Confused Buyer : Petrol Vs Diesel Cars. Review on Petrol Vs. Diesel car

Diesel engines are talk of the town these days. Diesel does have low price as well as high mileage, so a double benefit. I though of doing a mathematical analysis using some basic business concept I learned in my MBA to know which car(diesel or petrol) is better for a person who drives around 10, 000-15000 kilometers per year in city of Bangalore.

The summary is an average consumer will be better off buying a petrol car.

Part 1: consumer profile

Let’s say our consumer is Rajesh Adiga, who stays in Kormangla and drives to Electronic city to work around 15 kilometers one way. Rajesh is also married and his wife throws tantrums every weekend if he keeps her at home, so he needs to accommodate some travel during the weekend too. So here is how a happy Adiga family total monthly kilometer consumption looks like:

20 days office travel, 30 kilometer(two way)= 600 km

3 weekend trip to a mall or forum( 15 km two way)= 45 km

2 shopping / no entertainment travel( 20 km two way)= 40 km

1 long trip per month to Mysore or coorg etc( 200 km return trip)= 200 km

2 miscellaneous random trips of 15 km each= 30 km

So total monthly kilometer consumed= 915 km

So total for year= 10980 km

Wait Mr. Adiga is not basically from Bangalore, his parents still leave in one of the lovely small towns or villages in Karnataka. He makes a trip home once in 6 months covering a distance of 250 km one way or around 1000 km per year.

So total kilometer per year= 11980~ 12, 000 km.

Yes the happy Adiga family based on my calculation will travel around 12000 km per year in their car.

Part 2: Some facts and assumptions

Well 80% of Mr. Adigas travel is in Bangalore only 20% is on highways. Don’t call hosur road a highway a snail walk faster than cars on this road.

So if a diesel car gives 15kmpl in city and 20 kmpl on highway, the average mileage from Diesel car is 16 kmpl.

Same way if a petrol car gives 12kmpl in city and 15 kmpl on highway the average mileage for petrol is 12.6 kmpl.

At present petrol is priced around 50 per liter and diesel around 38 in Bangalore.

If you look at cars priced between 4 -8 lakh the on road diesel car costs 1 lakh more than petrol car and you must keep at least Rs/- 1000 per year for extra maintance for diesel engine.

Now at 8% interest rate this extra 1 lakh you paid for diesel could have earned 8000 per year in bank fixed deposit interest rate.

So final saving per year by diesel engine=(12, 000(50/12.6)-(38/16)-1000-8000= Rs/-10, 000

Part 3: solution proposal

So Mr. Adiga saves 10, 000 per year if he buys a diesel car compared to a petrol one.

But wait a movement he has paid 1 lakh more for a diesel car so this is just 10% of that amount. So actually only in 10 years Mr. Adiga will be able to recover his extra cost of diesel car compared to petrol car from the same model.

So here is my conclusion I have seen the average family consumer in Bangalore runs his car around 10-15 thousand km per year(based on the second hand car data from some websites) and it would be better for him to go for a petrol car compared to a diesel car even if he wants to keep it for around 10 years. The less noise / vibration and low maintainace for petrol is additional benefit.

Well to be frank our Mr. Adiga still prefers to wait for Bangalore metro construction and will choose to defer his car purchase in recession but if you have a plan “Go Petrol”.

Cheers

Sanjay