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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-8.html)

Umm.. if you think the financing lease is better, why are you still looking for operating lease deals? Is there anything that gives the operating lease an edge?

As per the email from one of the leasing companies I dealt with, my wife's company only does operating lease as they do not want to take the asset on their books. Hence she won't be able to go to them with an alternative company that provides financial lease.

I wonder if the 3 quotes at end of lease term is something that applies to all operating leases. That's one of the reasons I asked if there is a better operating lease deal.

Right now for me, not knowing the RV (resale value) is turning out to be a deal breaker. I was even OK with the inflated charges.

In case of Company leased car, the insurance is in the name of the company - (with c/o. user's name).
Would this complicate the NCB claim?

In my company's case, the employee doesn't have to bother on two counts. The first count is obvious - since the vehicle is on the leasing company's name the employee's NCB profile remains untouched (assuming there is one). That is to say, if you took the NCB certificate of your older car in 2008 and you took a car under company lease immediately after selling off your old car, any accidents to this new car won't invalidate your personal NCB as long as it's valid (until 2011). That's my understanding of the issue.

Conversely, if you have a clean record, NCB on this new car will not be applicable on your next car purchase (self-owned or hypothecated). So it's fair that way.

The second thing is that Sundaram (the leasing company) transfers the insurance payout to the company which in turn reimburses the employee.

This might encourage some people to drive recklessly (adverse selection -- everyone gets paid with no impact on the NCB) and hopefully the incidence of such behaviour is within manageable limits.

This policy might differ from company to company so please check with your lease plan provider and employer.

Regards,
spadix

Thanks for your help, all of you. I have decided not to lease the car but I thought I should share my findings with the community.

I write the below after interacting with a bunch of leasing companies including the biggest in India.

• NONE of the leasing companies I spoke to do a "finance" lease these days. They only do "operating" lease.
  
• In a "finance" lease, the asset goes back to your employer. In an "operating" lease, the asset belongs to the leasing company and it goes back to them at the end of the period (i.e. 3/4 years). ALL the leasing companies I spoke to follow the process of obtaining 3 quotes from used car dealers.
  
• None of the leasing companies wanted to give any indication of the resale value (or repurchase/ residual value - RV). I was able to pry that information out of only one company and honestly the depreciation% he quoted (see earlier post) appears way out of line to me.
  
• The monthly lease rates are sky high. The only advantage is that since most of it is pre-tax, you don't feel the pinch as much. However when I asked one leasing company as to which items would be deducted pre-tax and post-tax, he stopped replying to me.
  
• Since the leasing rates quoted were roughly in the ballpark of 27,000 to 33,000 a month for the Xylo E8 w/ABS, I asked one of them how he is able differentiate his offering from the others. He said their prices are roughly the same, but they provide more services and are more reliable.

So bottom-line is this. If you are a person who gets attached to the car you buy, then perhaps the operating lease is not for you. That is because you have no idea whether you will be able to own your car at the end of the lease.

Some other benefits of an operating lease:

• "Free" insurance: You can have bumps and small accidents without a worry in the world. Your NCB is never affected, and all body-work is free of cost.
  
• "Free" maintenance: You can rough use the car. Actually, your driver can rough use the car. One of the leasing companies told me that most cars on lease have drivers anyway.
  
• Get a better car at the end of the lease. Lease makes a lot of sense to people who desire to maintain an image. In a hassle-free manner (without bothering about the current car), you can easily move on to a newer car.
  
• Lease amount goes out from your pre-tax earnings: Thats really what they would like you to believe. In an operating lease there are multiple items and not all of them are applied to your pre-tax income. I couldn't get a straight answer on what is post and pre-tax from any single company.
  
  In any case the concept itself is a bit like "robbing Peter to pay Paul". You rob the government to pay the leasing company.
  
  For the Xylo, I pay 27K a month pre-tax on a 3-year lease which works out to say 18K post-tax. On the other hand I pay 27K post-tax on a 3-year loan with a down-payment of 1 lakh.
  
  On paper the lease looks like a better deal with the saving of a max of 9K (assuming full exemption for the 27K), but don't forget that at the end of 3 years the guy on lease has no car.
  
  If you change jobs, not only do you have no car but you may owe the leasing company a tidy amount.

Talking about changing jobs; if a leasing company say leaseplan agrees to allow a lease transfer to another employee then is the transferring employee eligible for any money? I am just wondering what happens to the emi's that the first lease employee paid before he transfers to the next employee?

Get the total outstanding book value(say X) from the LeasePlan. And say Y is the used car value, you have negotiated with colleague(buyer).

If Y>X then, the buyer needs to pay the difference to the seller. And if Y<X the seller needs to pay the difference to the buyer. LeasePlan do not involve in this settlement. For LeasePlan its a change in user name, as the vehicle anyway is registered in Employers name.

Received a quote from ALD automotive (leasing company).

Car : Linea Tjet
Exshowroom : Rs. 903,604
Regn + Tax : Rs. 96,860
Total : Rs, 1,000,464

Insurance for 1st year : Rs. 23,000

The quote is as below (per month) for 48 months/60,000 kms:
Finance EMI : Rs. 19,355
Fleet Management Charges : Rs. 1396 ( full maintenance)
Insurance+Insurance disallowances : Rs. 2200
VAT on Finance EMI (12.5%) : Rs. 2,419
ST on Fleet Mgmt/Insurance (10%) : Rs. 400
Education Cess (3%) : Rs. 12
Total Monthly outgo (pre tax) : Rs. 26,184

Post tax, the monthly outgo will be Rs. 18,329

On the whole, I pay Rs. 879, 782 (post tax). This is excluding tax benefits on Fuel reimbursement and Driver salary.

I have an option of buying back the car at the end of 48 months at Market determined value (or) handover to the lease company.

Better than a Bank Loan, what say ?

For the same car, whats the EMI, if Car is personally(bank) financed? (for same tenure, 4yrs)

For a 10 lac loan at an interest rate of 10 percent, the emi for 48 months would be Rs. 25,153.

^^ Then car lease makes sense. Main think to factor is, willingness to keep the car for the entire tenure, or else you may end up paying lot of VAT if lease is pre-closed.

Not really.
I think the loan still makes sense.

Look at the overall payout in both cases.

Lease : close to 9 L + i guess market rate of a 10L linea at the end of 4 yrs would be around 5 L = 14 L

Loan : EMI * 48 installments = 12 L

I went through this thought process at a point of time but eventually decided against the lease. The lure of 'tax savings' is always there but you end up paying a % tax far more than a regular loan.

Lease is specifically meant for folks who are 'in transit' for a period of time, or who do not want to go through the ownership hassle of buy, maintain, sell.
It is equivalent of a rental flat.

Oh I did not consider the buyback value.
Even if the buyback value is only 3L(ie, Lease=Loan), its better to go for Loan and the Car Rgn record also will show it as a single owner vehicle.

if you are a car enthusiast and like cars, driving and jazzing them up a bit etc, then it might possibly be more attractive to own a car rather than lease one.
even financially, as per many others posts and my own cross checking homework, it appears that a loan is better than a lease.
and of course lets not forget - in this world nothing is permanent - so if one finds one's self in between jobs for a bit, then is one prepared for circumstances where one doesnt have a vehicle/ transport of one's own in the intervening period?

Loan :
In case of a loan, i need to pay income tax @ 30%.
Loan outgo = 12 L
IT @ 30% = 4L
Total outgo = 16L

Lease :
Buyback on lease will be around 30 percent (max) of Ex-showroom price less VAT.
The ex-showroom value less VAT is approx Rs. 800,000 (on a 10L onroad price).

30% buy back on 8L will be 2.4 L
Add 12.5% VAT will be Rs. 30,000
Total buy back price is 2.7 lacs

Total lease payment of 9L + 2.7 L will be 11.7 L which is far better than the loan outgo of 16L.

what say ?