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-   -   ARTICLE: Lease OR Loan? Which EMI is better for you (https://www.team-bhp.com/forum/buying-car/20127-article-lease-loan-emi-better-you-4.html)

@appuchan : the 10% residual value is also good. Other companies I know of quote upto 25% for a 3 year lease, and 20% for a 4 year lease.

The quotes I've seen had varying residuals. Of course, the monthly payments varied according to the residual as well. I saw options ranging from 10 - 35% residual at the end of the term.

@GTO, yes. Companies did offer their employes a residual value as low as 10%, till about a year back. Sometime in early 2008 / late 2007, this changed to a minimum of 20%.

Any one recall any changes in regulations / intrest rates / market conditions that could have triggered this ?

Yes, the monthly payments wild depend on the RV.

Can an individual go for a lease plan ? If yes, are there plans available for 5 years?

Yes to both your questions, Milecruncher.

Is this feasible for business owners if you plan to sell your cars every 3 to 5 years?

Thanks GTO . Guess need to get in touch with LeasePlan guys see how it works.
In the west one's get an option to go for something called PCP wherein you have an option of making a balon payment at the end of the term to buy the car but the maximum term for that is about 36 months. There is also another option called long term rental for 2 years with insurance and maintenance paid for at almost the same as EMI.

i have a car with company car lease program. if i want to withdraw out of it and not opt to take the car, how would it work? i am just 9 months old in the lease program. the lease years are 3 years.

thanks for the article GTO!! I am considering this option now...

But tell me whom do i have to approach in order to buy a car on lease?
Do i understand correctly that i have to approach the leasing company, for example Orix?

i got it after further reading all of the posts... thanks.

It is beneficial ONLY for companies & entrepreneurs. Two reasons:

1. You write off the monthly lease as a cost (deduction in taxable income and thus 30%)

2. No capital locked up in a car (no down payment). Hence, you could use it to expand your business.

3. Maintenance is entirely the leasing companys headache (beats the BSI too :)).

4. Most leases give you the option to buy the car at the end of the lease. Now, if you don't want to retain the car, simply opt out. However, here is what I recommend : The amount you can retain the car for is generally LESS than its market value. Thus, even if you want to dispose her off, buy it from the leasing company and sell it yourself.

Would depend on your employers policies. But generally, you cannot opt out of a lease without penalties.

Yup, get in touch with the leasing organisation directly.

But GTO does it mean that i have to stay at my present company for the time of the lease? If so, then sadly it won't be possible for me to go this way, as i am planning to change in a year or so.

@GTO, I am in a little bit of conflict with your installment calculations. See, as per my calculations, a 4.5 Lacs Loan @ 12.5% (10.5%-11% for nationalised banks in which case EMI would be lower) for 36 months with 1 emi in advance entails an EMI of INR 14900 which works out to be much cheaper than your calculation of 16800. So, this makes leasing less attractive.

Additionally, any given day a Hire Purchase with a recognised bank/NBFC is better than dealing with a private leasing firm like Orix. That is why these people never got big in India. Their credit appraisal and customer management processes are not perfect. Their cost of funding is much higher than scheduled commercial banks because of which leasing is at a higher ROI. Am not really sure how and what kind of arrangement do they have with credit bureau like CIBIL.

Additionally, if I go as per your quotes for leasing, a lease with an installment of INR 17400 for 36 months resulting in total outpay of INR 626400(-)hire purchase outpay of INR 536400. [b]A difference of INR 90000 in favour of Hire Purchase[b]. Couple that with handicap of ownership serial 2 at the expiry of lease and you are sure to loose additional money in terms of resale of leased vehicle. In such a case, leasing becomes a very very unattractive option.

Depriciation Calculations:

LEASING: Total Outpay INR 626400*.3367=INR 210909 over a period of 3 years.
HIRE PURCHASE: Ex showroom Price= 5 lacs
Depriciation Y1= 500000*.15=INR 75000
Y2= 425000*.15=INR 63750
Y3= 361250*.15=INR 54188
Grand Total= INR 192938 over a period of three years
Interest Admissible as expense over 3 years= INR 86400
Tax saved@33.67%= INR 29000
Total for HP option= INR 220000

As such, Hire purchase is a far better option than leasing in India.

Note from the Team-BHP Support Team: Please avoid quoting an entire large post. It inconveniences our small screen & mobile readers.

Thanks.

Policies vary from employer to employer.

Prateek, the calculations you see in the opening post are from a time when interest rates were different (look at the post date). Get a fresh quote from Orix & leaseplan to see todays rates.

I've seen the contracts and can confirm they are solid / straightforward. Plus, we've had many BHPians take the lease option and ending up fully satisfied. Orix is a global player, not a local fly-by-night operator. Lastly, we cannot blindly generalise *recognised banks* as the better option. As an example, search through the forum for ICICI complaints.

Unanswered questions for sure. I'd love to get more indepth information on these concerns.

As I have reiterated earlier, Lease makes the MOST sense for entrepreneurs & businessmen. Reason :

1. The tax benefits more than make up for any difference in outlay.

2. No money locked up in a depreciating asset (an automobile); money that could be used for the business.

3. Option to buy the car at the end of the tenure. And maintenance is entirely the headache of the leasing organisation.

Again, whether lease or loan is better for you entirely depends on your occupation & financial situation. The point of this article is to let BHPians know of another option which would have otherwise never been considered. I'd say it is more beneficial for atleast 50% of the businessmen out there (small or big).

As far as I know, in case of theft of total loss of vehicle; one gets nothing back from the insurance company and all of it goes to lease provider. :Frustrati