ARTICLE: Lease OR Loan? Which EMI is better for you

[Rahulk76]

Yes I have opted for car lease from my company through Leaser for Swift Vdi+ABS. 35 emis are deducted from salary and the 36th emi is 25% which needs to be given directly to leaser.

After Many calculations and breaking my head over, we came to know that 3 years down the line the actual benefit is that we bought the car at exshroom value (this is after getting all the deductions etc etc.)

In my case the exshowroom price of vdi_abs is 526xxx.xx/ a whopping 11000 cheaper than I had gone to market to buy it in Pune.(this again brings down the rto and insurance directly)

So my rental works out to be 17k approx pm for 35months and i pay 1.7l (not tax exempt)at 36th month to get the car transfered in my name.

End result is: I saved tax on 35 emi's, ( 3 yr insurance +maintainance bills+fuel bills not exceeding 60k/year)
Though interest rate is approx 13% or something, all i paid in 3 years was the actual amount of exshowroom value of the car at the time of buying.
Hope this helps
Thanks
Rahul
PS: car should be arriving sometime in dec08-Jan09

[condor]

@Rahul, thanks that did help.

@Guna, pls explain reg the intrest rate & eligibility part.
[ OT : pls avoid quoting what dont need to. The reply button is at the bottom of the page (I know the 'Quote' button is nearer & in the message box itself ]

[Guna]

[quote=condor;983292pls explain reg the intrest rate & eligibility part.
quote]
Eligibility is purely a policy specific to the company. In my company, for my role/level there is a limit fixed. If I choose a car outside this eligibility limit, the additonal amount is deducted every month and a flat interest rate (10% in my case) will be charged on the additonal amount.

[condor]

Rahulk76 : End result is: I saved tax on 35 emi's,

That is one way to look at it. End of the day, we are looking at the money saved

My question here is :
you paid 1.7L on the 36th month. Now, for the 3 years of the lease, what amount was used as the basis of calculation of your monthly rental ?

Is it 5.26L - 1.7L = 3.56L ?
Or was it calculated using 5.26L as the financed amount ?


One other point I am confused about in all this is the last emi. Till about 2 yrs back, companies only asked for 10% of the capitalized value as the last emi. Today it has gone up to 25% for a 3 year lease, & 20% for a 4 year lease.

So does this mean that the base amount used for calculations has now been reduced (so smaller EMI's/rentals), or are we paying about 15% more today, than 2 years back (in the form of a larger last EMI).

[sridharps]

Originally Posted by condor

Is it 5.26L - 1.7L = 3.56L ?
Or was it calculated using 5.26L as the financed amount ?

Well, it must be calculated on the financed amount, for sure.Plus 25% capitalized value on this financed amount after 3 yrs.
It will still work out much better than taking a personal loan by yourself.

[Rahulk76]

Originally Posted by condor

My question here is :
you paid 1.7L on the 36th month. Now, for the 3 years of the lease, what amount was used as the basis of calculation of your monthly rental ?

Lets see...
the financed amout is exshowroom+registration which approx to 90% of the lease amount. and the 36th payment is paid from my pocket which is rental*10 DP.

e.g. The montly rental comprises of rental (15k)+ vat 12.5% + service tax 12.5% = 17k.

Hope this helps

[married2speed]

Hi guys

Great write up GTO. Makes a beemer definately affordable now . However, this article found on the 'net has brought my dream crashing down. Any information to counter the claim

"

In leasing you need not worry about making a lump sum down payment. However, you need to pay the pRevailing sales tax (as per the country's rule) and also a special financial rate of return, which is better known to be the Money Factor. This Money Factor is somewhat similar to the interest rate you need to pay in case of a loan. In some special cases of leasing, you may also be asked to pay a security deposit.
All the automobile lease payments are primarily constituted of two parts. The first part is called the Depreciation charge. It refers to that payment which is needed to counterbalance the vehicles value which might be lost during the tenure of the lease. The second part is called the finance part and is the interest which is intended to be realized in the process of leasing.

However, this concept of automobile leasing can also get confusing at times with all the residuals and money factors. Some people are found to lease their cars with the intent of buying it at the end of the lease period, or even before hand. If this is practiced, it will eventually turn out to be a more costly proposition than normal buying. So, if you are crazy about new cars and want to drive them every now and then, and want to pay lower amount as your monthly payments for the same, then you should always go for automobile leasing and rule out the idea of buying them"

Courtesy : Automobile India

[GTO]

M2S, I don't know who wrote that article but lease definitely makes sense to business owners. That said, each individual lease is unique. Best to compare between the actual quotes received.

[tabrez02]

Originally Posted by Rahulk76

Lets see...
the financed amout is exshowroom+registration which approx to 90% of the lease amount. and the 36th payment is paid from my pocket which is rental*10 DP.

e.g. The montly rental comprises of rental (15k)+ vat 12.5% + service tax 12.5% = 17k.

Hope this helps

Dear ALL

Please correct me if i am wrong, what i can see from my company is as below comparing to the above equation.

e.g. The montly rental comprises of rental (15k)+ vat 12.5% + service tax 12.5% + 2000 Lease rental tax = 19k

[condor]

@Tabrez02, a more detailed structure will help answer your question better.

Approx payments should be in the range of 2800/- per month per lakh for a 36 month lease. Just that you will have a choice on the amount that will be financed through lease.


One other point in the break-up mentioned by Rahul & Tabrez02 is that the service tax is 12.5% of the VAT, not on the rental.

[amit27]

Our company is planning to introduce a Car Leasing scheme for employees wherein employee can purchase the car under compannies name and can save some tax on it . We are in negotiation with 3 -4 companies Hertz , ALD & Arval India they have offered us cars on Fully maintained basis where in they also undertake responsibility for maintaining the car upto the mileage specified by user typically 45 K or 60 K over a period of 3 year i.e. the lease duration . End of the 3 years car reverts back to Lease company wherein user has an option of car buyback at prevalant market price . Therein other options also of Fixed RV but typically they are variations of same . Where I need help is in terms of experience of other members with any of these company and how good & efficient there are in terms of executing their promised.
Any suggestion or expereince is most welcome

[AlokSriva]

You might want to check with LeasePlan - my personal experiences with them has been satisfactory. It is head-quartered in Gurgaon only and it should not be a big hassle for your company's folks to contact them and get a quote from them too.

[appuchan]

I plan to get a company lease for my new i20. Here are the details I could gather. Let me know if I am missing something here.

Lease amount: Rs 6,00,000
Duration: 36 months
Monthly EMI: Rs 18,642
Total EMI paid: Rs 6,71,112
Amount to be paid after 36 months to get possession of car: Rs 60,000 (10% of lease amount)
Perquisite value: Depreciated value - 60,000 = 2,47,200 (assuming 20% depreciation)
IT to be paid on perq value:~ Rs 83,060 (@33.6%)
Total outgo: Rs 8,14,172
IT saved on EMI: ~ Rs 2,25,490 (@33.6%)
Net outgo after 36 months: Rs. 5,88,682 (after considering saved IT)

In addition I can claim up to Rs 14,000 per month on operating expenses such as fuel, maintenance/repair, driver salary and cleaning expenses, which is tax free. (This facility is available even if I dont have a company lease). FBT will have to paid on this though.

[vasoo]

It looks like a good option for lease if what mentioned above are accurate.

[SkyWalker]

@appuchan - yes you are right. Most corporate leases lets you claim tax benefits on the Fuel,Maintenance and Insurance and (if you have one) chauffeur's salary. Bring that into the picture , and the cash benefits of leasing can be substantial. There are added benefits of corporate schemes with corp discounts & discounts on insurance.