Petrol Car or Diesel Car?

[rksingh1]

For almost every new car buyer, one of the most common question to answer is which fuel option to pick? There are multiple fuel options available in todays world, however the question of Diesel or Petrol is the most dreaded one. We have seen multiple threads in Gearhead and at many places all over the Internet asking suggestions for which vehicle to buy and whether to go for Diesel or Petrol.

Decision Making is a very scientific method which can help us answer both the queries, i.e, which car to pick from a set of definite options with defined constraints, and which fuel type to go far with economics kept in mind. Here in this thread, we'll try to answer the second question.

I'll try and bring in mathematical calculation to show which fuel option might work for you best. Before we begin, lets list down few assumptions:

• The calculations are purely on finances, nothing else
• If you have personal liking for any particular fuel type, you'll not be much interested in numbers here
• Buyer is just an ordinary person out in the market to pick either a diesel or petrol non-commercial car.
• The calculation takes certain assumption on car usage and other parameters,though they are expected to differ from person to person.

There are many diesel engine fans ought there. I doubt they would even be bothered to read it.

Well, if you are still reading it means I can cut the crap and get straight to business.

When we go for a diesel variant of a car, we typically pay a premium price compared to its petrol counterpart. The difference is in range from 1.2L to 2.5L depending upon the model. This is what a car buyer sees upfront and does his comparison. But wait, there are few other things as well. For better understanding, let me take up a practical example and go about things.

Maruti Swift mid variant : VXI(Petrol) and VDI(Diesel)

Ex-Showroom price in Chennai are 5,09,000 and 6,28,000 respectively. Difference of 1,19,000! This is what we see and compare. However is that correct? Shouldn't we compare with the difference of their on road prices. Thats the actual diffence in amount that we need to pay. Diesel cars, with higher price tag attract higher road tax and insurance amount too.

The on road prices of cars come to 5,71,000 and 7,09,000. Difference of 1,38,000! So, is this the exact extra amount am I paying for Diesel car? Not entirely. If you are taking a car loan (most of us take it - it has numerical benefits too apart from assistance in affordability), then understand that on this extra amount of 1,38,000, you'll need to shell out extra interest too. For this car, let say that our fictional buyer has 3L cash with him, that would mean if he goes with petrol variant, he'll be needed to take loan of 2.71L, whereas for Diesel, the loan amount will be 4.09L. This would increase the total interest that he is needed to pay out. I did some calculation, and I understood that the total amount jump is in the range of 25-40% of the increased amount depending upon duration of loan and interest rate. For our assumption, lets see that the jump is in 25% range of total for the sake of us to take little liberty in favor of diesel. Should we add this to the cost of procuring diesel vehicle too? I mean had we gone for petrol, I'd have not been needed to pay that extra interest on my car loan.

Lets be logical and add 25% to the cost as well - total is coming to 1.72L.

Gosh! Did you ever think this far? The difference that looked like 1.19L to begin with is actually 1.72L. If I go for Petrol variant of this car, I can easily save 1.72L money for self. So is that all that I am managing to save, (or pay extra)? Is that the real monetary difference in petrol and diesel car? - Not exactly.

Lets make one more assumption around the running life of the car. For an average user, it typically lasts for 5-8 years. There are people who make their cars sit in garage in just 3 yrs and there are few others as well who run the car for 10-15 years. Lets not go to those extremes and take a rought estimate of car life to be 6 years, which I dont think is a bad idea. While we are at it, lets assume the car to have average annual running of 15000km. Meaning the car will run for 90k km roughly in its life time. Thats like 1250km every month. Roughly 40km every day non stop!

I guess this will be the case with most of us. Slightly more, slightly less! May be in some year, car will run 30k KM, however in someother year, it might clock only 6k KM in total. All in all, the assumption is that car runs for 1L KM post which, most of us abandon our cars anyway and move on.

Now, lets think that our fictional user actually went for Petrol. Meaning, he managed to save 1.72L with himself. If he puts that money to a simple FD, then this saving that he did will result in more than 9% per-annum return to him. If you are smart enought, you can get a better return than a simple 9% long term FD on your saving. Shouldn't we include this earning as well? Afterall, its a benefit or extra money you'll get if you chose to go with Petrol variant. If you had taken loan, than this retun will accrue to you in form of saving via installments and assuming you have gone for 2 or 3 yr loan, your entire saving will accrue to you in the same duration. For the sake of negating this interest acruing, lets assume that return that you'll get will be a bare minimum of 8% compount. All FDs give you compound interest. Below is summary of all the calculations we've done so far:

Annual Average Run	15000
Running Period	6
Price Difference in model	119000
Normal Road tax percantage of the price	16%
Including Road Tax	138040
Loan Interest Increment Percentage	25%
Including Interest Amt	172550
Price that you are paying Upfront for the Diesel Car	172550
Average Interest earning on this Amount	8%
Total return Expected for duration of Running Period / Total Saving	273815

Your total saving is actually 2.73L!

Finding it unbelievable - eh? Go through the calculations once again if you wish to see if there is any thing wrong with it. There isn't! What looked like a mere 1.19L difference in Petrol and Diesel car, is basically a 2.73L long term loss thats getting incurred immidietely. Though we dont feel it as the entire loss is spread over years.

Now lets do a simple petrol and diesel cost comparison too, to understand the benefit in favor of diesel.

	Petrol	Diesel
Rate Assumed	70	50
Mileage	15	18
Annual Fuel Consumption	1000	833.3333
Annual Fuel Cost	70000	41666.67
Lifetime Fuel Cost	420000	250000

I have taken an average cost of 70 and 50 for petrol and diesel respectivel for through out the 6 year period and the mileage assumed is 15 for Petrol and 18 for diesel. Again folks, these are assumed to an average figure for 6 year. Those simple assumptions and calculations say that after the life of car, I'd have spent 4.2L on my petrol and 2.5L on diesel cost. We are also assuming that other maintenance cost of both the cars are constant. This tells us that the total saving I'll do on fuel for a period of 6 years would be around 1.7L!

Lot of us would still be thinking that, hell, with better and higher run, this number will definetly look more positve. Yes, thats true! So, I increased the annual run to 25000km and life to 5 years. Total car running for 1.5L! I mean I doubt any non commercial guy would take his car to any more extreme than that. Even in that situation, the calculations come as :

	Petrol	Diesel
Rate Assumed	70	50
Mileage	15	18
Annual Fuel Consumption	1666.666667	1388.889
Annual Fuel Cost	116666.6667	69444.44
Lifetime Fuel Cost	583333.3333	347222.2

Difference of 2.36L! I doubt we can ever achieve any more than this.

I am attaching the excel file here for you to download and play around with numbers. If you have read this post, I doubt you'll need any instruction to use it. Go ahead and try out various combinations with it - if you get any other interesting result - do share with us all.

With my this post, I sincerely don't wish to encourage or discourage in buying any particular vehicle, neither I want to present any biasness toward any fuel type. All I wanted to do is to present some numbers - hope it was all worth the work!

Cheers!

[mclaren1885]

Brilliantly put across Ravi! Thanks a ton for taking time out to write this wonderful thread.

This should bring out a clear perspective each time we get a query when people get confused what fueled car to buy.

My next car is mostly going to be a Diesel too! Not because Diesel is cheaper! But because that additional torque is just way too addictive.....

[dj.nish]

Brilliantly put across Ravi! Thanks a ton for taking time out to write this wonderful thread.

This should bring out a clear perspective each time we get a query when people get confused what fueled car to buy.

My next car is mostly going to be a Diesel too! Not because Diesel is cheaper! But because that additional torque is just way too addictive.....

Or it could be a turbo petrol too! I know what turbo addiction does to am enthusiastic driver!

[rksingh1]

My next car is mostly going to be a Diesel too! Not because Diesel is cheaper! But because that additional torque is just way too addictive.....

That's why people like you are in exceptions list!

I hope the template attached be of some use to people! It might be a real handy tool to get the comparison going.

[Ripper]

Shouldn't we also factor in the greater depreciation for petrol cars, for when it is sold?

I'll be buying diesel too. Irrespective of what my running is. Still, nice thread. Made me think.

[rksingh1]

Shouldn't we also factor in the greater depreciation for petrol cars, for when it is sold?

I assume car resale value is being talked about here. A cars resale value is always proportional to its original value. A diesel car is expected to have higher resale value due to its original cost too; not to mention the general psychic of masses help it as well.

For our Swift VXI vs VDI example, I don't think that after 4-5 years, when the cars are getting resold, the difference in price would be more than in the range of 1L max!

[mclaren1885]

Shouldn't we also factor in the greater depreciation for petrol cars, for when it is sold?

For our Swift VXI vs VDI example, I don't think that after 4-5 years, when the cars are getting resold, the difference in price would be more than in the range of 1L max!

I do agree with Ripper. I have a ton of friends who all sold their petrol Swifts. Say the OTR price they paid was 6L for the petrol car. When they sold it, they lost about 2.5-3L from the OTR price only because it was a petrol. While most people including me who sold our diesel Swifts lost about 1-1.5L only.

Resale prices of petrol cars has dropped phenominally these days. Special the cars like ANHC, SX4, Fiesta 1.6, Laura P etc. It's only the low end commuter petrol cars like the Alto, i10 etc that still continue to do without the dent in resale because of their price factor and VFM offering. Not everyone can afford to buy a diesel car these days!

[vasishta.sushant]

I still see that the actual savings, in absolute terms, isn't too much.

Even though you have quantified all the major aspects, I bet you can't quantify the feeling that you get when you get a tankful in less than 2 grand, good enough for running 750Km.

I say I bought 'piece of mind' after buying a diesel engine. No more do I get thoughts like "6 Rs per Kilometer, I'd better not visit the milk booth".

[rksingh1]

Nomad, the interest calculation will happen twice but the calculation done is not entirely accurate. There is dual calculation, however I have tried not to take extra benefit for Petrol by decreasing the rate of return and assuming lower change on interest. But I do agree, there might be variation of few % here and there.

vasishta.sushant, psychology is the thing here. We can get all the good feeling that we want, but the point should be, is it actually beneficial to me in long run.

As Nomad already quantified in terms of annual run of 18k being the break-even distance for him, we can be little logical in choosing the fuel option for self depending upon our criteria. Again, the purpose here is to enable confused people to decide and pick a fuel option. People who have already fixed idea of fuel option would find much help from the post here.

[roadracer]

This thread is very useful to someone who is clearly confused in choosing between a petrol and diesel vehicle.

Good post rksingh1

The person who is going to buy a car should work out his running, money etc and then decide what vehicle to buy.