Do you want to know the cost of using car for a travel of 1 kilometer?
Case Study: Calculation of Cost per Kilometer for Car Usage
Introduction
This case study provides a detailed calculation of the cost per kilometer for a car purchased at ₹10 lacs with a combination of own capital and a bank loan. Various factors such as depreciation, fuel, maintenance, insurance, and other expenses are included to determine the per-kilometer cost, assuming the car is driven an average of 60 kilometers per day over a lifespan of 8 years.
Data and Assumptions
1. Car Purchase Price: ₹10,00,0002. Capital and Loan Structure:
- Own Capital: 20% (₹2,00,000)
- Bank Loan: 80% (₹8,00,000)
- Interest Rate: 11% per annum
4. Insurance: ₹25,000 per year
5. Fuel Cost:
- Cost per Liter: ₹110
- Mileage: 18 km per liter
6. Tire Replacement:
- Cost per Set: ₹20,000
- Replacement Interval: Every 40,000 km
7. Oil and Related Expenses:
- Cost per Change: ₹7,000
- Interval: Every 10,000 km
8. Servicing Cost:
- Cost per Service: ₹550
- Frequency: 4 times per year
10. Car Usage:
- Average Distance Traveled Daily: 60 km
- Total Annual Distance: 60 km/day * 365 days = 21,900 km
- Estimated Total Distance over 8 years: 21,900 km * 8 = 1,75,200 km
Fixed Costs
1. Depreciation Cost:
- Annual Depreciation = Purchase Price * Depreciation Rate = ₹10,00,000 * 0.15 = ₹1,50,000 per year
- Total Depreciation over 8 Years = ₹1,50,000 * 8 = ₹12,00,000
- Depreciation Cost per Km = ₹12,00,000 / 1,75,200 km ≈ ₹6.85 per km
2. Insurance Cost:
- Annual Insurance Cost = ₹25,000
- Total Insurance over 8 Years = ₹25,000 * 8 = ₹2,00,000
- Insurance Cost per Km = ₹2,00,000 / 1,75,200 km ≈ ₹1.14 per km
3. Interest on Loan:
- Loan Amount = ₹8,00,000
- Annual Interest = Loan Amount * Interest Rate = ₹8,00,000 * 0.11 = ₹88,000
- Total Interest over 8 Years = ₹88,000 * 8 = ₹7,04,000
- Interest Cost per Km = ₹7,04,000 / 1,75,200 km ≈ ₹4.02 per km
Variable Costs
1. Fuel Cost:
- Fuel Consumption = 18 km/liter
- Fuel Cost per Km = ₹110 / 18 ≈ ₹6.11 per km
2. Tire Replacement Cost:
- Tire Replacement Interval = 40,000 km
- Number of Replacements over 8 Years = 1,75,200 km / 40,000 km = 4.38 (rounding to 5)
- Total Tire Cost = 5 * ₹20,000 = ₹1,00,000
- Tire Cost per Km = ₹1,00,000 / 1,75,200 km ≈ ₹0.57 per km
3. Oil Change and Related Expenses:
- Oil Change Interval = 10,000 km
- Number of Changes over 8 Years = 1,75,200 km / 10,000 km = 17.52 (rounding to 18)
- Total Oil Change Cost = 18 * ₹7,000 = ₹1,26,000
- Oil Cost per Km = ₹1,26,000 / 1,75,200 km ≈ ₹0.72 per km
4. Servicing Cost:
- Annual Servicing Frequency = 4 times per year
- Cost per Service = ₹550
- Total Servicing Cost over 8 Years = 4 * ₹550 * 8 = ₹17,600
- Servicing Cost per Km = ₹17,600 / 1,75,200 km ≈ ₹0.10 per km
5. Average Annual Maintenance:
- Total Maintenance over 8 Years = ₹25,000 * 8 = ₹2,00,000
- Maintenance Cost per Km = ₹2,00,000 / 1,75,200 km ≈ ₹1.14 per km
Total Cost per Kilometer
Summing up all costs: