OPINION | The double EMI trap: When a festive upgrade outlives its budget

Every festive season, Indian households make purchases that go beyond utility. A new smartphone, a larger television, a premium refrigerator or a new washing machine can represent aspiration, progress and the reward for a year of hard work.

But this year, the economics behind that festive upgrade are changing. Products are becoming more expensive, consumers are trading up to premium models, and financing is increasingly helping bridge the gap between what they want and what they can pay upfront.

The bigger question, however, is what happens after the purchase.

When a more expensive device is bought on EMI and then requires an unexpected repair or replacement, the household can find itself managing two financial commitments for one purchase.

This is what I call the credit-repair triangle, the intersection of credit, repair costs and household affordability. It is becoming increasingly relevant as the cost of ownership rises.

When input costs make the festive upgrade more expensive

The first pressure point is the rising cost of making the products consumers are buying.

Memory, one of the most critical components in smartphones, laptops and other electronics, has seen significant price increases as demand from AI data centres puts additional pressure on supply.

Counterpoint Research found that smartphone memory prices rose by over 80 per cent quarter-on-quarter in Q2 2026, with DRAM becoming the single costliest component in some smartphones.

Consumer durables are facing their own input-cost pressures. Copper, aluminium, steel and crude derivatives influence the cost of manufacturing appliances, while freight costs and currency movements add further pressure. Air-conditioner prices are set to rise by 5 per cent to 8 per cent, while some manufacturers have announced price increases of 3 per cent to 4 per cent for washing machines, refrigerators and LED televisions.

Importantly, this is not necessarily a short-term festive-season phenomenon. With memory costs expected to remain elevated through at least 2028, the higher cost of electronics could continue to influence retail prices and household budgets well beyond Diwali.

Premiumisation makes the ticket even bigger

Input costs are only one part of the story. Indian consumers are also moving towards more premium products, including smartphones with higher storage, televisions with larger screens and appliances with more advanced features.

This premiumisation on top of higher input costs is pushing average selling prices higher, changing the affordability equation for consumers.

The smartphone market illustrates the trend clearly. Average smartphone selling prices in India rose 16 per cent year-on-year in the first half of 2026, reaching a record $318 in Q2. Phones priced above ₹20,000 have continued to gain traction, supported by the wider availability of no-cost EMI and other affordability options.

As ticket sizes rise, financing naturally becomes more important. Counterpoint expects financing to account for 42 per cent of smartphone sales in India in 2026, compared with 35 per cent in 2025. In the broader consumer electronics and durables market, retailers are also seeing a substantial share of high-value purchases being financed.

For consumers, this changes the psychology of the purchase. A ₹60,000 or ₹70,000 product can feel more affordable when presented as a monthly EMI. But while the EMI breaks down the purchase price, it does not break down the financial risk of ownership.

The credit-repair triangle

This is where the credit-repair triangle comes into play.

At one corner is the EMI that continues even if the device is damaged. At the second is the repair or replacement cost that can arrive without warning. At the third is the household budget, which has already been committed to the original purchase.

Consider a ₹50,000 smartphone bought on EMI. If a major repair costs ₹25,000 to ₹30,000, that expense may arise while the consumer is still paying for the device. The original EMI does not stop simply because the phone has stopped working.

The same dynamic applies to consumer durables. A refrigerator, washing machine or television may be purchased with a combination of savings and financing, but an unexpected breakdown can create an additional expense that was never factored into the original monthly budget.

The challenge becomes greater when repair is no longer economical. If the cost of repairing a severely damaged device approaches a significant share of its original value, replacement may appear to be the more practical option. But replacement at today's prices can mean taking on another large financial commitment.

That is the double EMI trap: the consumer continues paying for the original purchase while simultaneously taking on another financial obligation to repair or replace it.

The affordability question does not end at checkout

Festive buying is rarely an entirely impulsive decision. Consumers compare models, wait for offers and often spend weeks deciding what to purchase. Yet the final product can still cost more than originally planned as consumers move towards better specifications or larger, premium variants.

By the time the purchase is made, the available budget may already be fully allocated to the product and its EMI. Protection or maintenance is then perceived as an additional expense rather than part of the cost of ownership.

This creates a gap between purchase affordability and ownership affordability.

A consumer may be able to afford the monthly EMI, but that does not necessarily mean they are prepared for a ₹20,000 or ₹30,000 repair bill six months later.

This gap becomes more significant as product prices continue to rise. When the upfront cost is higher, and the purchase is financed over several months, an unexpected repair during the repayment period can put additional pressure on household finances.

Breaking the triangle before it becomes a trap

The most effective way to address the Credit-Repair Triangle is to think about the entire ownership journey at the point of purchase.

Consumers should consider not just the price of the product, but its total cost of ownership. This includes how long they intend to keep it, how frequently it will be used, the risks it may face and what a major repair or replacement could mean for the household budget.

Where protection is considered, its cost can be factored into the overall purchase decision rather than treated as an afterthought. Consumers should also understand what their warranty or protection plan actually covers, including accidental and liquid damage, exclusions, claim processes and replacement terms.

This becomes particularly important as products become more expensive. When the price of the device rises, the financial consequence of damage rises with it.

The festive season should be about celebrating the ability to upgrade, not worrying about whether that upgrade can be sustained. In a market where input costs are pushing prices higher, premiumisation is increasing ticket sizes, and financing is making larger purchases more accessible, consumers need to think beyond the EMI.

Because the real cost of a festive upgrade is not simply what it takes to buy the device. It is what it takes to keep owning it when something goes wrong.

The author is CEO of OneAssist, a home appliance repair and maintenance service.

The opinions expressed in this article are those of the author and do not purport to reflect the opinions or views of THE WEEK.