Lifetime vs 5-year: Which one to pay? Road tax explained for car buyers
Choose lifetime tax if you intend to keep the car for a long time like more than 10 years.
Buying and owning a car is a dream for many. But, beyond the fulfilment of the dream, car buying comes with a hefty amount of finances too. Throughout its lifetime, a vehicle demands expenditure in terms of maintenance, fuel, insurance, and taxes. While buying the car, the consumer can opt for lifetime tax or pay it for five-years. This comes as a tricky part for many.
Many consumers think that lifetime tax is best as he or she doesn't need to pay it again and again. Now the question is should you pay tax for lifetime or for five years? Here is the tax structure explained in detail for your understanding and take wiser decision.
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Tax for lifetime or 5-years: Which's better?
| Lifetime tax (LTT) | 5-year tax (Periodic) | |
|---|---|---|
| Duration | Valid for the entire life of the vehicle (Typically assumed as 15 years for initial payment) | Valid for a 5-year period, requiring renewal |
| Cost | Higher initial lump sum payment, but generally works out cheaper cumulatively over 10+ years | Lower initial payment, but cumulative cost over 15 years is often higher |
| Convenience | Pay once, no worries about missing deadlines or penalties | Requires periodic renewal every 5 years |
| Resale value | Higher resale value, as next owner does not have to worry about future tax payments | Selling price might be lower, as the next owner may soon have to pay tax |
| Transferability | In case of shifting to another state, you may have to pay a pro-rata tax there and seek refund from the original state, which can be a complex process. | With less amount paid upfront, offers more flexibility for people with transferable jobs |
For most of the private car owners who plan to keep their vehicle for a longr period like, more than 10 years or so, paying lifetime tax (LTT) is generally better option, as it offers cost savings over the long term. Also, this eliminates the hassle of periodic renewals, and results in a better resale value of the vehicle if sold in between the 15 year period.
Choose lifetime tax if you intend to keep the car for a long time like more than 10 years. Also, opt for this, if you want peace of mind from repeated road tax renewals, and are likely to stay in the same state where the original registration is being done.
On the other hand, choose 5-year tax if you plan to sell the car within a few years after purchase, or have a transferable job and anticipate shifting to a different state soon.
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