Thursday, 2 May 2013

Query Solved - Should you buy Petrol or Diesel car - Find out here !

Petrol and Diesel prices have been on a continuous rise since January 2011 and since this time they have been in the limelight and created a big question mark on which car to purchase in minds of car buyers when they decide to finalize their purchase. We have brought here a detailed analysis for you to decide upon which car should you go for. But before that let us take you back to history and show what has been the trend of petrol and diesel prices since last 2 years.

In January 2011, Petrol prices were at Rs. 54.87 and Diesel was at Rs. 38.12 (Waoo, we wish the prices could atleast come down to this level ! ) By the end of year 2011, Petrol prices grew by 19.6% to Rs 65.64 per liter and Diesel prices grew by 8.2% to Rs 41.27 per liter.Thereby letting people start thinking to buy Diesel car looking at the trend or speed of increasing petrol prices. Result - Diesel car sales started to pick up !

The belief in minds of people further got strengthened in May 2012, when a single highest rise in Petrol prices of Rs 7.54 was done and brought the levels of Petrol prices to Rs 73.18 per liter and Diesel prices reduced by 37 paise in June 2012. Dieselization trend started here and companies started adding to their Diesel cars manufacturing capacities. A single highest price increase in Diesel of Rs 5.63 in Sep 12 made people rethink their decision and the already overburdend inddustry came to an even slow response with confused buyers delaying their purchase.

In Year 2012, from Jan-Dec, the petrol prices rose by just 2.4% and Diesel prices by 14.2%. Thereby making Diesel prices an increase of 23% in two years (from Jan 2011 to Dec 2012) and Petrol prices by 22%.

In first four months of 2013, Petrol prices dropped by (6.5%) and Diesel prices increased by 2%, not to forget the partial de-regularization under which Diesel prices are supposed to be hiked by 0.50 Re per month and levels will very soon be seen at Rs 53 per liter levels. Assuming, no change in Petrol prices, which car does it makes sense to purchase - petrol or Diesel ? Also, what should be the threshold levels of distance travelled per month, i.e. what should be the minimum running of persons to consider buying a Diesel car. We got it here for you !

Considering a scenario in July 2012, when petrol prices were at Rs 70 and Diesel prices were at Rs 41. It always made sense to purchase a Diesel car and Diesel cars sales were pushed up by upto 35%. Now when, Petrol prices are again reduced by Rs 3 per liter and levels have come down to Rs 63.09 Per liter in New Delhi, does it still makes sense to go for Diesel cars ? We will find it out here !

Focus on the green marked columns in the Image below, and you could see in May 2013, after price reduction of Rs 3, it would take 31 months or 2.6 years to recover the high cost of buying a Diesel car (we have taken an assumption of 2,500 Kms of travel on an average per month). Considering the current petrol and Diesel prices of New Delhi, you would just save 1,852 Rs or 7.79% per month. However, due to high initial cost of car, apprx. 100,000 higher than similar Petrol priced variant, you will end up using car for 31 months and then would be able to recover the high cost of the car. Whereas, during July 2012, the ownership levels were as low as 21 months. Also, at current fuel prices, in case you drive your car for 1,565 Kms per month or 60 Kms per day, then it makes sense for you to purchase a Diesel car other wise you should go for a Petrol car. 

If we assume that Petrol prices would remain the same till end of this year, December 2013 and Diesel prices as announced after partial deregulation would be hiked 50 paise per month will bring levels to Rs 53 per month. It would take 1,804 Kms per month to consider buying a Diesel car and an ownership levels of 36 months.

We would therefore suggest you to go for Petrol cars, in case you have travelling of less than 1,600 Kms per months or 60 Kms per day and intend to keep car not more than 3 years.

P.S - All analysis have been done at the current level of fuel prices. 


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