How Is The On-Road Price Calculated?
Are you out and about on the automobile(d) market streets for a new car? This probably must be your first time buying a new car! Have you decided which car to buy yet? Did you calculate the on-road price? Not sure how to calculate the on-road price? Don’t worry we have got you covered!
Before we drive through the calculating process, it’s necessary to understand the ex-showroom price of any car is just the cost of the car-make that the car-making company charges for the whole manufacturing process. That’s why if you ever notice an automobile ad quoting a price, know that that is only the manufacturer’s cost. In reality, there are a lot more expenses involved before the car is ready to debut on the busy, public, country roads. Through this blog, we attempt to clear any confusion that one might have about these extra costs and expenses and, therefore, cars’ ex-showroom prices vs on-road prices. Let’s start the engine!
Before we get into the jargon of complicated costs involved in deciding the on-road price, we ought to be clear with the basics. Ex-showroom price simply means the car price as it is standing on a spot in the dealer showroom. This cost involves the manufacturer’s cost as well as the commission or profit of the dealer for selling the car in their showroom. Every other cost included in the car invoice, like Car registration, and road tax, is calculated on the ex-showroom price of the car only. Potential buyers can note that the GST on a car is part of the manufacturer’s cost, so it’s included in the ex-showroom price of the car. GST is charged by the central government of India for For example, The Maruti Suzuki Swift LXI 2021 comes at an ex-showroom price of Rs.5.85 lakhs.
Car registration is done with the state RTO through the dealer only. Car registration is extremely important as it certifies the car to run on country roads. To recognize that the car is certified by the state government for running on public roads, each car needs a unique registration number, and so we pay the registration fee to the dealer to get our car registered. Once again, the registration cost varies from state to state, as well as the model and making of the car, which gets included in the ex-showroom price. Potential car buyers may note that they can’t get cheap registration, i.e. buying a car from one state and getting it registered elsewhere, since registration happens only at the buyer’s permanent address. A car number plate has a two-letter state code followed by the area and series code and then finally the 4-digit unique registration number, and getting this is a part of the registration process.
One-time Road Tax depends on the ex-showroom price as well as the usage of vehicles, either private and non-commercial or commercial. According to the Delhi Motor Vehicle Taxation Act of 1962, the road tax levied on private and non-commercial vehicles is to be paid only once. The state implication of road tax varies from state to state and is calculated by the state RTO or Registration Transport Office on the ex-showroom price of the car. One-time Road Tax is charged by the state government when a car gets registered in a state. This is so because the road tax paid by us on the toll plazas goes to the central government. Therefore, to maintain the in-state roads on which the car will run, this one-time Road Tax is charged by the state government through RTO. The lifetime road tax ranges from 4% to 15% at max. For example, in Delhi, road tax on the ex-showroom price of Rs.5.85 lakhs for the Swift LXI 2021 would be 4% of the ex-showroom price. This is so because all cars under INR 6 lakhs are to be charged 4% road tax only.
While these dealer’s charges for safely bringing the car unit from the manufacturer’s warehouse into the showroom, maintaining the car, fuel cost, etc. are already included in the car’s ex-showroom price, it could be that dealers might include it as an add-on so buyers ought to be careful when checking the invoice. The Supreme Court of India declares logistic or handling charges to be illegal, and car dealers can lose their license if charged for these.
For products of huge value as cars themselves, the manufacturer provides a car warranty for up to a few years or up to the specific km the car has been driven. But car buyers can get this warranty extended, of course, by paying extra charges for it. While this add-on expense is not a necessity but it’s still beneficial for buyers. What does this warranty do exactly? Just like how other warranties work, having a car warranty means that you can get specific parts replaced or repaired if they malfunction. However, suggesting an extended warranty is risky as it might just happen that the standard warranty doesn’t cover parts that are at risk of damage and so an extended warranty is rendered useless. Therefore, this may be food for thought.
Originally, TCS was not to be worried about by the buyer since it is the dealer’s headache. Tax Collected at Source, a mere 1% of the ex-showroom price of the car is to be paid by the dealer as per the 206c section of the income tax act. This tax is levied only until the dealership does not file for income tax. Once the filing is done, this tax amount is returned to the dealership’s account.
A rather tricky one, this green cess! Buyers just need to keep in mind that green cess is applicable only when their car’s engine is of more than 2000 cc as per the Supreme Court of India’s orders. The cess was applied after the diesel engines were banned in Delhi and Delhi NCR and charged as 1% of the ex-showroom price. So dear buyers, if your engine is of lesser power than 2000 cc, then you have the right to get green cess removed from the invoice.
After all these necessary costs have been added to the ex-showroom price of the car, you finally have your on-road price at hand, and now you are all set to take the car out onto the public roads, riding smoothly and comfortably in your car!
Note: the costs explained above are the mandatory costs concerning the conditions of their application. However, maybe preferred by some and avoided by others, there are a few other costs in the invoice that are optional, i.e. it depends on whether you wish to include those costs or not. So let’s have a glance at what these other costs are and if they are worth getting included on the invoice.
When debuting your car on the road, you can’t be sure of the accidents it might face, so we buy insurance to cover these plausible risk factors that might occur in the future, like a car accident, etc. The dealer might provide you with insurance policies, but the cons involved in purchasing insurance from the dealer is that you miss out on the opportunity to compare and customize your insurance policy which becomes possible when buying insurance from the aftermarket. But it isn’t half as bad to buy car insurance from the dealer themselves since you are saved a lot of hassle, and you can customize still from the options that the dealer provides, and ultimately prices for an insurance policy are calculated accordingly.
Usually, people go for add-on accessories like steppers, mudflaps, seat covers, etc. because everybody wants that their car looks as if it’s their dream come true. But the matter of fact is that these accessories come cheap from the aftermarket as compared to the unnecessary expensive accessory packages provided by the dealer. But if you have second thoughts about the brand name, authenticity, and quality, then we leave you to your thoughts! But from our side, aftermarket accessories work just as well!
What’s a car? It’s machinery. And all machines require a great deal of attention and care from their owners. Of course, you can get annual car maintenance packages from your dealer, but then again, these services are way cheaper in the aftermarket, perhaps with the added benefit of occasional discounts and other things. We would suggest against the purchase of car maintenance packages but hey, reader! We respect your choice for wanting a hassle-free year, at least on the car front!
With this, we conclude our blog on the calculation of on-road prices of cars. We hope you now have crystal thoughts and that you make a wise and aware purchase, with only the feelings of contentment and fulfilment in your hearts and your faces!
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