Buying your dream car is not just about satisfying your passion for driving—it’s about doing so without compromising your financial stability. Whether your dream machine is a luxury sedan, a sports car, or an SUV, smart financial planning ensures you achieve this milestone without debt stress.
In this article, Sanjay Kathuria breaks down a step-by-step financial planning guide to help you turn your dream into a well-budgeted reality.
🚗 Step 1: Define “Dream Car” — Realistically
Before you begin financial planning, understand what your dream car is. Is it a ₹10 lakh premium hatchback or a ₹50 lakh luxury SUV? Clarity on brand, variant, fuel type (petrol/diesel/electric), and on-road price is the foundation for budgeting.
🧠 Sanjay Kathuria’s Tip: “Your dream car should excite your heart but also align with your wallet. Don’t aim too high if it means compromising on long-term goals.”
📊 Step 2: Calculate the Total Cost of Ownership
Buying a car is not just about the ex-showroom price. Consider:
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On-Road Price: Includes insurance, RTO registration, taxes
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Loan Interest: If you’re opting for financing
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Fuel/Maintenance Costs
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Annual Insurance Premium
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Depreciation: Luxury cars lose 40–50% value in 5 years
Add up all these to understand the real cost of your dream.
💰 Step 3: Fix a Budget (The 20/4/10 Rule)
To stay financially sound, follow the 20/4/10 car budgeting rule:
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20% Down Payment: Minimum upfront payment from your savings
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4-Year Loan Term Max: Avoid long tenures that increase interest burden
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10% of Monthly Income: EMI should not exceed 10% of your take-home salary
📌 Example: If your monthly income is ₹1,00,000, EMI should not exceed ₹10,000.
💼 Step 4: Set Up a Car Fund
If you’re planning to buy within 1–3 years, start a Dedicated Car Fund:
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Use a Recurring Deposit (RD) or Short-Term Mutual Fund
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Set a monthly SIP goal based on the car’s total cost
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Avoid tapping into your emergency or retirement savings
🧠 “Discipline is key. Automate your savings so you’re not tempted to spend it elsewhere,” says Sanjay Kathuria.
🏦 Step 5: Evaluate Loan Options Smartly
If you’re taking a loan:
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Compare interest rates from banks, NBFCs, and dealerships
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Opt for fixed interest over floating for predictable EMIs
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Read the fine print: Check foreclosure charges and processing fees
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Consider pre-approved loan offers from your bank
🧾 Step 6: Factor in Running and Maintenance Costs
A dream car comes with dream expenses:
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Service costs for luxury vehicles can be 2–3× higher than regular models
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Petrol/diesel/electric—each has its own cost implications
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Don’t forget about accessories, extended warranties, and tyres after 3 years
🔧 Pro tip: Set aside an annual Vehicle Maintenance Fund of at least 3–5% of the car’s cost.
🧘♂️ Step 7: Don’t Compromise Long-Term Financial Goals
Ensure your dream car purchase doesn’t come at the cost of:
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Your emergency fund
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Children’s education savings
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Retirement corpus
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Home loan EMIs
🧠 “A car is a depreciating asset—treat it as a reward, not an investment,” Sanjay reminds.
📈 Bonus: Use Windfalls Wisely
Got a bonus, incentive, or side-income windfall? Channel a portion toward your car fund. It helps reduce your loan burden or upgrade to a better variant.
✅ Sanjay Kathuria’s Smart Car Buying Checklist
| Item | Ideal Practice |
|---|---|
| Down Payment | 20–30% minimum |
| EMI | ≤10% of monthly income |
| Loan Tenure | Not more than 4 years |
| Loan Type | Fixed rate, minimal processing fees |
| Car Fund Option | RD, FD, or Short-Term Mutual Fund |
| Maintenance Fund | 3–5% of car value/year |
| Impact on Other Goals | Zero or minimal |
🚦 Final Thoughts
Buying your dream car should be a moment of joy, not regret. With proper financial planning, you can enjoy the ride without running over your future goals.
💬 “Be emotionally driven to dream big, but financially smart to make it real,” says Sanjay Kathuria.
