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Old 25th August 2020, 10:43   #256
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Default 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?

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Old 25th August 2020, 22:21   #257
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Default 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?
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Old 26th August 2020, 09:51   #258
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Default Re: ARTICLE: Lease OR Loan? Which EMI is better for you

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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%
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Old 30th August 2020, 01:42   #259
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Default Re: ARTICLE: Lease OR Loan? Which EMI is better for you

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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.
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Old 10th October 2020, 22:02   #260
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Default 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?
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Old 11th October 2020, 01:08   #261
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Default Re: ARTICLE: Lease OR Loan? Which EMI is better for you

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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.
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Old 11th October 2020, 17:18   #262
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Default Re: ARTICLE: Lease OR Loan? Which EMI is better for you

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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.
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Old 8th December 2020, 12:36   #263
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Default 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?
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Old 31st December 2020, 17:24   #264
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Default 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.
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