ANALYSIS: Diesel vs Petrol

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The union budget is around the curve and there's talk of a cess on diesel cars by a certain section in the power corridors of New Delhi. The cess could either be a percentage of the value of the car or a flat charge, something to the tune of Rs 80,000 if we have to go by what the press is brandishing about.

If indeed this is true, then it could pretty much turn the whole argument in favour of diesel on its head. Besides, the industry is trying to stay afloat at a time when global economic policies and conditions are threatening to put India in the same spot as the developed world. Already, demand for petrol cars has reached an all-time low, thanks to the lopsided fuel pricing policies that have lead to a near 66 per cent price difference on a per litre basis, in favour of the diesel. This has led to the marketshare of diesel cars to rise substantially over the last few years.

As a case study, we decided to find out if you did indeed purchase a Maruti Suzuki Swift VDi or a Maruti Suzuki Swift VXi four years ago, would you have made the right decision. The idea here is simple – take a Maruti Suzuki Swift VDi with a purchase date of March 1, 2008. Most of our Which Car? questions have been about people with an average running of 1,000 kilometres a month and therefore used it as a pre-condition for our analysis. If you are wondering, 1,000 km/month is the kind of threshold that makes most people wonder if it makes sense to spend extra on a diesel or go in for a petrol. That should translate to about 40 km a day, assuming that the car is not driven for about 5-6 days a month on account of weekends or 33 km a day if the car is driven every day.

TURN TO PAGE 2 TO UNDERSTAND OUR ANALYSIS FURTHER>>>

If you are wondering why the Maruti Suzuki Swift, then let me put it this way. It is the most popular B-segment car in the country and the V trim are the most sold among the whole trim range. The price considered was the ex-showroom price, New Delhi for reasons of insurance calculation for declared values. So, putting all things into consideration, the Swift is run from March 1, 2008 to February 29, 2012. In this period, the car puts on 48,000 kilometres and is then put up for sale. For that, we considered the insurance calculated value of the used car price, since used prices differ wildly from person to person (dealer vs individual seller) to state of car etc.

We also calculated the costs based on the price of diesel and petrol in the last four years. So we hunted down the rate change and considered the price of fuel for that month until the next rate change. These rates are available freely on the internet. For convenience sake, if the price was altered from say Rs 40.33 per litre of diesel to Rs 40.66 on March 10, 2009, we considered the rate from March 1. This has been constant for both petrol and diesel cars.

Other things that were considered were maintenance costs. We contacted Maruti's service stations to find out what the average service cost would be for a Maruti Swift at 1,000 km, 5,000 km, 10,000 km, 20,000 km and 40,000 km. These are calculated on the basis of manufacturer recommended parts and lube changes, assuming the car is driven by a careful person and follows service intervals with a certain modicum of discipline. Costs incurred due to accidents, premature part failure or build quality issues as well as premature wear and tear were not considered in this calculation, since this is a variable.

To bring in a more realistic calculation, we also added things like a battery change in the life of the car, considering a car battery doesn't last more than three years on an average. This cost was rounded off to Rs 6,000, give or take a few hundred rupees. Insurance costs for all four years were considered, even though registration cost wasn't. We do have a final calculation based on the on-road price as well, so you can get a clear idea of the difference, if any. So what did we discover? Turn over to start reading our calculations.

NOTE*

Price of fuel is calculated for New Delhi. All prices, including ex-showroom, insurance, registration and on-road price are considered at New Delhi prices for sake of uniformity.

TURN TO PAGE 3 FOR OUR FINDINGS ON THE SWIFT VDi>>>

The Swift VDi's ex-showroom price is calculated at Rs 5,18,295, ex-showroom Delhi as of March 1, 2008. The car is run for 48,000 km at the rate of 1,000 km a month. We assumed a lifetime average fuel efficiency of 14 kpl for this calculation.

For the period March 1 2008 to February 28 2009 the fuel and maintenance cost incurred is Rs 36,178 while the insurance cost worked out is Rs 14,594. Thus the total cost for the first year is Rs 50,772 minus depreciation. Depreciation by insurance calculator works out to be Rs 64,787 bringing in the total outflow for the first year at Rs 1,15,559.

For the period March 1 2009 to February 28, 2010, the fuel plus maintenance cost works out to be Rs 35,286 while the insurance cost works out to be Rs 12,905. The total cost for year two is therefore Rs 48,191 minus depreciation. Depreciation by insurance calculator works out to be Rs 64,787 bringing in the total outflow for the first year at Rs 1,12,978.

For the period March 1 2010 to February 28, 2011, the fuel plus maintenance cost works out to be Rs 40,244 while the insurance cost works out to be Rs 11,215. The total cost for year two is therefore Rs 51,459 minus depreciation. Depreciation by insurance calculator works out to be Rs 64,787 bringing in the total outflow for the first year at Rs 1,16,246.

For the period March 1 2011 to February 29, 2012, the fuel plus maintenance cost works out to be Rs 34,834 while the insurance cost works out to be Rs 9,527. The total cost for year two is therefore Rs 44,361 minus depreciation. Depreciation by insurance calculator works out to be Rs 64,787 bringing in the total outflow for the first year at Rs 1,09,148.

Summing up the costs over four years works out to be Rs 4,53,931. Depreciation value by insurance calculator works out to be Rs 2,59,148 or 50 per cent of the value of the original car. Therefore total outflow is as follows

               Ex-showroom price: Rs 5,18,295
PLUS    Running costs 4 years: Rs 4,53,931
PLUS    One battery change: Rs 6,000
LESS    Depreciation: Rs 2,59,148
TOTAL   Lifetime cost: Rs 7,19,078

TURN TO PAGE 4 FOR OUR FINDINGS ON THE SWIFT VXi>>>

 

 

The Swift VXi's ex-showroom price is calculated at Rs 4,54,010, ex-showroom Delhi as of March 1, 2008. The car is run for 48,000 km at the rate of 1,000 km a month. We assumed a lifetime average fuel efficiency of 12 kpl for this calculation.

For the period March 1 2008 to February 28 2009 the fuel and maintenance cost incurred is Rs 55,258 while the insurance cost worked out is Rs 12,918. Thus the total cost for the first year is Rs 68,176 minus depreciation. Depreciation by insurance calculator works out to be Rs 56,751 bringing in the total outflow for the first year at Rs 1,24,927.

For the period March 1 2009 to February 28, 2010, the fuel plus maintenance cost works out to be Rs 51,599 while the insurance cost works out to be Rs 11,438. The total cost for year two is therefore Rs 63,037 minus depreciation. Depreciation by insurance calculator works out to be Rs 56,751 bringing in the total outflow for the first year at Rs 1,19,788.

For the period March 1 2010 to February 28, 2011, the fuel plus maintenance cost works out to be Rs 60,181 while the insurance cost works out to be Rs 9,959. The total cost for year two is therefore Rs 70,140 minus depreciation. Depreciation by insurance calculator works out to be Rs 56,751 bringing in the total outflow for the first year at Rs 1,26,891.

For the period March 1 2011 to February 29, 2012, the fuel plus maintenance cost works out to be Rs 72,924 while the insurance cost works out to be Rs 8,479. The total cost for year two is therefore Rs 81,403 minus depreciation. Depreciation by insurance calculator works out to be Rs 56,751 bringing in the total outflow for the first year at Rs 1,38,154.

Summing up the costs over four years works out to be Rs 5,09,760. Depreciation value by insurance calculator works out to be Rs 2,27,005 or 50 per cent of the value of the original car. Therefore total outflow is as follows:

               Ex-showroom price: Rs 4,54,010
PLUS    Running costs 4 years: Rs 5,09,760
PLUS    One battery change: Rs 6,000
LESS    Depreciation: Rs 2,27,005
TOTAL   Lifetime cost: Rs 7,42,765

STUMPED?!?!?

TURN OVER TO PAGE 5 TO READ OUR FINAL ANALYSIS>>>

So, if you did drive 1,000 km a month in the city of New Delhi and been one careful driver, you would have benefitted by Rs 23,687 if you bought a diesel. And that is if you drove 1,000 km. Push the figure higher and the savings are even more.

Even if one took the on-road price into consideration (Rs 5,38,000 for the diesel and Rs 4,69,000 for the petrol), assuming all things, the savings still work in the favour of the diesel.

However, if you did buy a petrol and put the difference in price, i.e. Rs 64285 on the basis of the ex-showroom price in a 10 per cent annual fixed deposit for a period of four years (hypothetical assumption), then you would stand to gain Rs 29,923 as interest on the principal. In that case, the investment in the petrol VXi leads to a substantial Rs 70,431 saving.

So, if you have been a careful investor, the petrol would still probably have led you to some savings if you made some sensible choices. However, if you look at the pure economics of it all, the diesel stands to gain. Whether this holds true in the future remains to be seen as oil threatens to touch $ 150 a barrel again and the government could make diesel cars more expensive. That, however will be a calculation for another day and another time.

*FOOTER: The calculations are approximate and not exact. Feel free to comment on the story and bring in your own calculations as well to the picture. We would like to have an open-ended discussion to help users, readers and potential buyers make the right decision. You can also write in to bsmotoring@gmail.com with your opinions.