lifestyle.
Now Guy+Wife will not be 6+6=12k,but it will become 6+(6+6)=18k for maintaining the same living standard.
And if one kid is added then it becomes 18+6=24k.

So now you people can understand how the expenses can increase unexpectedly after the marriage.Hence before buying your set of wheels you need to do a strict financial planning especially if you are unmarried and are soon going to get married.This will save you from sudden shocks.For keeping it short,here I conclude this chapter.[:)]
__________________________________________________ __________________________________________________ __________________

Chapter 2: Your set of wheels?

Well,now you have made your financial planning.So now its your time to select your ride.
Selecting your ride sounds very pleasing and it seems very easy too,but truth is that this is a very complex process.How its is so?Let me explain.Selecting your car means you need to make out three things:-
  • Your usage and the roads you will be covering.
  • Type of car you need.
  • Your budget and the running costs of the car.

Since you have already framed your budget.Let’s take each point one by one.

1): Your usage and roads you will be covering:City driving menas a good hatch.Highway driving means sedan or SUV and if bad roads are to be encountered then SUV.Rest is upon your wish,buy anything you like.

2): Type of car you need:This part consisits the space,equipment,design,power etc etc.While usage covers the way the car will be used,this part covers exactly what you want in your car and what you expect from your car.

3): Your budget and running costs of the car:This is the most crucial part of the decision making and most of the people ignore it at their best.This point consists of your financial planning and how you implement it on your car.Here you have to make the process like the following:-
  • Mr.A’s family income is 1.5 lac per month.
  • Now after all the expenditures etc etc he get a net amount of Rs 60k which when divided by 2 becomes Rs 30k per month for the car.
  • Now since Mr.A has shortlisted a Honda City,so after paying a down payment of Rs.2 lac he got one on a finance of Rs.8 lacs.On the finance of 8 lacs his loan installment will go somewhere like this:-
  • Let for 5 years,the bank charge Rs 2400 per lac per month.
  • So for 8 lacs his monthly installment will become Rs 19,200 per month.
  • His running is 2000 kms per month @ Rs 4.5/km
  • So his fuel bill will become Rs 9000.
  • Service charge per service,let it is Rs 5000.
  • Now since service will be done once in 5 months@per 10,000 kms.
  • So his monthly service expenditure will be Rs 1000.
  • Let zero depreciation insurance costs Rs 25,000 per year.
  • So his insurance amount per month becomes Rs 2083 per month.
  • Now on adding all Mr A gets his monthly expenditure on car as:-
  • 19,200+9000+1000+2083=Rs 31283 per month.
  • His saving for car was 30k but since his uplift or downfall is below +-5% so it is acceptable.But if he would have bought a diesel car for the same amount or bought a cheaper car then Mr.A could have been very much happy than he would be now.

So,now I hope you have planned your set of wheels.Hence lets proceed to the another point.[:)]

TSIVipul 16th May 2012 06:46 PM

Re: Buying your car on finance?What and how to do..
 
2 Attachment(s)
Chapter 3:Do you really need a finance?

Okay,so now you know how much you can spend on the car and what car you need for the happy ownership.But main point is,DO YOU REALLY NEED THAT FINANCE THING?

Okay,God created cars for shrinking the world and he created banks for keeping our money at one place,but then evil came in the head of some men and they created finance.

What is finance?It is a simple procedure in which the bank takes advantage of the situation of a person.Or as we say in Hindi Majboori ka faayda uthana.What these situations may be:-

1):Not enough money for purchasing the car.

2):Enough money for purchasing the car but CA has already warned about the income tax devils.
  • In case of first situation,no doubt you need to get the finance as there is no other way in your hand.
  • Coming to second case,I’d recommend you to **** the income tax department their own way.Many of you guys may be filling the ITRs and for that ITR you people obtain your copy of FORM NO.16(A) from your office itself if your tax is deducted by your employer itself you’re your CA can get its copy for you.Here is a FORM NO.16(A) to give you people an idea about it:-

Attachment 50387

Attachment 50388

The form displayed above is of the businessmen or the people who file ITR quarterly.At the end of the income column you people will find the sum or say the income of that quarter and similarly in the next table is the income tax deducted in that quarter and sum is at last.This is all your white money or say it is the money on which you people are paying the taxes(definitely for every businessman it is half of the earning or even less) and if you have paid the income tax on this money.
  • Now have a look at your income on which you have paid the tax.If your yearly income is higher than the price of the car then you can easily buy the car for cash.
  • If more than one member is earning in the family and family is paying the tax as a HUF(Hindu Unified Family) and the net total income exceeds the price of the car then also you can buy the car for cash.
  • In case every member is paying the tax but independently then if the car is to be bought on the name of one member then he/she can buy it for cash only if his/her income is higher than the price of the car else he/she will have to take some money as a gift from another partner.Or say give cash-take cheque style of converting your own money into gift.Else get the finance for your car.
  • Now before proceeding as per my words and becoming mad looking at your FORM NO.16(A),it’s the time to act very much sensibly and run to the office of your CA/ITR Advocate.Why?Because ITR means ‘Income Tax Return’.In your Form no.16(A) was your income on which tax was deducted and the tax.But now comes the wicked mind of you and your CA into action and you people hide a lot of tax by many methods like Home loan EMIs,Bills,School fee of kids and many more expenses which further reduces your taxable income a lot.And then a notice is sent to Income tax department that your taxable income was not that much and hence return the excess of money the government has deducted in form of income tax from your income.
  • Now if the price of the car is lower than this income then only you can buy your car on cash else its finance and that’s the only reason most of the businessmen buy bigger cars on finance and smaller ones on cash.Here is a small example:-
Mr.B and his wife want to buy a Wagon-R VXi on cash.
Their yearly income is 6 lacs and the car costs 4.5 lacs.
So they decide to buy it on cash.Then they go to their advocate/CA for the advise.And then everything goes on this way:-
  • As per CA,out of their 6 lacs their expenses shown are as follows:-
  • 1 lac as home loan installments.
  • 1 lac as other expenses.
  • 30k as insurance premiums.
  • 15k as children’s school fee etc.
  • This way the CA cuts on total 1.5 lacs form Mr.B’s salary and 1.75 lacs from his wife’s salary and then finds the taxable income as:-
    6-(1.5+1.75)=Rs 2.75 lacs.
  • Now since their taxable income is far lower than the price of the car,hence they can’t buy the car for cash.Instead they can pay a maximum 2.75(in fact just 2)lacs as down payment and take a loan of at least 1.75 lacs for the car.
And always remember as per Indian Government,the car is never considered as a need,INSTEAD YOUR CAR IS CONSIDERED AS AN EXPENSE DOEN USELESSLY(Shauk ki cheez in Hindi) and hence you never get any income tax benefits on car loan nor its involved in your expenses.

Well,I hope you people have got the point,so let’s now move to another point.[:)]
__________________________________________________ __________________________________________________ _________________________________


Chapter 4:How much loan you need?

Well,we have already discussed this point in chapter 3,but still let’s move on it quite deeply.
  • Okay,so now your CA has strictly ordered you to get a loan of some xxxxxx amount.Now its your work to again make a financial planning.Or say further refining your financial planning that you did before starting the whole process.
  • Now you have choice to take the loan of exactly the same amount which exceeds your taxable income or be quite lower on the amount.I’d advise you to be at least 25-33% below that amount.Why?Because income tax people are such goons that by mistake if you bang with one then he will simply ask just one question:When the taxable income is just 2.75 lacs and other all is expenditure.And you have filled all your saving income in car’s down payment then how are you now affording your expenses.Although its easy to get rid of this issue but who want to get involved with those bribe-addicted fools?
  • Okay so now you pay the down payment and if you wanna get rid of the loan soon then pay it back completely in either next financial year as that time you will again have same amount as savings or let it continue.But remember this loan won’t give you tax relaxation.
Now let's move ahead..[:)]

TSIVipul 16th May 2012 06:53 PM

Re: Buying your car on finance?What and how to do..
 
Chapter 5:Get your loan insured.

It is the most important point to remember while getting a loan.

You are insured,your house is insured,your car is insured,your health is insured..then why isn’t your loan insured?[frustration]
I mean you have got risk cover for your life,health,home and car then how can you leave this liability without any risk cover?If something goes wrong then this loan will get converted into a disaster for you and your family.If you want to keep yourself safe from it then get your loan insured.

What is loan insurance?
  • Loan protection insurance, or loan payment protection insurance, is a form of payment protection insurance. This type of insurance can help you protect your monthly loan payments if you become unemployed or suffer an accident or sickness.
  • Loan protection insurance will typically be used to protect a home loan, car loan or even sometimes personal loans.
  • Under a loan insurance cover, the lumpsum amount reduces as the outstanding loan decreases as per the loan schedule.

What are the benefits of loan insurance?

Loan insurance means during tough times, you'll have an insurance cover to take care of the EMIs or of the outstanding loan amount. This is especially useful:
  • In case of death or disability due to an accident or sickness.
  • In case of loss of jo.
This effectively reduces the burden on your family in case of any unfortunate event that occurs with you. They would be saved from the financial trauma of paying off the loans.

In cases of a joint loan application, a joint loan insurance plan can be taken which will effectively cover you and your partner.
Both will have the reassurance that if either of you should be faced with redundancy, illness, have an accident or even die, your repayments will be made for you.

What kinds of loans are covered under such an insurance schemes?
Loan insurance is offered mainly for home loan borrowers. However, some banks offer loan insurance for personal loans as well as auto loans.

Do I have to pay any premium for such insurance? If yes, how much?
Like any insurance you do need to pay premium for the insurance. There are only a few banks which offer this kind of insurance without any premium. Premium amounts usually vary from bank to bank and depend primarily on:
  • The age of the person taking the loan: The premium is usually higher for older people.
  • The loan amount: If the loan amount is high, the premium payment will also higher owing to the fact that the bank has a higher liability in such cases.
  • The tenure of the loan: If the repayment period is longer, the premium to be paid is also higher.
  • The medical record of the individual: If your physical health is good, the premium amount comes down. However, if you are suffering from any kind of serious ailments the premium amount will go high.

What are the things to keep in mind while checking about loan insurance?

Loan insurance is something that you need to give careful thought to. You need to check:
  • What does the loan insurance cover? Does it cover death by accident or death by any cause? Does it cover temporary disability only or does it cover permanent disability as well?
  • Eligibility for the insurance. Check out the eligibility criteria for the insurance. Check whether the loan needs to be of a certain amount.
  • Payment of premium. Check whether you can pay the premium as part of the EMI or does it have to be made as a lump sum amount.
  • Is a medical check-up necessary? Check whether a medical checkup is necessary in all cases.

Are there any tax benefits because of the insurance being a 'life insurance' scheme?

Yes, there are tax benefits that you can get with such kind of insurance. Since you are paying a life insurance premium, you can get deduction under Section 80C. However, if it is clubbed with your EMI payments, you will not get the insurance benefit.

If you haven’t yet got your loan insured then get it done today itself.Now let’s move to another point.Last two small chapters.[:)]

TSIVipul 16th May 2012 06:57 PM

Re: Buying Your Car On Finance – The Complete Guide
 
Chapter 6: Status of your bank account must be…

This chapter is based on the savings part and your emergency savings.

If you are taking a loan and its better if you are always ready to face any situation like halt in salary,over expenses etc.For tackling your this problem your best friend can come to rescue you.

Who this best friend is?This best friend is your own cash.This is the cash you have been saving and have in your bank account.Now if in any case you are unable to pay the installment for a month or two for any reason which is not covered in your loan insurance like halt in salary or over-expenses,then your saved cash comes handy.

Hence I recommend higher the saved cash is,higher will be your personal security.Now let’s move to last and very small point..[:)]
__________________________________________________ __________________________________________________ _

Chapter 7: Which way to go?(The bank thing)

First of all you people must remember that every bank wants to give as much loans as possible.In other words its not the bank who is not willing to give the loan,instead its our financial status or other issues whish forces them to refuse our loan.

Now since you have decided your car,you have planned your finance,you know hom much loan you want and you have to get it insured too.Now let’s move towards the bank.

First question that comes in the mind at such times is,Which bank,private or government?

Here first of all let me tell you a minor difference between the two:-
  • In private bank you will feel that everything is going on according to you.
  • The staff will be extremely helpful and your loan will be passed within a day or two.In fact you don’t even need to go to the bank,their guys will come to cut you at your home itself.
  • In Government banks,there is a feel like everything is going against you.
  • Be thankful even if the staff attends you in a nice and pleasing manner.They can take weks in passing your loan too and yes,there is no chance of them sending a guy at your home.You yourself need to go to them everytime.

Still I recommend you guys to go for the government banks.Why?

Because they won’t sweet talk you but will give you just a transparent deal without any hidden terms and conditions.And amazingly the private banks are your friend before you take the loan and become devils at any fault form your side after you took the loan while Government banks are not your friends before you take the loan but slowly they will make the friends out of you and will understand your problems too.If any.
Hence I’ll advise Government banks any day..

That’s all guys,I hope all your queries have been cleared,rest for any pending ones..I am waiting to hear them.But what I can assure is that if anyone follows these small 7 steps then at least the person can never suffer in terms of a loan. [:)]

Thank you..

point_city96 16th May 2012 07:18 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Nice article Vipul!

I have a question:Did you mention about the two types of loan("flat" and "diminishing")?I think government banks offer "diminishing" loan and most of the private banks offer "flat" loan,but I think there are private banks which offer "diminishing" loan.

TSIVipul 16th May 2012 07:22 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Naa,I haven't mentioned it.Why?Because depends on the loan taker.whatever he/she wishes.
BTW,before praising,have you read even 1/4th of it?

point_city96 16th May 2012 07:42 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by TSIVipul (Post 162511)
Naa,I haven't mentioned it.Why?Because depends on the loan taker.whatever he/she wishes.
BTW,before praising,have you read even 1/4th of it?

I have read completely.When I first opened the thread there was only one post and then you completed it.but I din't try my maximum to study the picture(form) though.

mukeshus 16th May 2012 10:25 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
In future i would like you to be my Financial Planner.[:)]

Well detailed and well written Vipul.

Rating 5 stars from my end.

TSIVipul 16th May 2012 10:41 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by point_city96 (Post 162522)
I have read completely.When I first opened the thread there was only one post and then you completed it.but I din't try my maximum to study the picture(form) though.

Haha,you did it quite soon..
So any other query or doubt buddy?

Quote:

Originally Posted by mukeshus (Post 162547)
In future i would like you to be my Financial Planner.[:)]

Aah,that's like an offer for me,even I'd also like to work for a cool minded person like you.Even I too sometimes think of withdrawing engineering,but then why not let it complete?

Quote:

Well detailed and well written Vipul.

Rating 5 stars from my end.
You passed it,that means the thread passed the exam.Thanks a lot buddy and not to forget that repo. point I got.....[;)]

TSIVipul 17th May 2012 10:34 AM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by point_city96 (Post 162506)
Nice article Vipul!

I have a question:Did you mention about the two types of loan("flat" and "diminishing")?I think government banks offer "diminishing" loan and most of the private banks offer "flat" loan,but I think there are private banks which offer "diminishing" loan.

Buddy you will be shocked to hear that in India you can't get the diminishing type of loans.
Instead here are of two types:-
  • Fixed interest rate type:In which interest rate is fixed throughout the term of loan.
  • Floating or variable interest rate type:In which your interest rate changes with the interest rates issued by RBI.

Both Govt and private banks offer both type of loans.

Iron Rock 17th May 2012 06:40 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Vipul by far this is your best piece of work ( i say its your master piece ). I very humbly salute the amount of effort you have put in to it - Kudos for taking the effort!

Rating the thread a well deserved 5 stars!

Can you also please highlight the prevailing car loan interest rates for us financial donkeys ?:stupid:

jalex 17th May 2012 07:05 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by Iron Rock (Post 162884)
Vipul by far this is your best piece of work ( i say its your master piece ). I very humbly salute the amount of effort you have put in to it - Kudos for taking the effort!

Rating the thread a well deserved 5 stars!

Can you also please highlight the prevailing car loan interest rates for us financial donkeys ?:stupid:

+1 on that Iron Rock. I too am giving this thread all the five stars.

Good work Vipul[:)].

TSIVipul 17th May 2012 09:21 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
1 Attachment(s)
Quote:

Originally Posted by Iron Rock (Post 162884)
Vipul by far this is your best piece of work ( i say its your master piece ). I very humbly salute the amount of effort you have put in to it - Kudos for taking the effort!

Rating the thread a well deserved 5 stars!

Can you also please highlight the prevailing car loan interest rates for us financial donkeys ?:stupid:

Quote:

Originally Posted by jalex (Post 162895)
+1 on that Iron Rock. I too am giving this thread all the five stars.

Good work Vipul[:)].

Thanks a lot guys.Now it looks like the thread has covered all its aspects.

@Iron Rock,here is the table of interest rates(Since I don't know how to design a table hence snipped one directly from net):-

ERTIGA_ZMR 21st May 2012 12:27 PM

Re: Buying your car on finance?What and how to do..
 
Quote:

Originally Posted by TSIVipul (Post 162490)
Chapter 1:Plan it out.

As the chapter name suggests,’PLANNING’ is to be done before anything.As we say “A person who moves ahead without planning finds the problems at his/her doorstep”.

Vipul, please accept my bow, this is the awesom work .If there is option to rate 10 of 5, I could have selected :).

I have a query, buying a car on cash plus cehque. In couple of months, I will be getting delivery of Car- ERTIGA ZDI. My plan is like 2.0 lakhs from my saving RD- salary account. 3 lakhs from my wife salary account. 2 lakhs from Dad, that too his savings retirement money or bonds.3 lakhs from in laws (on loan - intrest free [clap] ).Rest all from my PF money from previous employement. So I can show 7.5 lakhs as cheque and rest I am planning to buy in cash. Is it advisable to do so?

I am not planning to burden myself with any car loan as there is no additional benefit as home loan has.My and spouse income is sufficient enough to meet the monthly expenses of car. Just let me know is there any legal issue or anything from IT. We all are paying IT and all money are accounted.

TSIVipul 21st May 2012 10:36 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
@Eartiga_ZMR:
Buddy have a look at the chapter 3 and 4 and you will get the answer to nearly all your queries.
Since car loan does not give nay tax advantages and all hence they are not that advisable to be taken.

I think before taking money from all people as you have mentioned above,just first of all take all their income tax payments and ITRs filed to your CA/Income tax advocate and then the way he/she guides you is the way to go.Why?Because your plan is 100% correct,no issue at all but this can get those people in trouble with income tax department if by mistake they gift you more money than they can do in the views of the income tax department.

In other words..ITS A VERY COMPLEX PROCESS AND HENCE RUN TO THE CA/ADVOCATE BEFORE PROCEEDING FURTHER..My best wishes are with you...

Will come up with a small extension soon...

ERTIGA_ZMR 21st May 2012 10:50 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by TSIVipul (Post 164282)
@Eartiga_ZMR:
Buddy have a look at the chapter 3 and 4 and you will get the answer to nearly all your queries.
Since car loan does not give nay tax advantages and all hence they are not that advisable to be taken.

I think before taking money from all people as you have mentioned above,just first of all take all their income tax payments and ITRs filed to your CA/Income tax advocate and then the way he/she guides you is the way to go.Why?Because your plan is 100% correct,no issue at all but this can get those people in trouble with income tax department if by mistake they gift you more money than they can do in the views of the income tax department.

In other words..ITS A VERY COMPLEX PROCESS AND HENCE RUN TO THE CA/ADVOCATE BEFORE PROCEEDING FURTHER..My best wishes are with you...

Will come up with a small extension soon...

Remaining 3 lakhs as cash, I can declare it as my saving as wedding gift cash and some saved cash. Even my bank statements show that I have withdrawn frequent cash. BTW my salary is >11 , so I assume it wont be any issue. Even mt wife works well.

TSIVipul 22nd May 2012 06:54 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Hmmm,buddy going by your salary and the arrangements you have made,I think you can go for the way you have planned.
Just show most of the possible money as either a gift or loan from relatives and go for the car.We too buy the cars for cash,but before that we rush to CA for anything.

Okay take it this way:-
Wedding gift=3 lacs_______________No issue.
Your savings=2 lacs_______________No issue.
Gifts and loans from relatives=4 lacs__No issue
And some more minor tricks and you can go for the car for cash itself.

But take care,don't get any innocent relative of yours trapped in the ITR issues taking more than permissible amount from them.

dr_sachin 3rd June 2012 01:02 AM

Re: Buying Your Car On Finance – The Complete Guide.
 
Brilliant piece of work from vipul,so much of effort ,time,calculations and very impressive discussions,its really great.

i have not read that when i bought my cars,but i follwed most of the steps as vipul elaborated during purchase of my second car(may 2012),and i am quiet happy.but one thing is for sure,buying a car,this simple thought is so addicting that once it comes in your mind(ofcourse you must be something to think this),it makes even an intelligent person,insane,and thats the time which decides who is really wise.the one who can hold his nerves and think twice really succedes while the one who was taken away by the thought fails.

may be we know most of the things and we know that what we are doing may put us into the dangerzone,but still its the thought which rules in the end.this must have happpened with many of us(i accept my first honda city was the result of this thought,then it met with an accident and suddenly after that i became wise).

as our elders say KHUD KE MARE BINA SWARG NAHI DIKHTA,i feel its very true,because i learnt many things only after my car's accident.
after reading and understanding what vipul described i personally think that it will help many of the buyers choosing wisely.

TSIVipul 3rd June 2012 07:21 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Thanks Dr_Sachin.
You followed these steps before buying the car and that's the reason that you replaced your City with a City itself in a short time.This is called the financial planning and its effects.
Financial planning is not the family planning like we will have 2 kids one house and one car and some savings.
Instead financial planning is related to the responsibilities/liabilities of a person and issue is that they changes very fast.
As people say,having a kid takes 9 months,but having any financial emergency does not take even 9 seconds.So if one moves with his/her finance planned then we can easily deal with those emergencies.
One real life example:-
You are a doctor and you may be knowing about the expenses of medical treatments.Last year when we friends met a road accident then we friends spent some time in ICU too and at last there was a bill of some lacs when I was discharged from the hospital.Now this was a financial emergency and how this was coped,but strict financial planning.

Rest this thread still needs a lot more additions,but the thing that really hurts me is seeing may young people selling their cars off with a broken heart without nay smile on their face but a disappointment of getting parted from their set of wheels.

mukeshus 3rd June 2012 09:13 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Vipu hope you have your Mediclaim policy.

If not get yourselves covered, can't say when emergency situation arises.

TSIVipul 10th June 2012 08:28 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
^^Haha,buddy last time too 50% of all the expenses were paid by ICICI Prudential only..do I need to say anything else?
My father and mother both have been very practical and this gave me an advantage from the childhood,that before spending even a 100 rupee note,its planned,its planned to churn out the best of it in every situation.:biggrin:
We are really very very serious about the financial planning in every thing.

Let's add something more to the thread:-
Many people confuse themselves thinking that 'budget' planning and 'financial' planning are same and hence fail in planning their money,but pass in planning their expenses.This shows its effects in long term.
As per my research and survey:"Job doers are the worst finance planners and best budget planners"(No offense to any Job doer)and this is the reason after an age of 60,a businessman is expected to have more than 10 times the money a job doer who has been earning nearly same as the businessman has with him.
And hence its advised that job doers must approach finance planners for themselves.

So the basic difference between 'budget' and 'financial' planning is that in the budget you plan the money(yours) you have or likely to have,while in financial planning you have to plan the money you don't have added to the budget planning.Or in other words,in financial planning you have to plan the most efficient and profitable use of the money of other people/bank too which is in your hand.

Here is a small example of financial planning,this was done by me,myself when we bought Laura:-

According to CA,the highest amount we could pay for a car in cash was 15.6 lacs.
The cars considered were Laura TSi,Civic and Laura TDI A/T.
Civic 'V' M/T was costing us 14.81 lacs.
Laura TSi was costing us 15.35-80k=14.55 lacs.
Laura TDI A/T was costing us 18.3 lacs.

So after calculations we concluded that,since Civic was liked by us,until we TDed the Laura.So civic went out in no time.

Now,with a price difference of about 4 lacs,we thought that TDI is diesel and TSi is petrol,so we calculated it this way:-
For TDI we need a loan of about 3 lacs=Added interest and per month EMI as the expenses.
And then we calculated mileage and all for 1 lac kms taking an average price of petrol as 70 kpl and found that we will be spending about 6 lacs on petrol for 1 lac kms.
And for TDI we were to spend about 3 lacs on diesel for TDI for 1 lac kms.

Then we calculated that 4 lac+interest+diesel maintenance+other expenses-3 lac=Buying TSi was a profitable deal for us.
Again we ran to CA and evil no.2..it runs on petrol and higher price of petrol means more money spent while movements for business/work which means lesser taxable income after all the petrol bills are added to ITR file[evil].
This was one more profit.Overall,by spending this 3 lac more on petrol we will be saving a lot more tax too.
Hence,no thinking and TSi passed.
Since the car was bought after complete planning,hence running is also no issue for us!!

TSIVipul 17th June 2012 02:14 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Here is a good news guys:-
Considering the current state of economy,RBI my cut down the interest rates on all kind of loans.So,maybe this will help in case of car loans too.

Mahendra 17th June 2012 03:02 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
It is a fantastic article written by you Vipul boy,I have read it completely and must say that if anyone follows it word by word then the man will never face any financial problem in his life.
You have wrote something that people with ages even double than you also do not think many times.

vaibhav 17th June 2012 09:42 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
@tsi BUSINESSMAN has 10 times more money with same salary than salaried person of same income as they dont pay tax and put that ill gotten money in property which only rises in India
its not financial planning its theft

TSIVipul 17th June 2012 10:28 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Who said businessmen don't pay taxes?They do pay it,only its a fact that businessman+CA=tax saving heroes.

And yes,this is also a financial planning,and even if its a theft then also "Chor woh hota hai jo pakda na jaye"(Thief is the one who isn't caught).Job doers can't be thief also.

Mahendra 20th June 2012 02:56 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by vaibhav (Post 173467)
@tsi BUSINESSMAN has 10 times more money with same salary than salaried person of same income as they dont pay tax and put that ill gotten money in property which only rises in India
its not financial planning its theft

Boy you have some very big confusions in your mind.Yes businessmen save a lot of tax,but they fill also highest tax.
Yes it is a theft,but they are also done using the planning only my boy.

Quote:

Originally Posted by TSIVipul (Post 173490)
Who said businessmen don't pay taxes?They do pay it,only its a fact that businessman+CA=tax saving heroes.

And yes,this is also a financial planning,and even if its a theft then also "Chor woh hota hai jo pakda na jaye"(Thief is the one who isn't caught).Job doers can't be thief also.

Though it was a nice reply,but my boy you must always keep away from mentioning such words because at the end they just give others a bad impression.When you have written such a good report then now it is not good for you to make the reading experience bad with this type of comments.

In the topic you have mentioned some very valid points like how young boys and girls never make plans and then go over there budget and buy a big car.I too know many young IT professionals who earn very less than we people but have very big cars with them.And when I ask them why they spent all your money on the car then they very smartly tell me that they believe living in present one boy even one time told me that from his degree he can earn very high and hence he lives his own way,not having any degree or diploma makes me silent in front of them.

mukeshus 20th June 2012 04:24 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Yes even I feel, an IT professional must first gain financial stability, with the initial priority in investments.

After a few years once he is stable, must think of a car.

I mainly feel savings is important than meeting unwanted demands.

And I don't feel to buy a car with EMI, esp with loan.

Instead buying a car from one's own money is a peaceful affair, just my way of thinking.

We have never bought a car with loan.

Everyone is good at one thing or the other sir, so you should never feel that you don't have a degree.

You are good in your own way.[:)]

TSIVipul 20th June 2012 07:31 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by Mahendra (Post 174374)
Boy you have some very big confusions in your mind.Yes businessmen save a lot of tax,but they fill also highest tax.
Yes it is a theft,but they are also done using the planning only my boy.

+100..

Quote:

Though it was a nice reply,but my boy you must always keep away from mentioning such words because at the end they just give others a bad impression.When you have written such a good report then now it is not good for you to make the reading experience bad with this type of comments.
Point noted down sir,will take care next time.

Quote:

In the topic you have mentioned some very valid points like how young boys and girls never make plans and then go over there budget and buy a big car.I too know many young IT professionals who earn very less than we people but have very big cars with them.And when I ask them why they spent all your money on the car then they very smartly tell me that they believe living in present one boy even one time told me that from his degree he can earn very high and hence he lives his own way,not having any degree or diploma makes me silent in front of them.
Sir you are absolutely right.Actual its the fake standard of the young guys and girls which has resulted in this.
About degree part,people take them to get a good job,so that they can earn good money and I think you are already earning far more than those degree wallahs.[clap]Hence it is automatically a tight slap on the face of such guys.

Quote:

Originally Posted by mukeshus (Post 174418)
Yes even I feel, an IT professional must first gain financial stability, with the initial priority in investments.

After a few years once he is stable, must think of a car.

I mainly feel savings is important than meeting unwanted demands.

And I don't feel to buy a car with EMI, esp with loan.

Instead buying a car from one's own money is a peaceful affair, just my way of thinking.

We have never bought a car with loan.

Everyone is good at one thing or the other sir, so you should never feel that you don't have a degree.

You are good in your own way.[:)]

+100 to every word mentioned by you buddy.

Mahendra 20th June 2012 07:59 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Haha,boy I liked your attitude of accepting the things suddenly.

these young boys and girls think of buying some expensive mobile phones and cars for them with there salary due to which they leave no money in there hands for any other expenses.Which result in all the things mentioned by you boy.

billion$kid 20th June 2012 11:49 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by Mahendra (Post 174374)
In the topic you have mentioned some very valid points like how young boys and girls never make plans and then go over there budget and buy a big car.I too know many young IT professionals who earn very less than we people but have very big cars with them.And when I ask them why they spent all your money on the car then they very smartly tell me that they believe living in present one boy even one time told me that from his degree he can earn very high and hence he lives his own way,not having any degree or diploma makes me silent in front of them.

Dear Mr.Mahindra, you shouldn't feel sad. This is the 21st century. Achievement matters here. Talent/skill is what fetches you $$$ and status. Not certificates. No certificate is bigger than performance in real world. Bill Gates, Mark Zuckerberg, Steve Jobs, Lawrence Ellison... none of them degree holders though it's not wise to compare them with the ordinary business people. But what I'm trying to say is that the mentality of Indians has to change if we are to move forward. Entrepreneurs play a huge role in a country's development.

Having said that, I disagree with what many guys said here. We have no right to interfere in someone's personal life.

Decision making (financial) is a simple process for the office goer. He doesn't have too much to think about when it comes to spending money. But it's not like that for an entrepreneur. He has to consider many factors before taking such a decision, so he goes to the CA. Also keep in mind that a very successful entrepreneur need not run to the CA/fiance dept. every time he wants to spend some money because those expenses would be negligible when compared to his net worth.

The businessman always gives first priority to his business. If it's gone he will struggle(If he is talented he can easily come back). He cant keep changing businesses like changing jobs.

I don't support the anti-loan theory also. If used wisely they are actually beneficial. Consider a guy having Rs.5lakhs monthly income. He wants to buy a BMW 3 series. My advice would be to buy the car under finance scheme. He will have a fair amount of money left with him after paying the EMI which he can invest and/or spend for other personal purposes. That's cool in my opinion. In practical life, loans are very useful if you know how to handle it. Because time is limited.

But I agree with one thing that Mukesh said. One should attain a minimum level of financial stability before he starts thinking about spending it for luxuries.

dr_sachin 21st June 2012 09:34 AM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by billion$kid (Post 174615)

I don't support the anti-loan theory also. If used wisely they are actually beneficial. Consider a guy having Rs.5lakhs monthly income. He wants to buy a BMW 3 series. My advice would be to buy the car under finance scheme. He will have a fair amount of money left with him after paying the EMI which he can invest and/or spend for other personal purposes. That's cool in my opinion. In practical life, loans are very useful if you know how to handle it. Because time is limited.

But I agree with one thing that Mukesh said. One should attain a minimum level of financial stability before he starts thinking about spending it for luxuries.

well said billion$kid,i too agree that loans should be planned and used wisely and only then they are really helpful.my take home salary is nearly 65k,and i wanted a car,if i first save and collect 10 lakhs then plan for a car then it is of no use,as i need and can enjoy the car now,after 8-10 years what should i do with it,when i will be having other responsibilities too.so i planned for car loan,calculated an optimum emi for me and got the car.as i said earlier we must keep atleast 10% of the car cost handy at all times,this thing is important as when i met with accident this 1 lakh helped me to get a new one in very short period.this car is also on loan and next month i will again make 1 lakh handy,to be tension free.(in the whole process i din't have to borrow a single penny from any other as i planned the loans,and living happily right now).

@mahendra,your silence is the biggest answer to idiots like those who talk like this.no degree can give you money if you don't have skills.many degree holders(parents get them to big institutes)are still standing just because of parental support only.probably the people who talk like this are fed by their parents from hand to mouth,because the people who actually earn the degree knows its value,and know the truth.thumbs up to you if you are earning more than these virtual degree holders.

TSIVipul 21st June 2012 09:42 AM

Re: Buying Your Car On Finance – The Complete Guide.
 
Well guys I never said that loan is bad,what I was saying that,take the loan but be strict to your own limits.What is the use of paying 20k in various EMIs when your salary is 30k itself.

On the loan part,even I was also going to buy the Superb on loan because instead of spending those 26 lacs in car,it was more beneficial to pay 8 lacs and spend other 18 lacs by adding more 22 lacs or 32 lacs to them and invest them in some hot properties.And at the end we did the same,no Superb but some high returning flats.
But if you are earning quite good then I think buying any car upto 15 lacs is more beneficial on cash.

vaibhav 21st June 2012 09:55 AM

Re: Buying Your Car On Finance – The Complete Guide.
 
@TSIVIPUL you are right man. Now economy is in the doldrums and recession is likely to worsen for next 2-3 years. Car companies are already hit by less sales.
Now negative sentiment will result in bad loans also. Indians have to shrug this western culture of consumerism on loans
This feeling of getting rich without being rich resulted in such good sales of cars. Now everything will be back to normal
One good thing maruti and its dealers will soon may give dezire on the spot [lol]

ERTIGA_ZMR 21st June 2012 10:18 AM

Re: Buying Your Car On Finance – The Complete Guide.
 
Even I don't support anti loan theory,but the loan amount should not be too high that it seems to be a big burden.For House Loan, take loan in such a way that you should be able to pre close in 5-6 years. For Car loan, I believe it should not be more than 1/2 of your Annual income. If you earn 12 lakhs per annum, take loan worth 6 lakhs and try to close by 1 year. Once if you are loan free, then only you can think to invest further. But what I believe, there should be a cash resrve of 6 times of your monthly salary. This can help in bad/lean phase.
My point of view is that we should not pay a very hefty amount like 20K for House rent, rather pay EMI of 40K for homeloan.For any moderate salaried person, one should not buy a very expensive car which is hard to maintain rather go for VFM.
Regarding expensive stuffs like Mobile Phone, IPad, Mac book , SLR camera these stuffs people will buy when they start earning. Just imagine a 22 year old Software Engineer earns a average salary of 30K,if that person has no liability towards parents or any study loan then he/she has full right to enjoy his life lavishly atleast till he/she cross the age of 25-26 ( as till 22 years those poor kids are always under burden of study and ambitions so to do well, fullfill the parents dream). Believe me, this is true with most of us who started earning well at early age. My funda is that we should not regret at the old age that as ohh I didn't enjoy my youth period. With the age and along with guidance from parents those kids get matured and become very good in financial planning and investments. Just to ensure a very secure future one should not fully ignore the present. This is wat my parents used to tell me, "that if you compromise a lot then it's waste of our struggle".But at same time my dad made me to book a flat at the age of 24 so that by the time I got marrried my House was nearly loan free.:)

These are my personal view.

TSIVipul 21st June 2012 10:45 AM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by vaibhav (Post 174690)
@TSIVIPUL you are right man. Now economy is in the doldrums and recession is likely to worsen for next 2-3 years. Car companies are already hit by less sales.

Haha,recession means again good big cars will be fr sale at dirt cheap prices,many companies have already cut their sales for the same reason.

Quote:

Now negative sentiment will result in bad loans also. Indians have to shrug this western culture of consumerism on loans
This feeling of getting rich without being rich resulted in such good sales of cars. Now everything will be back to normal
One good thing maruti and its dealers will soon may give dezire on the spot [lol]
Buddy loans are taken in two cases:-
  • When your 2 years income is more than the loan amount.
  • When your 3 years income is less than the loan amount.
In first case you will always be happy with the loan and save a lot on income tax by the loan,but in case your three year income is less than the loan amount,then definitely the loan is going to disturb you quite soon.

Quote:

Originally Posted by ERTIGA_ZMR (Post 174700)
Even I don't support anti loan theory,but the loan amount should not be too high that it seems to be a big burden.For House Loan, take loan in such a way that you should be able to pre close in 5-6 years. For Car loan, I believe it should not be more than 1/2 of your Annual income. If you earn 12 lakhs per annum, take loan worth 6 lakhs and try to close by 1 year. Once if you are loan free, then only you can think to invest further. But what I believe, there should be a cash resrve of 6 times of your monthly salary. This can help in bad/lean phase.
My point of view is that we should not pay a very hefty amount like 20K for House rent, rather pay EMI of 40K for homeloan.For any moderate salaried person, one should not buy a very expensive car which is hard to maintain rather go for VFM.

That's what I was saying,the loan must be like that that you must be able to pay it back within 4-5 years.Actually the loan is not the only liability a person has,there are many more liabilities and people must plan their financial structure same way so as he/she may be able to easily withstand the load of loan from his/her salary.For example:You cancelled your Ertiga because you felt like you need some more time to strengthen your financial condition even more.This is finally going to keep you happy in long term,a three months delay will keep you happy for 3 years.

Quote:

Regarding expensive stuffs like Mobile Phone, IPad, Mac book , SLR camera these stuffs people will buy when they start earning. Just imagine a 22 year old Software Engineer earns a average salary of 30K,if that person has no liability towards parents or any study loan then he/she has full right to enjoy his life lavishly atleast till he/she cross the age of 25-26 ( as till 22 years those poor kids are always under burden of study and ambitions so to do well, fullfill the parents dream). Believe me, this is true with most of us who started earning well at early age. My funda is that we should not regret at the old age that as ohh I didn't enjoy my youth period. With the age and along with guidance from parents those kids get matured and become very good in financial planning and investments. Just to ensure a very secure future one should not fully ignore the present. This is wat my parents used to tell me, "that if you compromise a lot then it's waste of our struggle".But at same time my dad made me to book a flat at the age of 24 so that by the time I got marrried my House was nearly loan free.:)

These are my personal view.
Your personal views are just spot on with an added advantage of real experiences.Actually you have made a small compromise on your show off type happiness by booking the flat and paying for it instead of buying a bog car etc etc.Result is that the car owners are still living on rent because now the property has became very expensive and car has depreciated,but your own property has given you an advantage that you own a house of yourself,now you can easily buy a car and since you have your own house,hence you have already fulfilled your biggest liability.Hats off to you buddy..

ERTIGA_ZMR 21st June 2012 11:16 AM

Re: Buying Your Car On Finance – The Complete Guide.
 
Actually this time I belive Indians are more cautioned about their financial planning during recession. I still remember in 2008-09, there was a suicide case in my ex-organization where a senior manager failing to pay his emi and meeting the monthly expenses. That incident had shaken many of us. During 2009, there are many cars were on sale because people failed to repay. Hope we should not witness such incidents this time, it's very harsh on the family who suffered. One of my relative he is working in HSBC bank at very high post has suggested to keep a buffer of 6 months take home income for any emergency.
The good thing about India is that our parents have planned a lot and created assets which helped the youngesters to tackle lean phase. While in US there is no concept of saving thats why the salaried person felt the heat during recession. I still remember 2008-2009 when I was in US and recession had hit everyone badly. Even India students who had take huge study loan for their MS were unable to get the job and were delivering Pizza( no harm in delivering Pizza rather starving).My cousin had purchased a big house during recession as Mortgage was at very low rate as well as property was cheap.My cousin managed the recession well because of his saving.We used to feel very bad when our client were doing mass layoff that time, many of our American colleagues became jobless in the same day.
This time hope such worse situation should not come.

There was a sad article in ET:

Aviation sector crisis: Hi-flying pilots struggling to pay jumbo EMIs

Big bucks and pilots have been synonymous, but downsizing, paycuts and deferred salaries have seen many in this elite group find it difficult to pay up on existing home loan EMIs

This flight of fancy has hit an air pocket. Many young pilots in the country, who had started their careers on enviably handsome salaries, are now finding it difficult to repay the housing and car loans they had taken, owing to the financial crisis in the aviation sector.

A pilot's starting salary at Air India is anywhere above the Rs 1 lakh figure, and a commander gets as much as Rs 7 lakh per month. Understandably, many of these pilots have bought homes and fancy cars on a bank loan. However, due to non-payment of salaries for as much as six months at a time, a lot of these pilots are now defaulting on their EMIs. Add to that recommendations for a pay cut, and their cup of woes does overflow. Captain Tauseef Mukadam, joint secretary of the now de-recognised Indian Pilots Guild, doesn't have to look far for an example; he had to ask for a three-month waiver from the bank on his housing loan. "There are also cases of people having to sell off their homes because they could not afford the EMIs, which are often as high as a lakh of rupees," he says.

Anand Verma (name changed) is another case in point. The pilot, with a salary of Rs 2.25 lakh per month to boot, bought a plush apartment when he landed a job with Kingfisher Airlines, and was paying an EMI of Rs 62,000 per month on the loan he took. But when pilots' salaries were indefinitely delayed, he ended up exhausting his savings to ensure he could pay his EMIs, before finally switching jobs. "It was very stressful. But not everyone has a corpus of funds to fall back on, and I had colleagues who were defaulting on loan repayments," he says.

source:
http://economictimes.indiatimes.com/....cms?prtpage=1

billion$kid 21st June 2012 03:01 PM

Re: Buying Your Car On Finance – The Complete Guide.
 
Thanks Sachin. You are right. A car or house is not something you buy every month. And waiting for money to pile up is a stupid idea. In life, time is very limited. At the end of the day, one who enjoys it to the fullest by utilising the resources around him/her wisely is the winner.

Let's take a look the options Sachin had:

It would have taken him around one and a half years to save enough money to buy the car. But he will have to save the whole salary for that. Those one and a half would be miserable for him. And after one and a half years(of misery), there he is with a car (ANHC?) and zero savings. If he needs money for some emergency, what would he do? That's stupid.
But luckily, he's not stupid. He's smart. He bought it under finance. He got the car in a few weeks and has plenty of money to play with. He can use it in whatever way he wants to. He can invest it or he can spend it for his personal needs. The EMI of the car is not going to affect him. He is enjoying his life which is the goal for most of us.

@Vipul
If you look at everything with a business mind what you said will stand true. But there's more to life than business. The word practical is different for different people. If you already have the income, why not follow your heart? Trying to earn and save more and more is just a stupid idea if it doesn't bring happiness or satisfaction in life. To some people it does and to many it doesn't.

But it's true that the youngsters of today spend a lot more than they earn to buy useless things. One should buy things based on his/her needs. Most of the guys who buy tablets and expensive smartphones don't need it. But it's the prestige factor that forces them. If it is of absolutely no use for you then why buy it? It is difficult to make them understand all this though. It would be great if companies employ some kind of guidance system for the new kids on the block.

It's always good to create plans for life. If you are well planned, you will always be the Mr.Wonder for the ones around you.

TSIVipul 22nd June 2012 11:13 AM

Re: Buying Your Car On Finance – The Complete Guide.
 
Quote:

Originally Posted by ERTIGA_ZMR (Post 174715)
A pilot's starting salary at Air India is anywhere above the Rs 1 lakh figure, and a commander gets as much as Rs 7 lakh per month. Understandably, many of these pilots have bought homes and fancy cars on a bank loan. However, due to non-payment of salaries for as much as six months at a time, a lot of these pilots are now defaulting on their EMIs. Add to that recommendations for a pay cut, and their cup of woes does overflow. Captain Tauseef Mukadam, joint secretary of the now de-recognised Indian Pilots Guild, doesn't have to look far for an example; he had to ask for a three-month waiver from the bank on his housing loan. "There are also cases of people having to sell off their homes because they could not afford the EMIs, which are often as high as a lakh of rupees," he says.

Anand Verma (name changed) is another case in point. The pilot, with a salary of Rs 2.25 lakh per month to boot, bought a plush apartment when he landed a job with Kingfisher Airlines, and was paying an EMI of Rs 62,000 per month on the loan he took. But when pilots' salaries were indefinitely delayed, he ended up exhausting his savings to ensure he could pay his EMIs, before finally switching jobs. "It was very stressful. But not everyone has a corpus of funds to fall back on, and I had colleagues who were defaulting on loan repayments," he says.

source:
Aviation sector crisis: Hi-flying pilots struggling to pay jumbo EMIs - The Economic Times

Buddy the basic reason behind this is not getting the loans insured,due to which in case of any financial crisis such people have no way to save themselves or say they have no risk cover.
Even my own house is also having a hefty loan on it(in fact we have three home loans altogether with EMIs crossing 1.45 lacs) but since all the loans we take are insured and are taken in such away that they help us save taxes,distribute our investments even more and are easily affordable without jumping any budget.Hence we have no issue with the loans and no doubt they all will be cleared within 3-4 years itself.
Secondly we have established a small office in the home itself and after that 'jai baba CA',even more tax benefits and one small subsidy too was attained.
Just think,we are paying a good rent for the office area in our own house(this is an advantage of having properties on the name of one member of family and office under another),this was another advantage..:biggrin:

Quote:

Originally Posted by billion$kid (Post 174801)
Thanks Sachin. You are right. A car or house is not something you buy every month. And waiting for money to pile up is a stupid idea. In life, time is very limited. At the end of the day, one who enjoys it to the fullest by utilising the resources around him/her wisely is the winner.

No doubt,but my point of concern is using the resources sensibly.One guy named XXXX is in properties selling business in NCR just like me.The guy earned about 1.3 crore in 3 years and bought a used(new) Audi A8 for about 75 lacs,now the A8 is parked in a rented house and worse happened that now a days the business is running in slowdown and with the economic crisis and terror of recession people are now busy saving instead of spending the money they have.
Definitely this guy could easily afford an A8,but still I find this decision a foolishness.BTW,

Quote:

Let's take a look the options Sachin had:

It would have taken him around one and a half years to save enough money to buy the car. But he will have to save the whole salary for that. Those one and a half would be miserable for him. And after one and a half years(of misery), there he is with a car (ANHC?) and zero savings. If he needs money for some emergency, what would he do? That's stupid.
But luckily, he's not stupid. He's smart. He bought it under finance. He got the car in a few weeks and has plenty of money to play with. He can use it in whatever way he wants to. He can invest it or he can spend it for his personal needs. The EMI of the car is not going to affect him. He is enjoying his life which is the goal for most of us.
My friend too lost his City just like Sachin last year,his car was bought against full cash payment,but he had more than enough money in reserve.
Okay,Sachin did took a good decision because he had already kept enough backup in case of any emergency.But my point of concern is not about the financially sound people like Sachin.I am here discussing about what sort of finance planning one needs before moving ahead to buy the car.
Buddy,whatever it may be,but jumping ones budget or income is not at all advisable for buying a car.About home,no doubt everyone(nearly) has to jump his budget for it.
No doubt loan is the better way if you have just enough cash to buy the car because in such a case your loan will help you in many ways and added advantage of a bank balance always comes handy.
BTW,Sachin buddy have you got your car loan and all other loans insured?:smile:

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@Vipul
If you look at everything with a business mind what you said will stand true. But there's more to life than business. The word practical is different for different people. If you already have the income, why not follow your heart? Trying to earn and save more and more is just a stupid idea if it doesn't bring happiness or satisfaction in life. To some people it does and to many it doesn't.
Buddy there is a lot of difference between saving and planning.
We knew that car loan EMIs are not going to give us any benefit and this will be just a payment of some high interest only.For saving we need to wait for many years and then we get the car but by planning we got two within six months and will get next two within next one year.In my views if you have enough cash and now you don't have any good deals left in market for you under your budget then its always better to maintain a bank balance for any deals which come under the budget and go ahead for the car buys in cash for the remaining money.We did the same and are really happy.Also our CA too recommended us do the same because as per his calculations we could not get any tax benefits in car loan and couldn't invest any more money in properties too in that financial quarter.
In other words,financial planning is always done practically not with heart.

Quote:

But it's true that the youngsters of today spend a lot more than they earn to buy useless things. One should buy things based on his/her needs. Most of the guys who buy tablets and expensive smartphones don't need it. But it's the prestige factor that forces them. If it is of absolutely no use for you then why buy it? It is difficult to make them understand all this though. It would be great if companies employ some kind of guidance system for the new kids on the block.
Actually this is important for maintaining one's social status.Now a days people are having partial identity by the place they live,the car they drive and the phone etc they use.So somewhere they are important too.Only limits are meant to be followed.
HOW MANY OF YOU GUYS HAVE SEEN NEW GUYS AND GIRLS WITH EXPENSIVE PHONES BUT LOW BALANCE IN IT??It is a very usual sighting,the phone costs 30,000 and the balance is not even Rs 30.00 some times!![lol]

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It's always good to create plans for life. If you are well planned, you will always be the Mr.Wonder for the ones around you.
+100..
Thanks for sharing your views ERTIGA_ZMR,Dr.Sachin and Billion$Kid,your views really added too much to the thread too and made it a lot more readable.
It looks like many queries have been solved now..now let's bring soem more from different firelds.

vaibhav 22nd June 2012 11:49 AM

Re: Buying Your Car On Finance – The Complete Guide.
 
Hmm
I think its a great to buy a 2 yr old petrol sedan at 50% price and install cng in it and enjoy for 10 years......[:)]
No need to take loan for new cars


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