Cost Benefit Analysis

Hi All,

I have applied some basic math and done a cost benefit analysis where in I have compared Figo with similar choices of cars. Kindly note that this excludes the servicing costs where the unbeaten Maruti offers the least costly spare parts and other brands are still catching up. However since Ford has developed local manufacturing and sourcing, the servicing costs are likely to go down.

Lets look at the analysis

I took the average on road price of 4-5 brands and compared it with the cost of Figo. I have looked at the manual petrol top variants of each brand that include safety features. The average price of other models in around Rs. 6,90,000 and Figo is 5,82,000 which gives up-front savings of 1,08,000. The travel distance over a 5 year period is assumed to be around 35,000km. Average mileage of other cars is around 16.5 kmpl whereas I have considered a low figure for Figo at 11 kmpl.

Given the distance and mileage (assumed it to be standard), the petrol required will be 2121 liters and 3182 liters for other cars and Ford Figo respectively. Current approximate petrol price is Rs. 70 per liter. Assuming it increases by Rs. 10 each year and reaches Rs. 110 in the final year, the average price over the 5 year period comes to Rs. 90 per liter. If we multiply this price with fuel required, it comes to Rs. 1,90,909 required for other cars where as Figo requires Rs. 2,86,364 which is an excess cost of 95,454.5, still resulting in a saving of approximately Rs. 12,000 (1,08,000 - 95,454.5) on the up front cost.

Lets look at the petrol price impact. I have assumed the price to increase by 10 each year i.e. Year 1 - 70, Year 2 - 80, Year 3 - 90, Year 4 - 100, Year 5 - 110 with standard mileage of 11 mpl across the years

Since the car is new, you drive little less in the first year increasing it till the third year and thereby reducing it gradually till the 5th year. The usage in kms each year is 6,000 - 7,500 - 9,000 - 6,500 - 6,000. With the average mileage of 11 kpml and price each year given above, the costs each year is - 38,181 - 54,545 - 76,636 - 59,090 - 60,000.

With your up-front saving of 1,09,00 you deduct the first year cost of 38,181 and invest the rest at 10% offered by any good investment avenue. Hence the saving of Rs. 69818.18 + 1 year interest of Rs. 6,981.81 comes to 76,800 at the end of 1 year. Deduct the second year costs from this and save the rest. The resultant figure is Rs. 22,254.55 + Rs. 2,225.45. There will no more money left to invest as the savings will be less than the cost.

Hence the final saving number is Up front cost saving + Interest earnings = 12,545.45 + 6,981.81 + 2,225.45 = 21,752.

I have not taken any servicing costs into account, which will have an impact on the saving. Just wanted to bring this to your notice. Any feedback / suggestions / comments / changes / improvements are welcome.