Buying a car? High diesel prices favour petrol vehicles, but usage is key

In the past, many people opted for diesel cars because even though the vehicle itself was more expensive, it cost less to run it due to the lower fuel price and better mileage
Over the past month, the price of diesel in Delhi has risen sharply and become more expensive than petrol. On June 30, petrol was priced at Rs 80.43 per litre while diesel was 10 paise more expensive at Rs 80.53 per litre in the national capital. In other cities like Kolkata, Mumbai and Chennai, diesel continues to be cheaper than petrol, but the gap is reducing fast.

In the past, many people opted for diesel cars because even though the vehicle itself was more expensive, it cost less to run it due to the lower fuel price and better mileage. But now, with the price differential between the two fuels vanishing or narrowing down (and more states could follow Delhi’s example in the future), buyers will need to rejig their calculations. Some car manufacturers like Maruti Suzuki believe that diesel versions are losing their charm, as many of the traditional advantages that diesel had over petrol are disappearing. Says Shashank Srivastava, executive director, marketing and sales, Marutri Suzuki: “Now the running cost advantage of diesel seems to be disappearing. In places like Delhi there is zero difference in fuel cost.” According to him, it makes less sense to buy a diesel car now. He further adds that the cost of conversion of a petrol car from BS IV to BS VI is less than that cost of converting a diesel car from BS IV to BS VI. The initial acquisition cost is much higher for a BSVI diesel as compared to a BS VI petrol—as much as Rs 1.5-2 lakh. Some of the factors they need to take into account while deciding which fuel variant to go for.

Price of the vehicle: Says Hemant Dalvi, a Mumbai-based car expert: “The diesel variant of the same car costs at least Rs 1 lakh more than the petrol one.” For top-end models, the difference can go up to Rs 2-3 lakh or more.  Consider these examples. A Maruti Swift Diesel will cost you around Rs 6.39 lakh while the petrol variant Swift LXI will cost around Rs 5.19 lakh in Central Delhi, according to the company's website. Now let's check out used car prices. According to Cars24, in Delhi a 2017 Maruti Suzuki Dzire LDI (diesel variant) in good condition will cost Rs 4.79-5.16 lakh while a 2017 Maruti Suzuki Dzire LXI (petrol variant) will cost around Rs 4.60-4.96 lakh. The price difference in case of a used car comes to about Rs 20,000.

 

Cost of fuel: Says Sunny Kataria, vice president-auto, OLX India: “If you look at the ARIA (Automative Research Association of India) certified mileage of the petrol and diesel models, you see a difference of around 20 per cent. This translates into cheaper running cost for the diesel variant.”

The number of kilometres you plan to drive is a crucial factor to consider. Says Puneet Gupta, an analyst at IHS Markit: “If you plan to drive more than 100 km a day, it's best to go for a diesel car. On the other hand, if you plan to use the car occasionally, go for the petrol variant.”  And due to the pandemic, it is expected that cars will be driven less. The math works as follows. Assuming you drive about 100 kilometres a day, the total run is 36,500 km annually. Take the average mileage of a car to be 23.4 km/l for diesel and 19.1 km/l for the petrol version. So, total fuel consumption would be around 1,911 litres of petrol and around 1,559 litres of diesel. The approximate cost of petrol is Rs 80.45 per litre and Rs 80.53 for diesel. If you do the math, you end up spending about Rs 1,53,015 on petrol and Rs 1,25,467 on diesel each year. Hence, you save Rs 27,548 each year on a diesel car. But this math is very case-specific. As far as insurance goes, the premium is slightly higher for a diesel car than for its petrol version.

Cost of loan: Most cars are bought on loan. Hence, you can only arrive at the real cost by taking into account the cost of the loan as well. So, if we compare a Rs 5 lakh (diesel car) and a Rs 4 lakh (petrol car) and you pay a rate of interest of 10 per cent per annum for a term of five years, the total cost of the diesel car will come to Rs 6.37 lakh, while that of the petrol variant will come to Rs 5.09 lakh. The relative difference is Rs 1.37 lakh for diesel and Rs 1.09 for the petrol car. In other words, taking a loan makes a diesel car even costlier.

Usage period and resale value: Another factor one needs to look into is that diesel cars are permitted to run for ten years only in some geographies. Petrol cars can be run for 15 years. People are worried that the same rule may apply pan India someday. So, before choosing a variant, think about the number of years for which you wish to own the car.


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