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Old 6th July 2011, 13:17   #31
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Default re: Car Lease Options from your Employer

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Originally Posted by akshay_ritz View Post
I am sorry if I differ with the popular opinion but I have always believed this to be a bad idea. Howsoever you may love your car it's a depreciating asset. Companies claim depreciation for cars on their payrolls and also get to retain employees so it's big gain for them.
From the financial point of view, I cannot agree more with akshay_ritz here.
It is not recommended to take a loan for a depreciating asset. Even more so, when this serves as some kind of a 'term contract' with your employer. Forget the fact about how beneficial it is for your employer, just try to focus on how this could be detrimental to you in terms of your finances. No offence meant, but the company lease options dont seem so beneficial to you in this case.

IMHO, it would be better in this case to buy a preowned Swift (if you want a Swift only) from your own finances and if necessary a combination of bank overdraft or loan. At least your loan liability would be limited and you will be able to repay at your choice. Of course, it also means that you are free to jump ship without worrying about other impacts.
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Old 6th July 2011, 14:12   #32
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From the financial point of view, I cannot agree more with akshay_ritz here.
It is not recommended to take a loan for a depreciating asset. Even more so, when this serves as some kind of a 'term contract' with your employer. Forget the fact about how beneficial it is for your employer, just try to focus on how this could be detrimental to you in terms of your finances. No offence meant, but the company lease options dont seem so beneficial to you in this case.

IMHO, it would be better in this case to buy a preowned Swift (if you want a Swift only) from your own finances and if necessary a combination of bank overdraft or loan. At least your loan liability would be limited and you will be able to repay at your choice. Of course, it also means that you are free to jump ship without worrying about other impacts.
Very true. Moreover, the interest rates for CLC loans are also higher. The overall savings are definitely there but then you are stuck with the employer for the period of the CLC or else, just in case you wish to pre-close for availing a better opportunity there is a penalty for prepayment of the loan.
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Old 6th July 2011, 14:44   #33
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Originally Posted by vvvinod View Post
Residual Value is calulated on Ex-shoroom price
EMI is calculated on leased amount not Ex-showroom (this include road tax, etc)

foreclosure is a pain though if you are sure about sticking to the same company for next 4 years go for it.
My company offers residual value of 1% or 10%. I am surprised that you guys are being offered 25% residual, etc and it depends on the loan duration??

Within the 1%/10% - the EMI will change accordingly. But note that you dont get tax benefit on the 10% you pay later - so its better to go with the lower residual value as you will get tax benefits on the EMI and not on residual payment.

Interest rates are higher - no doubt. But the car maintenance is reimbursed too. Services/repairs are all tax free. Tyre changes also! I heard ICE also but not sure.. My NHC GXi came with stock alpine HU and Blaupunkt speakers - so I didnt feel the need to change. As long as you have a original bill (you need to submit that), you are fine..

Foreclosure also has some clauses. If you foreclose within 18 months, you need to pay a higher penalty. But after 18 months, I think you just pay the foreclosure charge at 2% or so - not exactly sure of 2%, but its a very low digit single number.

BTW, driver salary is also reimbursed. So if you have a driver, then you are really good with the CLC. There is perquisite attached - 900 per month or so for the driver piece though.

So dont base your decision primarily on the interest rate difference.
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Old 6th July 2011, 15:08   #34
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Default re: Car Lease Options from your Employer

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Within the 1%/10% - the EMI will change accordingly. But note that you dont get tax benefit on the 10% you pay later - so its better to go with the lower residual value as you will get tax benefits on the EMI and not on residual payment.
On the other hand, if you have low residual value, you will have to pay perquisite tax on difference between Residual value and Straight line depreciation value of the car at the time of buyback. So higher the residual value, lower will be the tax.
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Old 6th July 2011, 20:06   #35
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Here is my case analysis. I bought Maruti Ritz VXi on CLC in 2009. Below you can find the simple calculations & benefits which I have got from company lease.
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Last edited by Ritzman : 6th July 2011 at 20:15.
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Old 7th July 2011, 12:17   #36
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Default re: Car Lease Options from your Employer

The Company Car Lease alternative becomes sweeter when you intend to serve the company for the lease period && company also pays for your fuel allownace (5k-6k something). This additional credit makes a big impact on the final calculation else the benefit of paying just ex show room price and EMI Tax benefits are negated by high interest rate and residual value payment (20%) + VAT.
Typically you pay VAT thrice. once with the exshowroom price, second during your EMI's and third along with the residual value.
If you leave the company half way, you would be liable to pay the outstanding loan amount incl. VAT on it and pro-rated insurance and road tax amount (pro-rated amount can be calculated by dividing your total RTO cost into 48/36 months)
You can also sell the car to your colleagues who are eligible under the Company Car Lease plan.
Can someone please share the hassles of premature termination of car lease ?
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Old 7th July 2011, 13:08   #37
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Can someone please share the hassles of premature termination of car lease ?
Yes, I had one!
I had bought my WagonR on company lease. While the benefits were significant, it would have been better if I had continued in the same organisation through the duration of the lease.
I was deputed to be onsite for a project and was moved to the payroll of another group company. This meant that I no longer received any salary in India and had the option to buy the car by repaying the balance amount. Now if I wanted the car, this would have been a good option. However, there was no one in India who would use this car and I did not have a parking space for it either. In any case, I didnt want to leave my car unused for long periods at a time.
The next option was to find a buyer within my organisation so that the loan could be transferred. Unfortunately this took some time and effort; I could have done without this hassle when I had other things to worry about in terms of my shifting base.
In this case, I would also recommend to buy a car which is a bit popular and is a diesel; no point buying a car which others may not buy from you later. It is also important to maintain the car well; one of my colleagues had trouble finding another buyer due to the state of his car interiors.
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Old 7th July 2011, 20:29   #38
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I own a car leased from my company. My advice to you will be go for a car lease scheme only when you get fuel benefits,yearly maintenance charges for the car,car insurance charges borne by your company.
Disadvantages:
1) I took the car on lease to save taxes but the tax slabs were changed by Finance minister and now I land up saving very little tax. Blame it on my small salary packet
2)You become the second car owner.
3)You get stuck in the same company for the leased car years.
4)You need to pay higher road tax and registration tax as the car is registered in a coporates name.In maharashtra its nearly double.You can get refund of this tax later when you transfer the car to your name but that involves lot of hassles and bribing.
5)Insurance is renewed by the company so you cant chose to select the cheapest insurance option.
6)Interest rates are higher than market.
7)You cannot prepay the amount and come out of car lease.
8)If you want to change job due to some circumstances you land up paying 5 to 7% penalty on the already high interest rates.
9)You never know the policies of govt. on fringebenefit tax and your profit can become loss at anytime.

My advice do your calculations very very thoroughly and proceed with caution. My experience tells me its not worth loosing our freedom of owning the car independently by taking a car loan from outside rather than taking it from company and add to it the trouble of changing the car owner and refunding the registration and road tax. Think twice before you proceed and verify each and every aspect before you plunge in.
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Old 7th July 2011, 21:17   #39
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Default re: Car Lease Options from your Employer

Though the Company Leased CAR scheme sounds very tempting, there are some significant trade offs as listed in earlier posts. One more disadvantage that should be to highlight and that I have experienced is -- Opting for Company Leased CAR optioned reduces the CTC significantly that has a negative impact on the Loan eligibility specially if one is considering a home loan. A small example to illustrate the same is mentioned below-

For eg - A actual CTC of 15 lakhs while opting for a Company Leased Car would come down by the yearly EMI amount of the Car Plus the Driver Salary and Fuel Reimbursement. ( In my earlier company Driver salary and Petrol allowance was paid through Claim every month by submitting the petrol bills and showing the receipt of salary aid to driver)

Considering a 8 lakhs On road price of CAr will translate to typically 19,200 Emi (approx) for 48 months- yearly emi = 12 X 19200 = 2,30,400/-

Driver salary of Rs 5000 P m = Yearly Rs 60,000/-

Fuel Reimbursement - Rs 9000 Pm = yearly Rs 1,08,000/-

Total Effect of Company Leased Car = 2,30,400+ 60000 + 108000 = 3,98,400/-

Total salary - Company leased Car benefit = Revised CTC

15,00,000 - 3,98,400 = 11,01,600/-

The reduced or revised CTC is the One that is shown in company remuneration letter and is considered by Banks while applying for loan (house loan, personal loan etc). Banks will typically consider 50% of your take home salary to calculate the EMI paying capacity of the individual even though the individual may be willing to stretch beyond 50%.

With above example, the EMI capacity of the individual will come down as shown in the below table--

Original CTC 1500000 50% for EMI calculation 750000
EMI eligibility per month 62500.00 Loan eligibility for 20 yrs = 62 lakhs


Revised CTC 1100000 50% for EMI calculation 550000 EMI eligibility per month 45833.33 Loan eligibility for 20 yrs = 45 lakhs

The above is done as back of the envelop calculation and figures have been approximated to drive the point.
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Old 20th July 2011, 15:34   #40
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Now, lease a Merc at 50% of price - The Times of India

This sounds very tempting
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Old 20th July 2011, 15:47   #41
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Default re: Car Lease Options from your Employer

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This seems to be an individual lease hence no tax benifits.
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Old 2nd January 2013, 18:25   #42
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Arrow Which organizations have the best car lease policy available?

The significantly large crowd in team-bhp may conform to various profiles. Love for cars, driving, meeting new people and exploring places are the common interests that bind us together.

While some of us are self-employed, I assume a lot many are working for various organizations, either private or government. I am sure most of the private organizations would have a car lease policy as part of the employment/remuneration package.

Why not we kick off a discussion to:
1) Find out the organizations with the most employee friendly car leasing policy

2) Whether TEAM-BHP-ians are satisfied with the organizations current lease options or not

3) Sore learning from past leasing experiences -- will be useful for many

4) Most of these companies engage external vendors to manage the lease. Any feedback on the services available from the external vendors would also be a useful piece of information


NB: A general discussion on the company name and your perspective on the friendliness of their leasing policy is what would be appropriate to discuss here. Kindly ensure that any confidential or internal policy information of the company is not shared. Thank you.

Last edited by B103 : 2nd January 2013 at 18:26.
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Old 2nd January 2013, 19:52   #43
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Default Re: Which organizations have the best car lease policy available?

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Originally Posted by B103 View Post
Why not we kick off a discussion to:
1) Find out the organizations with the most employee friendly car leasing policy

2) Whether TEAM-BHP-ians are satisfied with the organizations current lease options or not

3) Sore learning from past leasing experiences -- will be useful for many

4) Most of these companies engage external vendors to manage the lease. Any feedback on the services available from the external vendors would also be a useful piece of information


NB: A general discussion on the company name and your perspective on the friendliness of their leasing policy is what would be appropriate to discuss here. Kindly ensure that any confidential or internal policy information of the company is not shared. Thank you.
Long Awaited thread ,

Lease thing was always confusing , Break even period more confusing .

My old company , had a nice and simple policy , for INR 10 lks CAR on Road , INR 5lks as intrest free , remaining INR 5 Lks at 10% fixed intrest , 3 yr period ,
at the end of 3rd year , company deducts the total depreciation( asset depriciation is taken by company as the car will be on company name ) and left over to be paid by employe . The regular EMI comes from FBP kitty .

My New company went with Sundaram lease .
Tricky to understand , 16.5 % intrest , 3 or 5 yr locking period , you can buy used ( < 3ys old ) , or you can go for new . EMI gets deducted from Kitty FBP , 25% of invoice value to be paid at the end of lease policy .
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Old 3rd January 2013, 10:11   #44
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Default Re: Which organizations have the best car lease policy available?

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Originally Posted by Rovergen View Post
My New company went with Sundaram lease .
Tricky to understand , 16.5 % intrest , 3 or 5 yr locking period , you can buy used ( < 3ys old ) , or you can go for new . EMI gets deducted from Kitty FBP , 25% of invoice value to be paid at the end of lease policy .
I believe it is 25% value at end of 3 years and 5% value at end of 5 years
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Old 3rd January 2013, 11:09   #45
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Default Re: Which organizations have the best car lease policy available?

In one organization, employees can opt for any car as long as the EMI does not exceed 75% of the FBP. Lease period can be 3,4 or 5 years. There are 3 vendors who provide the car lease service. At the end of lease, we have to pay the residual value which ranges between 15 to 20% (depending upon term of lease).

An example scenario with one of the vendors.

Car value: Rs 7.5 lk
Lease term: 5 years
EMI: Rs 16,163 per month
Residual value: Rs 1,12,500
Total outgo: Rs 10,82,280
Effective interest rate: ~8.9% per year (flat rate)

The entire EMI is tax free. This will result in an IT savings of about Rs 3.2 lakhs over 5 years. Factoring this in, the actual outgo will be almost the same as the original cost of the car making the scheme appear as an interest free loan.

A car maintenance allowance of Rs 12 to 20k per month (depending on grade of employee) is admissible. Perquisite taxes applicable as per rules.
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