Car leasing is cheaper and convenient
But to get the best value, the lessee needs to clock the right number of kilometres
Auto major, Mahindra & Mahindra (M&M), recently launched a leasing programme for customers who want to experience the company’s cars, but are not ready to buy yet. The car maker has introduced a unique plan where the customer can lease two models – KUV100NXT starting at ~13,499 a month and XUV500 starting at ~32,999 a month. Car leasing is not new in
India but until now it was offered by luxury car makers only. It’s for the first time that a manufacturer is providing lease on a car that rivals with B-segment hatchbacks and costs below ~1 million.
The leasing facility is at present is available in six cities and will soon be available in 19 more cities and also on other M&M models. The company has partnered with Orix Auto Infrastructure Services and ALD Automotive for this offering. The leased vehicle will be available for a period of up to five years, depending on the city and model selected. “There has been a change in ownership psychology over the past couple of years. Today, a large segment of buyers prefer convenience over long-term ownership,” says Veejay Ram Nakra, chief of sales and marketing, automotive division, M&M. Leasing offers greater convenience than owning a car. There’s lower or no down payment, zero risk on resale value and a fixed monthly charge inclusive of maintenance cost. Depending on the individual's requirement, a leasing company can customise a package that takes care of all the inconveniences. Once the lease is over, the person returns the vehicle to the company and can take a new one if he wants to. “Until now we provided leasing services only to corporates. For mass market, leasing is possible only if the manufacturers tie up with us. Now, car makers are increasingly exploring the option,” says Dipankar Sen, executive vice president and business head – lease, Orix Auto Infrastructure Services.
However, it is important that you roughly estimate the use. Leasing can work out at par or cheaper than ownership only if you are able to clock the kilometres that you have paid for. Orix, for example, offers four leasing programmes for 10,000 kms, 12,000 kms, 15,000 kms and 20,000 kms a year. If your usage is much lower than 10,000 kms in a year, owning a car could be a better option as the leasing company calculates all costs based on the running of the car. If your usage is higher than 20,000 kms, Orix will customise the package. If you cross the prescribed usage, there’s an additional charge for each kilometre. In India, leasing companies offer two models. In a dry lease, the leasing company bears the cost of the car, insurance and accidental repairs. In a wet lease, the company also takes care of the maintenance, one set of tyres and battery change, 24-hour roadside assistance in case of a breakdown, and pick and drop facility when the vehicle goes to a workshop. When you lease, the car registration certificate and insurance carry your name and not that of the leasing company. That’s because, in case the car owner breaks any laws, the Regional Transport Office issues a receipt in the name of the car owner.
When you take a car on lease for business, the entire money paid as rental can be claimed as deduction. In case of a car bought on a loan, the business owner can claim depreciation and only the interest portion of auto loan as deduction. Also, the money spent on maintenance, repair, insurance and fuel can be claimed as deduction.