Why INDIANs with Low- income are buying High price Cars?

In recent years we have seen a massive change in this trend, as now Indians are actually spending way above their limits for these cars. But Why?

Why 80% of the cars in India are bought in EMI / Finance?

Only 7.4 crore people in India pay taxes. But the people who come under tax liability in India are only 2.24 crore. This means only 1.6% of the Indian population earns more than 5 lakhs per year. But despite this fact, 6.64 crore families in India own a four-wheeler. And that’s why, according to a report, around 80% of the cars in India are bought through finance firms. This means some type of loan is to be availed for taking a car. This report also tells that people in India take a loan of up to 90% of the price of the vehicle. For example, if the price of any car is INR 10 Lacs, the amount of INR 9 Lakh is paid through a loan. And there is no big deal in this, even though buying a car is a huge decision for the people in India.

Why Vehicle loans are increasing in India?

Even we can observe that low-income individuals buy cars according to their needs. But the problem starts when you start buying a car that is completely out of your budget. These things are continuously increasing in India. And that’s why the report of some creditors says that the defaults on vehicle loans are increasing. And these have touched the sky during the COVID-19 pandemic.

A big reason behind this is that the people in India are not buying cars according to their needs and budget. But to maintain their social status. And they think while buying a car that if four people look at our car, they must say, Wow! What a car.

How did SUVs become a best seller in India?

Here comes the SUVs. These look bigger in size and provide a better social status. And unlike ten years ago when small used to be bought by more people, that means hatchbacks. Today, a SUV has captured more percentage of the Indian market. And today 43% of the market belongs to SUVs or cars that look like SUVs. It is completely more than any other type of car.

This means the monopoly of these cars has been created. But not only SUVs, now it is quite evident in India that people like buying feature-rich or higher variants of cars more. According to a report, the preference for buying a feature-rich car was only 17% in the year 2016-2017. And today that has increased by 24%, which means in the year 2021-22. But I believe that all the features that are provided in the mass market cars are not of much importance. But these are added in the cars only because you look cool through these, like electrically adjustable seats, wireless chargers, or sunroofs.

How Sunroof car market increasing day by day?

And if I specifically talk about sunroof, according to a report published in the Times of India, in the past five years, the demand for buying a car with a sunroof has increased a lot. This could be known by the fact that in the total number of cars sold in the year 2019, only 3.5% of the cars had a sunroof.

But in the year 2023, this percentage has increased by 26%. This means there is an increase of around 642.8% from 2019 to 2023. And today, one car out of every four vehicles that is sold today has a sunroof. Now, clearly, the Indians have become obsessed with the sunroofs. And a bigger sunroof is better, like the one available in the Hyundai Creta. But do you know that this sunroof is of no major importance to the Indians? We will discuss this as well.

Why sunroofs cars are not useful in Indian?

We need to look at the report published by Ford. The report tells that in majorly cold countries or the countries that receive less amount of sunlight, people in these countries generally opt for sunroofs in their cars.

Like, 15% of the buyers in Norway opt for a sunroof in their cars, 11% in France, and 10% in Germany. But it is also mentioned in this report that the countries where the majority of the days in the year are sunny, the countries that are generally hot, people in these countries do not like to buy a car with sunroofs. Like, only 5% of the people opt for a sunroof in their car in Spain, only 3% in Italy, and only 2% in Greece.

Now, the point to consider is that even though these countries are hot in comparison to the European countries, but still, they are not as hot as India. But still, we could observe that the Indians are completely mad about the Sunroofs. And there is more demand for sunroof in India in comparison to these countries.

Even though a sunroof is not available in the base model, this means if you want to have a sunroof in your car, you need to pay more and have to rush to the higher Variants. Look, I have used the sunroof here only as a matric to make you understand.

How do people in India think when buying a car?

We become ready to pay more for a car with a sunroof because this adds up to our social acceptance and status. Because everybody knows if the car has a sunroof, this means the person has paid more to buy this particular car. And even the car yells that I belong to the higher Variant. But there are not only unnecessary features that enhance your social status. But the bigger cars even do that, that means SUVs.

As I told you in the introduction of this article, the senior executive director of Maruti Suzuki said that the contribution of the SUVs has increased to 40%. And this share was only 19% a few years ago. The chief of sales of Kia Motors in India, Myung-Sik Sohn said that the demand for SUVs in India has increased a lot.

He also said that in the past five years, they have sold 30,000 units of its Sonet. But do you know about the amazing fact that 47% of the total cars in these were the top trim models? Shocking right?

Now let’s consider people buying these cars looking at their practicality. SUVs do not look claustrophobic. These have a good ground clearance. And even a good boot space is provided in these cars. And look these features are also available in hatchbacks and sedans. Yes, we do not get the feeling of sitting at a height in sedans. But the rest of the things are definitely available.

But do people spend about INR 6-7 lacs more for SUVs only because of sitting at a higher height? And even in the SUVs that are not SUVs truly, these are only front-wheel-driven and these SUVs do not provide any off-roading capabilities. Look, it could be understood from these facts that people generally buy these SUVs because this enhances their social status. But everybody in India wants to maintain a social status, whether they can afford an actual SUV or not.

How did Renault Kiger and Nissan Magnite come into existence?

That’s why cars like the Renault Kiger and Nissan Magnite came into existence. Renault and Nissan have tried a lot to offer an SUV at the price of a hatchback. And they have even done this. The base model of Nissan Magnite comes to the price of the Hyundai i10. And it ends at the price where SUVs like the XUV 300 start. Now, even though you get a car that looks like an SUV at a low price, in real life, you have to pay a lot more than this in real life for these cars.

What are the Problems with Low-budget SUVs?

Now, I should not mention here that a completely useless engine is provided in these cars.

Their steering response is very poor. Boring interiors are provided in these cars. A poor fit and finish are provided in these cars. Many cars generate complaints. One of my friends even told me that the car leaks from the door while driving in the rain. But still, Kiger and Magnite are the most selling cars of Renault and Nissan respectively because you get the looks of an SUV at the price of a hatchback.

Thar is only launched for Off-roading and Adventure

One more thing could also be observed in this whole game of SUVs, the bigger the SUV bigger the reputation.

And the point of status is completely justified by Thar 4×2. When Mahindra and Mahindra launched Thar, they targeted a niche audience from this. Mahindra and Mahindra thought that people would use it more for off-roading or they would buy this vehicle for adventure purposes. But when Mahindra and Mahindra announced this vehicle, Thar was booked so much that Mahindra and Mahindra did not think about this.

And this car went overbooked every year. Even though Thar only has 2 doors and the mileage of its petrol engine is very poor, still, it is still overbooked. Mahindra and Mahindra realized that many people could not buy this car for off-roading. This meant that people were buying this car only for its road presence. And keeping this in mind, Mahindra and Mahindra also launched Thar 4×2. This car does not have any off-roading features that are available in Thar 4×4.

But yes this has one superb feature, due to this people buy Thar, and it is the road presence of Thar. And if the road presence of Thar is not the only reason to buy this car then you think to yourself, are cars with better ride quality, performance, practicality, and better mileage not available in India?

Buying this type of car is definitely not good for the people who could not afford a car, or who could not afford an expensive car. And especially when we talk about a new car, we should also think about Melting Ice Theory. Melting point theory tells us that just like ice starts melting when it is taken out of the freezer, similarly, the car starts losing its value as soon as it is taken out of the showroom.

And a brand-new car could lose its value by up to 60% within three years of its purchase. Yes, it does not apply to every car. But it is observed with many cars. A car is never an asset we all know that. It is definitely a liability. And sometimes a huge liability. The thing worth bothering about is that to buy a depreciating item, you need to take a loan. This means a thing that loses its value rapidly, you are taking a loan for that and paying its EMIs.

And that’s why finance companies are progressing rapidly. Due to this progress of finance companies, we can observe that banks have severely reduced the loan eligibility criteria. I found in my research that some banks are offering loans to individuals who have an annual income of only 2.4 LPA. And there are several other criteria as well. It doesn’t depend on the companies.

How to afford a car with 20,000 INR salary?

I understood that people in India make the decision to buy a car after getting social approval. This social approval is received when you tell the public through your Instagram handle that you have watched Oppenheimer at IMAX, and that too while lying in a lounge. But if you are similarly buying a car, you are making a big mistake. If you ask me personally, I love fast cars. They have superb handling, just like Polo GTTSL. But what could we do? Polo did not provide any respect to the people in comparison to an SUV. Hence, Volkswagen discontinued its Polo.

Don’t Buy a Car for Status

Look, I simply mean that if you could afford a car, buy anything you want. But if you cannot do that, don’t push yourself after hearing or watching someone. Buy a car that is absolutely right for you, the car that looks practical to you, and you also like, whether it is a hatchback, sedan, or SUV.

Buy that car only. Don’t think about your social status. It will definitely be loss-making for you.

What are the Benefits of Buying Used Cars?

And if you think you like a particular car, whether it is compact or big in size, buy a used car. As I told you earlier, a car loses a high amount of its value in the initial 3-4 years. Today there are many websites like Spinny and Cars 24 that provide absolutely clean used cars that also come with a warranty for a complete year.

Look, the option of buying a used car is absolutely better because when you buy a new car, it depreciates rapidly in the initial 2-3 years. But when you buy a used car, it does not depreciate as rapidly, and it might happen that when you go to resell your used car in the market, you might get a price that is near to the price at which you bought it.

Because depreciation is less and inflation is increasing. Hence, think well and choose wisely.

Conclusion

Now after reading this article till now, you should understand that social status becomes a huge factor in India when people go to buy a car. And this is not at all a bad practice. If you can afford a bigger-size SUV, you must show off your car. A big reason behind this is that the people in India are not buying cars according to their needs and budget. But to maintain their social status. And they think while buying a car that if four people look at our car, they must say, Wow! What a car.

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