A chartered accountant’s detailed breakdown comparing car loan EMIs with mutual fund investments has sparked widespread discussion online, highlighting the long-term financial impact of vehicle financing on middle-class households in India. Chartered accountant Nitin Kaushik warned that what appears to be an affordable monthly car payment can significantly reduce future wealth accumulation when interest costs and vehicle depreciation are taken into account over several years.
Kaushik explained that a buyer paying an EMI of Rs 25,000 every month for five years ends up paying a total of nearly Rs 15 lakh during the loan tenure. However, the actual value of the car purchased is only around Rs 12 lakh, with approximately Rs 3 lakh going toward interest payments to the lending bank. He argued that many buyers focus primarily on the affordability of monthly installments rather than understanding the complete financial cost attached to vehicle ownership.
The financial impact becomes even larger due to depreciation, which steadily reduces a car’s market value over time. According to Kaushik, a Rs 12 lakh car may lose nearly 60 percent of its value after five years of regular usage. By the end of the loan period, the resale value of the vehicle could fall to nearly Rs 5.2 lakh, resulting in an additional wealth reduction of around Rs 7 lakh beyond the interest already paid on the loan.
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Combining both factors, Kaushik estimated that the total financial erosion over five years could reach nearly Rs 10 lakh. While acknowledging that the owner receives the benefit of using the car during that period, he stressed that buyers should compare the opportunity cost of spending large amounts through EMIs instead of building long-term investments. His comments have resonated strongly with young professionals and middle-income earners increasingly relying on easy financing options for lifestyle purchases.
To illustrate the alternative, Kaushik compared the same Rs 25,000 monthly outflow with a systematic investment plan (SIP) in a mutual fund earning an average annual return of 12 percent. According to his calculation, investing the same amount consistently over five years could potentially create a corpus of approximately Rs 20.6 lakh. In contrast to owning a depreciated vehicle, the investor would accumulate a substantial financial asset capable of generating future returns and financial security.
Kaushik clarified that his argument was not against buying cars altogether but against making decisions based solely on manageable EMIs without considering long-term consequences. Financial experts have increasingly highlighted the importance of balancing lifestyle aspirations with wealth creation, especially as consumer loans become more accessible in India. The discussion has also reignited broader conversations around financial literacy, responsible borrowing, and the importance of understanding how depreciation and compound returns affect personal wealth over time.
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