Buying Car? Check Out Tips from CA Shirnal Trivedi

Whenever you're thinking of buying a new car, the first question that comes to your mind is the scenario: should you make the down payment or pay in cash to buy a new car? If you're one of those who is confused about which option is better, let us solve your confusion with CA Shirnal Trivedi. She helped you to get rid of this problem. Also shared a simple hack with a perfect example that can help you get your car for free. How? Let's find out.

CA Shirnal Trivedi, a well-known finance influencer, gives some valuable details regarding buying a new car with cash or choosing a loan with a downpayment. Apart from this, she discussed a simple yet effective example, displaying how a balanced approach of partial loan and investment can give crucial financial benefits.

Suppose you are buying a car priced at Rs.15 lakhs. You have the option to either pay the full amount in cash or make a downpayment and pay the remaining amount through a loan. Let's assume a scenario highlighted by Shirnal Trevedi.

Down Payment or Cash:

Suppose you make a downpayment of Rs. 5 Lakhs and secure a bank loan for the remaining Rs.10 lakhs at an interest rate of 11% for five years. Over time, you will pay a total of Rs.13 Lakhs in five years to the bank through monthly EMIs, which will be up to Rs.18,000 to Rs.21,000 every month.

Instead of using the entire Rs.15 lakh for the car purchase, you invest the remaining amount worth ₹10,00,000 in mutual funds. It is assumed that an average return through mutual funds extends over ₹20,00,000 in five years.

Let's Understand Deeply: 

Total Car Cost:

• Downpayment: ₹5,00,000
• Loan Repayment: ₹13,00,000
• Total Cost: ₹18,00,000

Return:

• Earlier Investment: Rs.10 lakhs
• Final Value: Rs.20 lakhs 
• Net Profit: Rs.10 lakhs

When you compare these outcomes, you can simply find that your total spending on the car over five years amounts with interest is Rs.18 lakh. However, your mutual fund investment has grown Rs.20 lakh,  giving a net profit of Rs.2 lakhs. The returns from your investment not only cover the total cost of the car but also provide you with an extra Rs.2 lakhs in profit.

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Other than this, Shirnal points out one more thing this approach is especially effective if you can comfortably handle the monthly EMIs. If you can't, this can put you at a big financial loss.