Go Back   Team-BHP > BHP India > Team-BHP Reviews > Indian Car Loans & Insurance


Reply
 
Thread Tools Search this Thread
Old 1st May 2011, 10:55   #1
Senior - BHPian
 
DCEite's Avatar
 
Join Date: Sep 2004
Location: NCR
Posts: 3,045
Thanked: 476 Times
Default Car loan from employer- pros and cons?

My employer provides car loan upto 20% (subject to 1 Lac limit) of the on-road price of the vehicle, for employes who have completed a certain number of years with the company.
The same is recovered from the salary of the employee in equal number of installments over a period of 1 year.

Would like to know from fellow members if anyone has experience of taking this kind of loan from employer and what are the pros and cons of the same (specially tax impact and so on).
DCEite is offline   Reply With Quote
Old 1st May 2011, 10:59   #2
dot
Senior - BHPian
 
dot's Avatar
 
Join Date: Dec 2007
Location: Ban Chang
Posts: 1,681
Thanked: 714 Times
Default Re: Car loan from employer- pros and cons?

I had taken car loan from my previous employer (when I was employed there, naturally). The interest was about 100bps higher than market values. The package was good since the company was paying for insurance and registration. The only flipside was you could not sell off the vehicle till the loan period was over, which was either 3 or 4 years. Still it was not a bad deal and I saved a lot of money.
dot is offline   Reply With Quote
Old 1st May 2011, 14:45   #3
Senior - BHPian
 
Gansan's Avatar
 
Join Date: May 2009
Location: Chennai
Posts: 3,427
Thanked: 875 Times
Default Re: Car loan from employer- pros and cons?

Normally the vehicle and housing loans from employers will be most attractive. They will have the most emis and least interest. They will also cover 90% of the vehicle cost. What you have posted (20%) is laughable! Stay away from it.
Gansan is offline   Reply With Quote
Old 1st May 2011, 14:59   #4
Senior - BHPian
 
DCEite's Avatar
 
Join Date: Sep 2004
Location: NCR
Posts: 3,045
Thanked: 476 Times
Default Re: Car loan from employer- pros and cons?

Quote:
Originally Posted by Gansan View Post
Normally the vehicle and housing loans from employers will be most attractive. They will have the most emis and least interest. They will also cover 90% of the vehicle cost. What you have posted (20%) is laughable! Stay away from it.
I think i was not clear in my post.
Its not really a "loan" in real terms, but a 20% of car value overdraft (subject to limit of Rs. 1 lac), which will be deducted from the salary within a period of 1 year in 12 equal EMIs (0% interest).

Last edited by DCEite : 1st May 2011 at 15:02.
DCEite is offline   Reply With Quote
Old 1st May 2011, 18:06   #5
Distinguished - BHPian
 
supremeBaleno's Avatar
 
Join Date: Dec 2005
Location: Weekdays@Chennai, Weekends@Kerala
Posts: 5,164
Thanked: 1,638 Times
Default Re: Car loan from employer- pros and cons?

If its a salary overdraft (advance salary), I would think no FBT or other taxes apply.
Do you necessarily have to buy a car with it or could use as an interest-free Personal Loan ? :-)

At my 1st job, they used to give bike-loans - 75% of OTR price, zero interest, repayable in easy installments, no hypothecation endorsement in RC Book (pure trust - wonder if it would work today) etc. My CD100 was bought that way. This was long ago, much before the FinMin thought up FBT - so no tax implications.
supremeBaleno is offline   Reply With Quote
Old 1st May 2011, 18:12   #6
Senior - BHPian
 
Join Date: Dec 2010
Location: Ghaziabad/Hyderabad/Mysore
Posts: 1,416
Thanked: 313 Times
Default Re: Car loan from employer- pros and cons?

For this kind of loan I don't foresee any problem.

However for what @dot is taking about (substantial part of the loan is from the company, they pay registration etc.) - there is one hassle. If you leave the company before the loan is fully paid (and the company has shown full depreciation on the vehicle) it becomes a royal mess. This happened to two of my ex-colleagues.

@Gansan - This still saves him interest on 1L for one year - can you clarify what is the harm?

@supremeBaleno - I once worked for an employer that offered similar terms . I don't think anybody does anymore.
vina is offline   Reply With Quote
Old 1st May 2011, 19:20   #7
Senior - BHPian
 
Warwithwheels's Avatar
 
Join Date: Aug 2009
Location: India
Posts: 1,251
Thanked: 1,013 Times
Default Re: Car loan from employer- pros and cons?

Quote:
Originally Posted by supremeBaleno View Post
If its a salary overdraft (advance salary), I would think no FBT or other taxes apply
Just to clarify a few things from the taxation point of view
  • FBT is abolished long time back, hence there is no question of FBT
  • However those *perquisites* are now taxable in the hands of the employees subject to the stipulated conditions
  • As per the rules of taxation, Advance Salary is always taxable whereas Advance against salary is not taxable
  • Very vaguely remember that loans granted to an employee at concestional or Zero rate of interest is taxable to the extent of the market differential

So be prepared to cough up a higher amount of tax if the amount is liable to be taxed as a perquisite. However some companies manage to get away from the this by meticulous tax planning. You better talk to your HR or Finance Dept. and get the above things clarified before you opt in for it.

EDIT: You may find this link informative. Read thru' the last few paras which talks about the concessional rate of Interest on Loans.

Link: Use company car, decline its leased flat: Experts - Rediff.com Business

Last edited by Warwithwheels : 1st May 2011 at 19:35. Reason: Link added
Warwithwheels is offline   Reply With Quote
Old 1st May 2011, 21:57   #8
Senior - BHPian
 
Gansan's Avatar
 
Join Date: May 2009
Location: Chennai
Posts: 3,427
Thanked: 875 Times
Default Re: Car loan from employer- pros and cons?

Quote:
Originally Posted by vina View Post
@Gansan - This still saves him interest on 1L for one year - can you clarify what is the harm?
Well, what we have here is an interest free advance. But that was not what he said in his original post. This can be availed, no problem.

My employer used to give vehicle loan @ 11% (monthly diminishing) rate, up to 90% of vehicle value, before it was stopped. Car loans were repayable in 100 months and bike loans in 60 months.

Quote:
Originally Posted by Warwithwheels View Post
Very vaguely remember that loans granted to an employee at concestional or Zero rate of interest is taxable to the extent of the market differential.
I think this is a valid point.
Gansan is offline   Reply With Quote
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search


Similar Threads
Thread Thread Starter Forum Replies Last Post
The Cheap Loan or the Smart Loan - SBI Advantage Car Loan keyur Indian Car Loans & Insurance 208 5th July 2017 15:56
Clear Protective Car Bra - Pros and Cons kuttapan Modifications & Accessories 24 21st March 2012 22:47
Go for a loan OR pay upfront? Pros and Cons? nayshak Indian Car Loans & Insurance 31 10th May 2007 01:27
Ford Fusion Pros and Cons vivek_pinkoo The Indian Car Scene 35 31st December 2006 13:30
New Esteem - pros and cons harifire Sedans 8 25th November 2004 15:50


All times are GMT +5.5. The time now is 17:59.

Copyright 2000 - 2017, Team-BHP.com
Proudly powered by E2E Networks