Car Affordability Calculator
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Learn More About Car Affordability
1. What This Calculator Is About
This tool helps you gauge whether a target car comfortably fits your finances. It goes beyond EMI by layering in fuel, insurance and ownership horizon to approximate the total lifetime burden, then compares the EMI against your net monthly income (after estimated tax) to generate an affordability verdict.
The goal: prevent over‑leveraging and highlight optimisation levers before you book the car.
2. Key Factors That Affect Affordability
- Net Take‑Home Income: Higher disposable income reduces the EMI ratio faster than any other lever.
- Down Payment %: A larger upfront payment shrinks the loan principal → lower EMI and interest outflow.
- Interest Rate: Even a 1% reduction over multi‑year tenure meaningfully cuts total interest paid.
- Loan Tenure: Longer tenure lowers monthly EMI but increases cumulative interest; balance comfort vs. total cost.
- Mileage & Fuel Price: Realistic mileage (often lower than brochure) + local fuel rates shape long‑run operating cost.
- Annual Distance Driven: Higher usage amplifies fuel sensitivity; low usage tilts TCO toward depreciation & financing.
- Insurance & Taxes: Frequently ignored in quick mental math; renewals add steady annual drag.
3. How The Calculator Works
- Tax Estimation: Approximates income tax from annual income to reach net annual figure.
- On‑Road Price: Base (ex‑showroom) + Road / Registration & miscellaneous costs.
- Loan Model: Principal = On‑Road – Down Payment. EMI uses standard amortisation formula with monthly compounding.
- Fuel Projection: (Monthly Distance × 12 ÷ Mileage) × Fuel Price × Ownership Years.
- Total Ownership Cost (TCO): On‑Road + Lifetime Fuel + (Annual Insurance × Years).
- Affordability Ratio: Monthly EMI ÷ (Net Annual / 12). Threshold bands drive verdict + colour.
- Visualisation: Donut highlights EMI share vs remaining income headroom.
4. Practical Optimisation Tips
- Negotiate interest: A 0.5% concession or using a limited-time scheme often beats stretching tenure.
- Target ≥20% down payment: Below that, EMI pressure climbs quickly; savings buffer erodes.
- Be conservative with mileage: Use real user reviews or 70–80% of ARAI figure for planning fuel expense.
- Total cost perspective: Don’t ignore accessories, extended warranty, and first‑year add‑ons—add to "Road Tax + Others" for truer baseline.
- Avoid stacking new loans: Layering car + other EMIs can push debt ratio beyond safe range even if each one looks fine in isolation.
- Revisit annually: Recalculate after salary revisions or fuel price shocks; decide to prepay / refinance if ratio improves.