Since I recently purchased a new car, my insurance has shot up quite a bit. I thought this would be a good time to look at my vehicle insurance inflation before the major jump. As I always say, it does not matter what the government published inflation numbers say, the question is how much is your personal inflation. Your corpus, the safe withdrawal rate and thus your financial independence depends on your inflation. So it is always a good idea to know your inflation numbers. In the past, I’ve written a few posts on our inflation of a few things. Here are some of them if you are interested:
You might know that I have two vehicles. One is Maruti Ignis and the other is a Hero Honda Pleasure. Earlier, I also had a Bajaj Pulser (motorbike for fun rides), a Honda City (for long drives) and Maruti Alto (for city driving). After retirement, I did not plan to have so many vehicles. I just wanted one car and one scooter. So taking that into account, I will calculate insurance inflation for those two vehicles using data from the past 10 years.
I only have insurance information for the scooter only from 2018. I just copied over the cost into the previous years. For Alto, I have the insurance information since 2012.
In 2012, the total cost of insurance for 2 vehicles is Rs. 5,200. By 2022, the expense has shot up to Rs. 24,847. While the cost of insurance comes down a bit every year, if we look at long enough data like the past 10 years we also see the spikes when new vehicles are purchased. I will just do a point to point comparison to estimate the cost of insurance which turns out to be 17%! It is way more than my anticipated inflation of 6% overall, but since this is only a part of my total expenses, I am not worried. Moreover the inflation number will come down if we look at it after 15 years since that is the time I want to keep each vehicle.
While I have the data for vehicle maintenance (battery replacement, servicing cost, tire replacement etc), they are so uneven that it does not make sense to do the point to point inflation. So lets go right to inflation of cost of vehicles. Since I only replaced my car, lets do the cost inflation for that as of now. Later when I replace my scooter I will give another update. We purchased the Alto for Rs. 2.1 lakhs in 2011 as a used car. Which was replaced by a new Ignis at the cost of Rs. 6.15 lakhs in 2022. Over 11 years, that is an inflation of 10%. Again, way higher than the 6% inflation I was planning after retirement.
I consider this car purchase as an anomaly because it was replacing two cars. Before the brush with minimalism, we always intended to have two cars. One small car for city driving and one big car for long drives. So if we include the cost of Honda city into the mix, the inflation actually becomes a negative number. Anyway, I don’t want to think too much about the exact inflation, but in future, the vehicle inflation will be certainly be less than 10% and more than 0%, so somewhere around 5% hopefully.