Buying your first car is a memorable milestone. It promises freedom, convenience, and a sense of achievement. But for many first-time buyers, the excitement can quickly turn into confusion when unexpected expenses start to add up.
From routine maintenance to paperwork and insurance, the "real" cost of car ownership goes far beyond the sticker price. Knowing what to expect helps you plan your finances wisely and avoid stress down the road.
By understanding these expenses upfront, you can make smarter decisions and enjoy hassle-free ownership from day one. Let's break down each essential cost to help you stay prepared.
The journey begins with the on-road price, not just the amount you see in brochures or advertisements. The on-road price includes:
Ex-showroom price (the base price set by the manufacturer)
Registration charges
Road tax
Dealer handling charges
Mandatory car insurance policy (at least third-party insurance for a car is required by law)
Accessories and add-ons (such as seat covers, security systems, or alloy wheels)
Sometimes, the difference between the ex-showroom and the on-road price can be significant. Always ask for a full cost breakdown before making a decision.
It's tempting to spend all your savings on a new ride. However, it's wise to set aside a budget for:
Routine servicing and maintenance
Fuel costs
Parking charges
Toll expenses for regular routes
Unexpected repairs
A good rule of thumb is to reserve 10–15% of your car's value each year for running and maintenance costs.
Car insurance is more than a legal formality, it's your financial safety net. Third-party car insurance is mandatory in India. It covers damages or injuries you cause to others, but does not pay for your own car's repairs or theft.
For wider protection, consider a comprehensive car insurance. This covers third-party liabilities as well as damage to the vehicle from accidents, theft, fire, or natural disasters. You can also add benefits like zero depreciation or engine cover.
When choosing any car insurance, don't focus only on the premium. Compare important features such as:
Claim settlement ratio
List of cashless garages in your city
Customer support and claims process
Optional add-ons, like zero depreciation or engine protection
Always read your policy documents thoroughly. Some hidden costs arise from unclear terms or misunderstandings about what is actually covered. Selecting the right insurance means fewer surprises, smoother claims, and better peace of mind every time you drive.
Routine servicing is critical for your car's health. Most new car owners underestimate:
Scheduled service costs (which rise as the car ages)
Wear-and-tear parts like brake pads, tyres, and wipers
Battery replacements every 3–5 years
Wheel alignment and balancing
Skipping regular maintenance may save you money in the short term, but it can lead to expensive breakdowns and a drop in resale value.
The fuel economy claimed by manufacturers may differ from your real-world experience. Heavy traffic, short trips, and air conditioning all affect mileage.
Use your car's trip meter and track how often you refuel to calculate your actual monthly fuel expense. Compare this to your budget and adjust your driving habits if needed.
6. Watch Out for Depreciation
A car's value depreciates from the moment you drive it out of the showroom. On average, a new car loses about 15–20% of its value in the first year, and up to 50% over five years. This affects resale value and loan eligibility.
To minimise depreciation:
Keep up with regular maintenance and service records
Protect the car's exterior and interior from damage
Avoid unnecessary modifications that might turn off future buyers
Several documents need annual renewal, each with its associated fee:
Car insurance policy (renew on time to avoid legal trouble)
Pollution Under Control (PUC) certificate
Vehicle registration (renewal every 15 years in most states)
Missing these deadlines can result in fines, late fees, or trouble during traffic checks.
While it's fun to personalise your car, costs can add up quickly with:
Upgraded sound systems
GPS or navigation devices
Sun films, custom lights, or new alloy wheels
Before making these upgrades, check if they impact your insurance. Some modifications could lead to higher premiums or even claim rejections if not declared.
Even with careful driving, minor accidents or breakdowns can happen. Towing charges, emergency repairs, or even replacement of parts like mirrors or headlamps can be costly. Keep an emergency fund or check if your insurance offers roadside assistance as part of the plan.
Living in a busy city? Remember to budget for:
Monthly or yearly parking passes (at home, work, or public lots)
Electronic toll collection devices and associated charges
Seasonal charges or congestion fees in certain metro areas
These small costs, when added up, can make a significant difference over the year.
When you buy your car, dealerships may push "essential" kits or extra warranty packages that add little value. Always ask for an itemised bill and question each charge. Compare costs of insurance, accessories, or extended warranties with outside vendors before committing.
Plan for resale from day one. Keeping your car in top shape, maintaining service records, and avoiding cosmetic damage can fetch you a better price when it's time to upgrade.
Owning your first car is exciting, but unexpected expenses can add up quickly. Plan by budgeting for routine and emergency costs, understanding your insurance, and keeping all documents updated.
Use digital tools or apps to track spending and set reminders for renewals. With a bit of planning and smart organisation, you can enjoy your car and avoid unexpected expenses, ensuring every rupee goes further throughout your ownership journey.
(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)