One day while traveling in a car with my brother in law and friends we started having discussions on which car is the best? Now to tell some car as the best we had to look into a whole lot of things and the important one was the price.So we kind of settled on which is the car we should be buying if we were buying for the first time and with our own money. So the BMWs, Mercs and the Audis were out of the picture. For me almost all cars were out of the picture as I was participating in this discussion with no job and a huge education loan on my head. But I wanted to be in this conversation and I imagined myself in my old job.
We started discussing from hatchbacks going as far as SUVs like Innova and Scorpio. My brother in law had owned Scorpio and owned an Innova. According him Innova had not broken down had a good engine and good handling. The image of quality that is associated with Toyota. When it came to scorpio it was mentioned it had good power can hit high speeds easily and was rugged. Exactly the things Mahindra wants to associate itself with. So know I began thinking whether he is feeling these things because that is what he had in mind before buying them or was it unaided and unbiased opinion. A few days ago I saw my friend praising his Ford Figo on Facebook. I began to think as long as a car doesn't breakdown at crucial times the things related to feeling like great power, quality are more or less derived from brand associations.My brother in law did not remember his Scorpio breaking down but when asked the first thing that came to his mind was if you are looking for power Scorpio was the one though he had no problem with his Innova when it came to hitting high speeds.
Lesson number 1 for me was it is hard to differentiate power and handling etc unless I am real expert at it. I did go in both Innova and Scorpio and really couldn't differentiate and it's the power of peer opinion pressure that made me conform to the opinion of Power- Scorpio, Handling-Innova
Next the discussions rolled on to hatchbacks for many of us buying hatchbacks the mileage was a big factor. Even for the same car diesel and petrol variants make a lot of difference when it comes to buying. My brother in law argued the Diesel variant of the Punto he had bought was more value for money than the petrol variant. I decided to analyze this claim. His reason was to go to bangalore and come back it takes Rs.1000 of petrol and Rs.500 of diesel. Now the difference for a Petrol model and Diesel model is Rs.1 lakh. The difference in mileage is 4km/litre (16 kmpl vs 12kmpl). The difference in petrol and diesel is Rs 10 per litre. So for every litre a diesel car gives a saving of Rs.22.5 (10+4/16*50, assuming petrol price is Rs.50)over a petrol car.
Now to the interesting fact: To breakeven with Rs.1lakh differential a diesel car should consume 4444 litres of diesel or should cover 71104 Km. Now I asked my brother in law how long does he keep his car the answer till it reaches 60 thousand to 7 thousand km. I have not taken the present value of the 1 lakh differential. So rational decision making says if people are going use cars mostly in city and sell it once it reaches close to 70,000 km then they should be buying a petrol car
But it doesn't work that way the classic rule of "Segregate gains and aggregate loses" does work. People don't mind paying a high price initially if the gains are distributed and visible. A saving of rs 22.5 per litre does look significant (half litre diesel price) this is what was the difference between a Diesel and petrol car.
So even though a car is a high involvement category where people seek a lot of information and it is believed they take rational decisions. The decisions are not so rational after all....
6 comments:
1. the price difference betn petrol and diesel is Rs20 and not 10.
2. There are many more criteria to consider while buying a car, like price vs features, ASS(After sales & service) and so on...
3. The petrol vs diesel is actually a rational decision in most cases...people go for diesel only if their usage is more than 1k kms per month or so...so that the extra initial investment is recovered soon...the gap between diesel and petrol engines has converged over the years...diesel has moved over from a costly to maintain, underpowered image to successfully competing with the petrol even in the hatchbacks segment!
So Not all decisions are irrational...there are excel sheets circulating that give you all the information and help u decide...most people do consider all the options and decide, All these, in the case that u mention - first car with own money!
Vijay good observation I agree on some points and disagree on some others
1) Petrol-Diesel price differential is Rs 10 not 20.. Do checkout
2) Yes Aftersales service etc are important but this was for cars with ok number of service stations.People do look price vs features. But how many of these features are you really able to observe or evaluate when you drive? Very few so many times your perception plays a role
3) No petrol vs diesel is not rational. It will be rational not when you compare km per month but total kms u drive before u retire your car. As I gave you the numbers u need to drive at least 90,000km to break even by which I mean for the investment in a diesel car to match petrol. Only after that you can realize the profit. As you are saying people base their decision on saving per month over the life cycle of the car it is not rational
Yes diesel is moving on but when it comes to decision between cars of same manufacturer people select diesel for savings..
Probably there are excel sheets circulating and I have not seen it so can't comment. If possible do share that excel sheet
replies to your points :
1) When's the last time u filled fuel at a bunk? Petrol costs 62 and diesel costs 42, atleast in bangalore!
2)You dont have to drive the car to get to know most of the features!
Few Ex : Airbags, Electric Mirror adjustment, seat height adjustment, bluetooth connectivity...
3) And about the monthly usage, its difficult to estimate your long term usage! I mean over a period of say, 3 years!
But your monthly usage will be predictable, and usually be in the same range...so thats used as a benchmark usually...and the frequency of long trips done over a period is also factored in to arrive at the decision whether deisel really works out well...
Of course the numbers you mention are to be considered, but its not as straightforward as you mention. also, the breakeven happens around 60k kms, and not 90k.
Also,Some of the New age diesels are lightning fast, super efficient and offer better drivability than the corresponding petrols...
So all these are considered :)
I shall share the excel sheets which will help you get a better idea...
1) Agreed in bangalore it is Rs.20 difference. But its 10 in majority of cities in India.
2) I know the breakeven.. 90k was for a different car.. But for the car in question its 70k and will change with difference in petrol. For the decision to be rational it has to be over the life cycle of usage not on monthly or travel basis..Yes you can see the specifications. But the petrol and diesel argument was for the same car model.. Yes people do see specifications apart from safety features the argument is it is really difficult to gauge the power difference or certain other things.. Plus as you are seeing there are lot of reviews influence on people.As you yourself brand Ford Figo more than say a Volkswagen Polo.
I am not denying there is no rationality but it is morphed by feelings.
and i have observed that in case of a breakdown, the repair of a diesel engine costs much more than it's petrol counterpart...and the mileage drops significantly in case you don't get your diesel car serviced..plus the driving pleasure a petrol variant offers can never be experienced on a diesel one...(indica(d) v/s swift(p))
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