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Understanding the On-Road Price of a Vehicle, Why it Cost More Than Price in Advertisement

Representative image.

Representative image.

So you’ve been saving up for your new car only to find out that the actual price is higher than expected. Well, here’s the price break-up for you to know where that money goes.

Almost every new car that is launched in the market nowadays is priced at something-point-nine-nine lakhs and if with this price tag, it happens to fall under your budget and you decide to check it out at the dealership, you are met with a surprise. The actual price of the vehicle is more than advertised and if you want to be taking it home, you will have to end up spending more than you had anticipated. So the question is, what are these costs that drive up the final price of the vehicle? We break it down.

– Ex-Showroom Price

Perhaps the biggest chunk of the money that you will be spending is going to be the ex-showroom price – which is the price that you see in advertisements and quoted in reviews because that is the base value of the car that is not affected by all the other things we will be mentioned below and is the best way to put forth an estimate of where the car stands in terms of cost as compared to other vehicles, as every other automaker is quoting ex-showroom prices as well. This includes the ex-factory cost, the Goods and Service Tax (GST) and the dealer margin. On top of that, other charges, like road tax, are calculated based on this price.

– Registration Fees

This is the charge that relates to the cost that is incurred towards the registration of the purchased vehicle. As part of this, all vehicles that are purchased are registered by the Regional Transport Office (RTO) of the state where the buyer resides, and hence, they differ from state to state. Dealerships often also include the price of number plates, smart cards and other such costs as part of this, and once registered, your vehicle is given a registration number which has a state code (alphabetical), followed by an area code (numerical), then a series code (alphabetical) and ends with a four-digit number, all of which combines to give your vehicle a unique registration.

– Road Tax

This too varies from state to state and is pretty much self-descriptive – it is the tax you pay to be able to drive the vehicle on road. This is collected once during the period of the vehicle’s registration which would be for about 10 or 15 years since the date of registration and ranges within 3 per cent to 20 per cent of the ex-showroom price.

– Tax Collected at Source (TCS)

As part of a statutory procedure by the Government of India, dealerships charge TCS which is 1 per cent of the ex-showroom price, since June 2016. Vehicle buyers are given a certificate of the same upon collection which can be used at the time of filing their income taxes wherein this amount is credited back into their accounts.

– Green Cess

This is a fairly new addition to the total cost of the vehicle which was added by the Supreme Court after the temporary ban on diesel-engine powered vehicles with engine capacity of over 2000cc. This is applicable only on such vehicles and is 1 per cent of the ex-showroom price.

– Insurance

Vehicle insurance is mandatory in order to have your vehicle be road legal and there are different types of insurances that the buyer can opt for, like Third-Party, Comprehensive and Zero-Depreciation. The cost of these insurances goes from being most accessible with the Third-Party insurance and costlier towards Zero-Depreciation insurance but all of them have their own set of advantages too, so make sure you know full well what you are paying for.

– Extended warranty

Almost every new car that you would buy comes with a complimentary warranty that is offered by the manufacturer. It would last you for some thousand kilometres or years, whichever comes first and varies between different automakers and car models that they sell. However, you can opt for an extended warranty that comes at extra cost which not only will help cover costs that may rise up in the coming years with regards to your car but also will help you towards getting buyers for your car when you wish to sell it as those looking for a used car prefer buying one which is still covered under warranty.

– Essential accessories

This usually consists of accessories like mud flaps, floor mats, seat covers and car pillows etc that are offered by the dealership that sell official accessories from the automaker. However, all these accessories are usually priced higher than what you would be paying for the same as aftermarket accessories. Having said that, best to buy them from outside the showroom and remember, this is an optional purchase and even if you think you would want to be opting for some of the accessories and not all that are bundled together, you have the choice to pick and choose what you want individually.

– Annual maintenance package

This is an optional package that a buyer can choose to go for which offers, on an annual basis, services like roadside assistance, replacement of certain wear and tear parts, services, polishing etc. Also, since they are optional and can vary in their prices, be sure to see whether you are getting your money’s worth over the course of the next year.

– Logistics/Handling Charges

This is the part that you need to be on the lookout for as this might be a part of your bill, but it has been deemed illegal by the Supreme Court. This is because the dealer’s margin already includes all the cost of transporting the vehicles from the factory to their stockyard.

– On-Road Price

And finally, we come to the on-road price. This is the sum of all the charges mentioned above and it gives you the final price that you would be paying for the vehicle’s purchase. And as you would have realised by now, this is not a fixed figure as it may vary depending on the things and services you choose for your vehicle. Also, there might be discounts being offered by the automaker or the dealership, or there might be things like an exchange bonus for trading in your older vehicle that affect this price. But even then, the final price that is settled for the purchase of the car is referred to as the on-road price.

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