Why leasing a car makes more than just financial sense

The Indian car market is now the third largest globally. Car leasing and subscription model in India is just gaining acceptability among the masses. Vehicle leasing can be the perfect mobility solution in our country where car ownership is very low compared to many other markets. The value proposition of leasing a car goes beyond the financial gains and is beneficial for everyone, right from individuals to employees and entrepreneurs.

In the case of individuals, one of the primary reasons for car leasing is the lower monthly outflow, compared to loans or EMIs. The total cost of ownership of an owned vehicle should be calculated to include the principal amount, interest payments, car maintenance and upkeep (from periodic repairs to unplanned expenses), insurance costs, and eventually the risk of resale in an unpredictable market. This cost of ownership can be optimised in the case of a leased vehicle with favourable tax implications.

As opposed to a car loan, leasing companies offer greater flexibility to choose from a range of tenure options. If the terms are transparent, the lessee can also terminate the contract and upgrade during the contract period when they desire. Additionally, when you lease a car, you can plan and track your expenses better because of fixed monthly outflows. There are no unexpected expenses or hefty down payments.

Lease payments also cover the cost of servicing, upkeep, and insurance for the lease period, so there is no additional effort and administration required on the part of the user. Moreover, leasing also provides the individual an opportunity to drive a brand-new car every few years and the ability to drive a higher priced car than one would have been able to afford otherwise with zero hassles of selling when it is time to move to another car.

For corporate employees, in addition to the advantages of lower monthly outflow, lower cost of ownership, flexible tenures, and controlled expenditure, they can also avail of tax benefits. Employees can opt for a company-leased car as part of their package. In this case, the deduction is made from an individual’s pre-tax salary by the employer and paid on the individual’s behalf to the leasing company as per HR policies. Employees can avail of up to 30 percent tax benefit (depending on prevailing taxation rules).

Leasing companies also offer transparent terms for car ownership at the end of the contract or if you want to upgrade you can let the leasing company handle the resale and move on to your next vehicle. In case of switching of jobs, there is always an option of early termination or easy transfer of the lease to the next employer as per the terms of the agreement. For corporate employees, leasing a car allows you to experience car ownership much earlier than you may have planned for, without the additional financial pressures. Lessees can also choose from a host of value-added services such as insurance, maintenance, pick up and drop, replacement car, relief car, etc. to customize their plan and make the experience completely hassle-free.

In the case of business owners, leasing allows for reduced administrative costs. The focus can be on the core business, while the lessor can take care of the mobility needs. Managing large fleets requires additional resources and staffing investment. Opting for car-as-a-service enables you to cut down on high operational costs. The lower monthly payments of leasing in comparison to the outright purchase of the vehicle allow the company to save capital which can then be used elsewhere in core business activities and help improve the bottom line. The flexibility of leasing helps reduce overheads and avoid financial risks that come with car ownership since the lessor manages the resale risk at the end of the term. Leasing helps businesses stay ahead of the curve when it comes to cost estimation and planning, through complete visibility of future expenses.

Product obsolescence can be another concern, especially for businesses that would have to invest time and resources in selling older models and upgrading to new ones. Leasing enables the business to keep up with the latest models and innovative technology, easily replacing the vehicles when the need arises. It also aids in creating a positive brand impression for the business which operates only brand-new vehicles rather than outdated ones. Whether you are a business, an employee, a professional, or an entrepreneur, leasing a car might be the right option for you if you want to enjoy all the benefits of car ownership without spending a fortune.

Turra Mohammed is Senior Vice President and business head, Quiklyz. Views expressed are those of the author.