A recent survey by Capgemini’s Research Institute shows that 57 per cent of Indian consumers are considering a car purchase to avoid future public transport.
Just a few years back, many of us would have compared the cost of owning a car and moving around in shared cabs such as Ola and Uber. Obviously, the COVID-19 factor was unforeseen and was not taken into calculation. Today, the scenario has changed and it is appearing that people may not opt for using shared cabs, public transport or may even depend more on working from home. Incidentally, looking at the falling demand, Ola and Uber have already announced big lay-offs.
On one hand, most of us could start using our own vehicle, on the other hand, the falling economic scenario is making corporates resort to lay-offs and pay-cuts, thus impacting the personal finances of individuals. But, with the social distancing appearing to be a long-term requirement, the need for a car may arise for many people, including young and salaried.
What may also become tempting is the offers and discounts which many car manufacturers and car dealers will be offering as the Lockdown opens up in the country. Let us see what the industry experts are suggesting to tide over the situation and plan the next car or bike purchase.
Before the COVID-19 outbreak, it was observed that more and more people are using metros and public transport for commuting. Will, that change now and will people drive own cars or buy more self-driven vehicles? “A recent survey by Capgemini’s Research Institute shows that 57 per cent of Indian consumers are considering a car purchase to avoid future public transport. The pandemic has raised the concern of health and safety, it is likely that people will choose to skip public transport or even hail and share a ride. So yes, we could see more and more self-driven cars on the road in future,” says Tarun Birani, Founder & CEO, TBNG Capital Advisers.
Any new purchase of a car or bike needs to be based on a future stream of income and its dependability. “Even if someone is planning to buy a personal vehicle, especially on loan, care should be taken to ensure that the EMI leaves enough money in the wallet to comfortably manage the household and fund important financial goals like retirement and children’s education,” cautions Rahul Jain, Head- Edelweiss Personal Wealth Advisory.
And, one may need not go for a new car as there could be a bargain deal waiting in the second-hand car market. It’s better to explore all options before buying. “In case, one definitely feels the need to own a car to go to work or for personal use, research on the car based on budget and other practical factors. One could consider a second-hand car, as the market for such cars is quite amenable and one gets a fairly good deal. There are second-hand car loan options available too and if assessed well, one can take that too into consideration,” suggests Saurav Basu, Head, Wealth Management, Tata Capital.
But, hold on. If you are already servicing EMI towards home loan or personal loan, you need to be extra cautious with any additional EMI burden. Birani says, “Defer investments in high-cost depreciating assets that could block your liquid cash and cause issues in fund flow in the near future. Avoid the burden of an additional EMI by the purchase of an automobile or real-estate, etc.”
Whether you are considering to buy a new car on a full cash basis or on down payment basis through a car loan, make sure your savings are not hurt. Even if you have saved for the goal of car purchase, the current times need you to re-visit the decision. “Time is right to inculcate discipline in savings and build up a corpus for future rather than pursue spending,” says Vijay Kuppa, Co-Founder, Orowealth.
Your savings could come handy in difficult times. If one doesn’t have an emergency fund, its time to create one or boost it. Already, much of discretionary expenses such as shopping, eating out etc are down which can add to your savings. “Cautious spending and lifestyle adjustments are need of the hour to curb expenses. Save and build an emergency corpus to ensure your expenses for essentials, critical bills, and loan payments are covered for at least a couple of months ahead. Ensure your health and life insurance cover for self and dependent is adequate, you could opt for family floater plans. And finally, up-skill or reskill to ensure you have the option to supplement your income in case of job loss,” says Birani.