SUV or small Car : What makes sense ?

One more article in the series which highlights difference between emotional purchases versus rational purchases..  Just got off the phone with a friend who wants to upgrade his car from Alto to SUV/MUV(Innova or XUV 500) and i had a hard time explaining him that it does not make sense because you dont buy a Innova if all you do is to ride it in Bangalore .Because i know he is the sort who prefers a train journey any where outside .. But i got several justifications like

a) Whole family can travel together->  He has a single kid , so did not get this logic. On further questioning i understood that once in a year his in-laws or parents will come down and he can take them all together in the MPV !.

b)  Go on long drives ->  Innova is better on long drives no doubt but i think the incremental benefit is not much since most hatchbacks these days offer equally drive quality.

c) Status symbol 🙂 -> No answer for this .. but this is surely not rational reason it is emtional reason ..

Now look at the overall costs of this emotional decision which my friend wants to make .

1) Cost of a good hatchack (i20 CRDI) => 7 lakhs on road  (approx)

2) Cost Innova MPV (Mid-range) => 11.5 lakhs on road (approx)

So the delta is 4.5 lakhs right ?? … No if one were to consider the fact that the car is bought on EMI the overall cost comes to 5.8 lakhs over 4 years.

So the question is if this 4.5 lakhs(current value) is worth it for all the non-emotional reasons. To calculate this lets see how we can overcome the cost of going on long drives and cost of taking the whole family together.

Lets assume we will go on 2 long drives in a year and 1 single day drive in a year we  can have an occasion to take family together.

Cost of 2 long drives  and 1 single day drive apart from cost of  fuel which you need to spend even if you had a innova=>   Rs 2500 x 3 Days = 7.5K (COST of hiring a  Scorpio .

Compare this versus what you can earn from Rs 4.5 lakhs in 1 year . At 9 % interest one can easily earn Rs 40k/year in a Fixed deposit…

I have not yet mentioned the hassles of driving a big car in City … parking is such a hassle and driving in general is more tedious compared to a MPV/SUV.

So you guys decide now !!!

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