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Old 20th July 2011, 23:04   #16
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Default Re: Individual lease: What are the benefits?

Yes as GTO says to avail tax benefits its a suitable option for companies.
In the scheme of things to be implemented by MBIL, we pay 50% of the car's cost. The car's ownership is with MBIL.It is leased out to the buyer (only name sake) for a period of three years.Upon the completion of the 36 month ownership MBIL terminates the lease, takes back the car leaving the lessee high and dry! The lessee in short pays 50% of the cost of the car and the company takes it back for free.
In the western countries this concept is fine as older cars depreciate very fast. But here in India, I cannot believe that a Merc will depreciate 50% in three years . These depreciate on an average by 50% in about five to six years, depending on the respective model.

Last edited by anjan_c2007 : 20th July 2011 at 23:10.
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Old 21st July 2011, 02:06   #17
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Default Re: Individual lease: What are the benefits?

Quote:
Originally Posted by GTO View Post
Lease is a good option for companies as they can claim the monthly lease payments as an expense and hence, get a 30% benefit (or whatever tax bracket they are in), when filing taxes.
---------------
Depreciation and thus, tax benefits. Even though you are using the car, it's registered in their name. Mercedes / their financing arm will avail of full tax benefits on the car (running into lakhs of rupees).
Am no Financial whiz.

Do we see "value" (rather a saving) by saving taxes two times?
If the company owned the car, I guess they would only be able to claim depreciation. Now, they claim the lease payments as expense and the manufacturer (Merc in this case) claims depreciation. So this saving is creating "value" (for want of a better word) and may be one reason in favour of this model to work.

Guys who understand taxation and finance better, please comment.

Last edited by Poitive : 21st July 2011 at 02:08.
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Old 21st July 2011, 14:18   #18
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Default Re: Individual lease: What are the benefits?

Personally, I am quite intrigued by this development. Assuming this concept is adopted by other manufacturers, I can go out and lease a BMW 3 series at the cost of a Honda Civic and drive it for 3 years. I can enjoy a car of double the price that I would normally afford. And a brand new one at that. Not bad at all!
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Old 21st July 2011, 20:29   #19
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Default Re: Individual lease: What are the benefits?

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Originally Posted by rammkp View Post
we should be able to walk into a Merc showroom and bargain a pre-owned 3 year old Merc for 50% of the cost of the new car????!!!!!
Some brands, including Mercedes, control the supply & thus prices of their used cars. Strong resale value greatly enhances the value of the brand in the eyes of the customer. Not to mention, the profit margin on a used car is easily more than that of a new car (well, mostly).

Some Mercs (especially the diesels) retain their value well, while the other (more expensive range like the E Class) can be had for 50% less once 3 years old.

Quote:
Originally Posted by anjan_c2007 View Post
I cannot believe that a Merc will depreciate 50% in three years .
The higher you go, the harder you fall . While the rate of depreciation for the C Class is lesser (thanks to its lower new car price), you can easily get 3 year old E / S Class for 50% of the original price.

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Originally Posted by Poitive View Post
Do we see "value" (rather a saving) by saving taxes two times?
It's the same for any equipment that is rented out. The equipment owner can claim depreciation, while the one who rents can write off monthly payments as expenses (thus, lowering his taxable income).

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Originally Posted by GloryManUnited View Post
I can enjoy a car of double the price that I would normally afford.
Not really. The 1/2 price car you would buy otherwise (in your example, the Civic) would still fetch you some resale at the end of 3 years. With the leased car, you get zero.

Like I mentioned earlier, leasing makes immense sense for companies who can write off the monthly payments as expenses.
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Old 21st July 2011, 23:08   #20
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Default Re: Individual lease: What are the benefits?

Not only companies but even self employed business people can write off expenses of monthly payments on a lease. The merc lease plan sounds interesting.. would be sweet if one could buy the car out after 3 years at 50% of the cost too!
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