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The Pricing Structure of Vehicles in India

​Buying a vehicle is a very involving process. You need to dedicate a lot of time to research and choose the vehicle that fits your needs. Then you have to arrange money for the vehicle. This can be from out of pocket or from a loan. You will have to understand the pricing concept of the vehicle before you buy one. You must have heard the terms ex-showroom price and on-road price of the vehicle. The two are very different, and the on-road price of a vehicle is always higher than the ex-showroom price of the same. Let us look at both in detail.

What is Ex-Showroom Price?

The ex-showroom price of the car or bike is the price set by the automaker along with the GST added to it, as per current government notification. It is the cost of the tangible items that you will get from a car or two-wheeler showroom.  In simpler terms, it is the Maximum Retail Price of the vehicle you are purchasing. Remember that it does not cover the charges levied by the RTO to make your vehicle eligible for being driven on the road.

What is On-Road Price?

On-road price is the actual amount of money that you have to pay to be legally able to drive the vehicle on the road. You will have to buy the vehicle, which is covered in the ex-showroom price. Over and above this, you will have to register the car or two-wheeler, for which you pay registration fees, road tax and number plate charges. Then you will have to buy car insurance or two-wheeler insurance as the case may be.  This cost is included in the on-road price. Any accessories you buy or any anti-theft devices you install from the dealer are also covered in the on-road price.

Why is On-Road Price More than Ex-Showroom Price?

On-road, the price includes dues that apply because of the government regulations on registering and running a vehicle. This is why it is higher.

Key points of difference between ex-showroom and on-road price

  1. Ex-showroom price covers the cost only to buy the vehicle; on-road price is to legally run it.

  2. Ex-showroom price goes to vehicle maker and dealer, on-road price includes RTO and car or two-wheeler insurance​ component in it.

  3. Motor Insurance is given based on ex-showroom price but is a part of the on-road price.

  4. Auto loans are generally calculated based on on-road price, not ex-showroom price

  5. Only car price can be negotiated in ex-showroom price. You can look for insurance discounts in on-road price but RTO components are fixed by the government and cannot be bargained.

  6. The ex-showroom price is not the final price of the vehicle, the on-road price is the final amount you have to pay.

Example of calculation

Let us take a simple example to understand the whole concept. You go to a dealer and finalize a car that has an ex-showroom price of 5 lakh Rs. Add to this, the cost to register the car, a high-security registration plate and road tax payment; all totaling up to approximately 10%. Another 10% should also be added to it as the cost of car insurance, making it Rs 6 lakhs on-road price.

How to Get Best On-Road Price?

To get the best on-road price, you will have to look for deals and bargain on all the components, which are not going to the government including motor insurance cost and ex-showroom price of the vehicle. Government charges are fixed so nothing can be done there.

Always remember that every rupee you save in buying a vehicle is a rupee you can divert to its running and maintenance. So be ready with all price info, shop around and haggle as much as you can.