When you are purchasing a car or a motorbike, the price of the motor vehicle is very important. The salesman of the showroom will give a quotation of two prices; that is; ex-showroom price and on-road price.
The price you will purchase the car at is the on-road price. Therefore, when making decisions on your purchase it is very crucial to take into consideration these two prices.
When a person buys a car or vehicle from a showroom he should clearly know the difference between these two prices. Mostly, a salesperson avails the information about these two prices.
However, many people find it difficult to distinguish the two. Therefore, it is important that one knows the price he is to pay for his car. this article will clearly bring out the differences between on-road price and ex-showroom price.
Ex-showroom price which is also known as car supply price is the actual asset price like a four motor vehicle and includes the cost of dealer margin, manufacturer, and transportation.
Conversely, on road price comprises of the ex-showroom price and additional charges such as road tax, service and insurance charges. A buyer is expected to pay the on-road price that is about 10-20% more than ex-showroom price.
Ex-showroom price is considered to be the cost at which the vehicle dealer buys the car from a manufacturer. This price also includes the amount of tax that the dealer paid to the revenue authority for him or her to purchase the car.
In some situations, it also includes octroi tax that is incurred if the vehicle is to be purchased from an outside territory or region. The government charges exercise duty on all cars manufactured.
This price is determined by the vehicle manufacturer and varies from town to town.
Conversely, on road price is considered to be the actual price that the customer has to pay to the dealer to get the car. This price is higher than the ex-showroom price since it includes additional charges.
Lifetime road tax is included in this price. Registration charges, as well as insurance charges, are added to this price. This charges also needed to be renewed from time to time.
Logistics charges are also added to this price. Logistics charges consist of the transportation cost of the car from the warehouse to the showroom, sundry expenses, and number plate charges.
You should note that you cannot purchase a vehicle at the ex-showroom price but you can do so with the on-road price.
In other words, road price is the price at which the vehicle dealer will hand over the vehicle keys to you.
Ex-showroom price does not include statutory charges such as local or state tax, insurance carriages, freight, cost of accessories and many more others. Therefore, when you are buying a vehicle you have to pay for all these additional costs.
The vehicle dealer is the one who determines the on road price. This price is calculated using the original value provided by the vehicle manufacturer and not the discounted value.
Similarly, the insurance premium should also be calculated using the original value and not the discounted value.
While calculating this price, several aspects are taken into consideration such as the type of the vehicle, goods, date of registration, engine size and carbon (IV) oxide emission.
Earnings of Government and Dealers
|Government Earning||Dealership Earning|
|Excise Duty – Charged to Manufacturer in Factory Price – 12% to 27% basis Engine Size, Body Length of Car||Fixed Margin on Ex-showroom Price|
|State Entry Tax – Octroi Charges – Up to 4%||Commission on Car Loan Cases – 1.75% to 2.5% of Loan Amount|
|State VAT – 12.5% to 14.5%||Insurance Commission – 15% to 25% on OD Premium|
|Road Tax Charges Paid to State – 3% to 20% – basis Car Model, State Own Slabs||Very High Margin on Sale of Accessories – as high as 50% on Some Accessories|
|State Development Charges – Like MCD Parking fee in Delhi – Rs 2000 to 4000||Dealer Handling Charges – Rs 6000 to 8000 on Hatch, Mid Sedan. Rs 35000 on Luxury Cars|
If you would like to buy a car through bank financing, these two prices are very crucial.
The bank offers options on the use of both these two prices. Mostly, private banks issue loans of up to 85% of the ex-showroom price while government owned banks issue loans of up to 85% of the on road price.
However, the customer’s creditworthiness comes into play when getting the finance from the banks. The financier first checks your creditworthiness before financing for the car.
This causes the amount to be financed to vary from bank to bank. Therefore, it is necessary for you to consider these two prices when calculating the budget for your financing options.
Also, the interest charges vary from a bank to a bank.
Therefore, as you are purchasing a car, make your decisions while taking into consideration these two prices. This will ensure that you budget properly for your car purchase.
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