Team-BHP > Team-BHP Advice > On buying a car


Reply
  Search this Thread
535,605 views
Old 25th August 2020, 10:43   #256
ppr
BHPian
 
Join Date: Aug 2008
Location: Mumbai
Posts: 100
Thanked: 31 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

For a self employed individual in the 35% tax bracket, does it make sense to lease an expensive car?

Since there is no set off of GST (I don't have a GST No. because I am a doctor), doesn't it work out more expensive?

Thanks
ppr is offline  
Old 25th August 2020, 22:21   #257
BHPian
 
Crazy_Bean's Avatar
 
Join Date: May 2014
Location: Gurgaon
Posts: 414
Thanked: 266 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

My company offers the lease program. Basically 80% Funded and 20% residual value. The lease rental is basically at 11% IRR, for the tenure period with PV as total onroad and FV as 20% residual value. At the end of the period, the employee has an option to buy the car at 20% residual value + GST (~ 48%).

I dont understand this GST component on the resdual value. Has anyone else heard of this?
Crazy_Bean is offline  
Old 26th August 2020, 09:51   #258
ppr
BHPian
 
Join Date: Aug 2008
Location: Mumbai
Posts: 100
Thanked: 31 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

Quote:
Originally Posted by Crazy_Bean View Post
My company offers the lease program. Basically 80% Funded and 20% residual value. The lease rental is basically at 11% IRR, for the tenure period with PV as total onroad and FV as 20% residual value. At the end of the period, the employee has an option to buy the car at 20% residual value + GST (~ 48%).

I dont understand this GST component on the resdual value. Has anyone else heard of this?
I also meant the GST on the lease rental which is at 48%! That is insane! Even on the buyback, it makes 20% residual into 30% if the GST is at 48%
ppr is offline  
Old 30th August 2020, 01:42   #259
BHPian
 
Join Date: Aug 2014
Location: Mumbai
Posts: 255
Thanked: 535 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

Quote:
Originally Posted by ppr View Post
For a self employed individual in the 35% tax bracket, does it make sense to lease an expensive car?

Since there is no set off of GST (I don't have a GST No. because I am a doctor), doesn't it work out more expensive?

Thanks
For you leasing may not be of much advantage over buying as you can claim depreciation on the vehicle you purchase. In fact, depreciation will be higher in early years, giving higher tax benefit in early years.


Quote:
Originally Posted by Crazy_Bean View Post
My company offers the lease program. Basically 80% Funded and 20% residual value. The lease rental is basically at 11% IRR, for the tenure period with PV as total onroad and FV as 20% residual value. At the end of the period, the employee has an option to buy the car at 20% residual value + GST (~ 48%).

I dont understand this GST component on the resdual value. Has anyone else heard of this?
Here is my simplistic working in your case.
Say cost of vehicle is Rs. 100, GST paid at time of purchase Rs. 48. Now, company will recover from you Rs. 80 (100-20) + 11% IRR interest cost + GST @ 48% on both the above. It will get input credit of Rs. 48 paid earlier. Therefore, your additional cost is the 48% on the interest component of 11% i.e. 5% p.a. Assuming a tenure of 5 years, it will be roughly 25% of cost of vehicle in total.
Mind you, 11% IRR is not same as 11% interest rate, but let us not complicate life with that for now.
One additional factor - you are paying the 11% also on the timing difference between GST paid by company (upfront) and GST recovered from you (over the years). This adds to your cost.

Now, if it goes from your pre-tax salary, you are saving approx. 30+% on the total amount you pay. This kind of makes it worthwhile for salaried people in the highest tax bracket. However, you should do a detailed working to compare based on your effective tax rate.

There is also another thread discussing impact of GST on leasing - https://www.team-bhp.com/forum/india...r-leasing.html (Effect of GST on Car Leasing)

Last edited by aashishnb : 30th August 2020 at 01:45.
aashishnb is offline  
Old 10th October 2020, 22:02   #260
BHPian
 
Join Date: Jun 2006
Location: Ernakulam
Posts: 70
Thanked: Once
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

Searched around and could not find the exact information. I'm a salaried employee at 30% income tax bracket. If I opt for > 4M car how would the calculations look like if I'm opting for lease from my employer? Does anyone have any calculations of any car model that considers GST implications, tax saving etc?
prasanth is offline  
Old 11th October 2020, 01:08   #261
AZT
BHPian
 
Join Date: Nov 2019
Location: Toronto
Posts: 680
Thanked: 2,577 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

Quote:
Originally Posted by prasanth View Post
Searched around and could not find the exact information. I'm a salaried employee at 30% income tax bracket. If I opt for > 4M car how would the calculations look like if I'm opting for lease from my employer? Does anyone have any calculations of any car model that considers GST implications, tax saving etc?
On the harrier thread someone had posted their excel sheet with calculations on how they find lease more beneficial. I think that should be of help to you.
AZT is offline   (1) Thanks
Old 11th October 2020, 17:18   #262
BHPian
 
Join Date: Jun 2006
Location: Ernakulam
Posts: 70
Thanked: Once
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

Quote:
Originally Posted by AZT View Post
On the harrier thread someone had posted their excel sheet with calculations on how they find lease more beneficial. I think that should be of help to you.
Saw that now thanks. In that the calculations seems to be wrong somehow.


Would be great if someone else can also post their experience post GST implementation.
prasanth is offline  
Old 8th December 2020, 12:36   #263
BHPian
 
RT13's Avatar
 
Join Date: Mar 2010
Location: Bangalore
Posts: 370
Thanked: 1,036 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

This is a great thread! Anyone has any updates on the company lease option?

My better half is getting a lease deal wherein the entire amount is covered and spread out over 4 years (with their interest and what they call 'fleet management charge') at the end of which she can buy it at 10% of the price. In addition, insurance, petrol, service and even driver salary can be claimed from her gross ctc, before tax.

I did a quick back of the envelope calculation including the tax saving she gets (as the monthly lease amount is deducted from her gross i.e. before tax is levied) and it appears that net net, at the end of the period, after buying it off the company at 10%, she'll end up paying a little bit less than the actual on road price of the car, if we were to fork out cash up front. This is not including the tax saving on claiming insurance, petrol, etc.

Anybody has thoughts on whether this is a good deal?

If she does leave the company before the stipulated 4 year period, she can buy it off the company by paying the rest of the remaining instalments + the 10% + a fee of some 1.5% levied on the aforesaid remaining instalment amounts.

Does it make sense? We are in the market for a 20-30/35L (on road price) car.

Thoughts?
RT13 is offline  
Old 31st December 2020, 17:24   #264
BHPian
 
TechLiveMANA's Avatar
 
Join Date: Nov 2020
Location: Pune
Posts: 41
Thanked: 44 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

My Company offers the Lease option from three different vendors and I have chosen one of vendors for my Creta SXO Diesel AT. One of the advantages that I have compared to what has been listed in the thread here, is that the vehicle would be registered in my name and not the company based on a tripartite agreement with my company, myself and the lease vendor. What I am told is, at the end of the tenure, they will just remove the hypothecation, the way you do when you go for a car on loan so the ownership doesn't change so I will be the first owner after all.

I have opted for a tenure of 4 years at an IR of 10.5% and based on the calculations, the ownership cost at the end of the tenure (after the tax savings) would come out to be around the current On Road price of the car. The total savings as per the calculator offered by the lease company when compared to opting for the same car at the prevalent interest rate of 8% p.a, turns out to be Rs.395221.

Note: I have excluded the tax savings which I would get for claims related to Fuel, Driver, etc as that benefit is available to me even if I don't opt for Lease car.
TechLiveMANA is offline   (2) Thanks
Old 16th March 2021, 20:32   #265
BHPian
 
Join Date: May 2011
Location: BANGALORE
Posts: 70
Thanked: 51 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

Hi,

What are the leasing companies that offer multi brand lease other than ALD and Orix?

Any feedback would also be much welcome.

Thank you,
Naga.Sid
naga.sid is offline  
Old 27th March 2021, 09:48   #266
BHPian
 
TechLiveMANA's Avatar
 
Join Date: Nov 2020
Location: Pune
Posts: 41
Thanked: 44 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

Quote:
Originally Posted by naga.sid View Post
Hi,

What are the leasing companies that offer multi brand lease other than ALD and Orix?

Any feedback would also be much welcome.

Thank you,
Naga.Sid
My Company has Tie up with Kotak and Leaseplan.
TechLiveMANA is offline  
Old 11th May 2021, 01:30   #267
BHPian
 
Join Date: Dec 2020
Location: Gurgaon
Posts: 44
Thanked: 87 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

I had taken a lease for my Honda City (5th Gen ZX, CVT) in December '20. My company has a tie up with Leaseplan. After having considered the 8 lakh loan I would have to take, the lease amount was coming out to be about 2-2.5 lakhs cheaper. Based on the calculation sheet they sent me, it appears as if cheaper cars will result in better savings over the course of the lease.

Query for those in the know: The buy-back the Leaseplan chaps have stated is 44% of the ex-showroom price of the car (which is around 14.4 lakhs). Once the lease gets over in 3 years, is there any room for negotiation on that or will they insist on the 44%?
GNG19 is offline  
Old 6th July 2021, 13:11   #268
BHPian
 
krishnakumar's Avatar
 
Join Date: Oct 2019
Location: Bangalore
Posts: 613
Thanked: 2,661 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

Hi all,

I'm looking to buy a new car and this thread has been really interesting.

I'm a salaried employee and my company doesn't appear to have CLC program (I have made an enquiry with the HR but I believe there is no such policy).

My question is this, can a salaried employee directly lease a car from leasing companies like Orix? Does it work out better in that case?
krishnakumar is offline  
Old 15th January 2022, 16:58   #269
Newbie
 
Join Date: Dec 2021
Location: Bangalore
Posts: 11
Thanked: 22 Times

Let's consider the Hyundai Creta 1.5 S Petrol to compare the Lease rental vs EMI.The Hyundai Creta 1.5 S Petrol on-road price is Rs 14,16,341 ( Rs 11,83, 900 - ex-showroom price).

If we talk about the leasing first, the lease rental will cost you Rs 35,572 per month for a tenure of 5 years with annual usage of 15,000 Km. The flat monthly rental includes all the service, maintenance, insurance, tyre, battery change and other charges during the 5 years except for the fuel expenses. If we calculate the sum of payments over the course of 5 years, the total lease payment which the user would be paying is Rs 21,34,320. At the end of lease contract, the user can decide whether to keep the car or return the car. In case of keeping the car, the user has to pay the residual value of the car after 5 years of use and the ownership will be transferred to the user.

If you are a salaried employee eligible for a company car, small business proprietor or a self employed professional like Doctor, Lawyer, you can avail tax savings upto 30% in case of leasing a car. As lease rentals are deducted from your CTC before imposing the tax, you enjoy an increased in-hand salary thanks to the tax savings because of your leased car hence reducing your effective lease rental.

Now, if we talk about buying a car with a loan, It is worth noting that in case of bank loan, the user is only paying the principal amount of the vehicle. The user is supposed to take care of insurance, periodic maintenance, irregular damages, road tax and other expenses as well.

So, If we consider a car loan for a tenure of 5 years with the interest rate of 9% and a 90% of ex-showroom price as the loan amount amounting to Rs 10,65,510 , the initial down payment would be 10% of ex-showroom price plus the RTO, Registration Charges & Insurance amounting to Rs 3,50,831. The user would have to pay a monthly EMI of Rs 22,118 plus insurance, maintenance & service costs. If we calculate the payment over the course of 5 years, the user would have paid Rs 13,27,080 + Rs Rs 3,50,831 = Rs 16,77,911 towards the car loan.

Moreover for a fair comparison, it is important to also consider the other ownership cost for the 5 years which will be approximately Rs 2,00,000 (Insurance Cost) + Rs 50,000 ( Regular Service Cost ) + Rs 85,000 (Tyre & Battery Change Cost) = Rs 3,35,000. These are the approximate ownership costs and may vary according to vehicle condition, driving behavior etc. In Addition to this, we should consider the lost opportunity costs by calculating the expected return over 5 years in case the initial down-payment was invested (e.g. 7 % interest on a fixed deposit) = Rs 1,22,791. Hence the total amount paid by user over the course of 5 years in case of taking the car loan would be Rs 16,77,911 + Rs 3,35,000 + Rs 1,22,791 = Rs 21,35,702

The key in deciding whether to lease or buy a car with a loan comes down to 3 main points
- Are you or your company eligible to avail the tax benefit?
- Do you plan to use the vehicle between three to five years and drive up to 20,000 km per year.
- Are you concerned about the maintenance, service cost and hassle of selling the used car after usage?
Incase the answer for at least 2 out of 3 question is yes, leasing a car is a suitable option for you.


You can still lease a car in your individual capacity if your company doesn't want to have a corporate leasing policy. You will still get all the other benefits associated with leasing except the tax saving benefits.

The KYC documents required to lease a car are
ID Proof - PAN Card

Address Proof - Passport / Election ID / Telephone Bill / Utility Bill / Valid Rental Agreement
PAN Card / Passport

Income Proof -
Last 3 months of salary slip
2 years of Form 16 or Income Tax Returns
Last 6 months of bank account statement in which your salary is credited
You can also provide a bonus or incentive letter if applicable.

Last edited by vb-saan : 22nd February 2022 at 07:57. Reason: Posts merged. And strictly no business promotion please!
madhukar is offline   (5) Thanks
Old 20th January 2022, 15:30   #270
BHPian
 
Join Date: Oct 2021
Location: New Delhi
Posts: 115
Thanked: 161 Times
Re: ARTICLE: Lease OR Loan? Which EMI is better for you

My company does have a car lease policy. However, there's a catch, if you opt for this policy then company will not provide the cab facility and my company does have a pretty good facility.

My house is approx. 40kms away from office, so 80kms up down daily, the exorbitant petrol cost, the hassle of driving in Delhi-Gurgaon traffic , it seemed fair in my case to buy the car on my own.
If I was living within 7-10kms radius of my office, I would have considered the lease policy.

So anyone who is thinking of car lease policy, please check all the terms.
Sahil00090 is online now  
Reply

Most Viewed
Thread Tools Search this Thread
Search this Thread:

Advanced Search

Copyright ©2000 - 2024, Team-BHP.com
Proudly powered by E2E Networks