Big dilemma - please help urgently!

himanshugoswami · 28th June 2007, 09:40

Guys, I need you to help me out a bit here.

I have recently relocated from bangalore to hyderabad on a new job.

As part of my compensation, i am entitled to a company owned car, that gets transferred to me on book value after 4 years. also, if I take this company car option, i save on:

1.taxes on account of car maintenance and running allowance.
2. No EMI (so save 10K a month there)
3. No expense on paying AP road tax for my current car (approx 55K)

Now my dilemma is that I recently purchased a Baleno LXI(Jan 07) in bangy that i drove down to Hyd. I really love this car and do not want to sell it so soon. But my head says that it will be a good financial move to go in for the company car option.

I have parking for only 1 car in my apartment so the option of 2 cars is also ruled out.

Am in a real dilemma here. Please help me out guys!

esteem_lover · 28th June 2007, 09:58

himanshu, i pity & envy you man. Its going to be very difficult to let go of the brand new baleno, but i think that would the sensible choice considering that you have to pay the AP tax & the EMIs. Harden your heart & bid goodbye. A sentimental sort that does not mind the expense will take the baleno to AP.

dadu · 28th June 2007, 10:05

Why not ask them for an option to get the same benefits on the existing car including road tax payment through the company, they can consider the market value of the car and calculate accordingly for the benefits.

CrAzY dRiVeR · 28th June 2007, 10:08

May i ask what are the options you have for a company car?

It must be hard to let go of the car you love. trust me, have gone through that situation, and still tears come to my eyes at times when i think of my previous car. However, its a fact that life moves on...

If you have better options available, and since its makes financial sense, you better take a sensible decision with the head, not the heart.

Or start looking for parking space at office, or any friend's apartments.

xbox360 · 28th June 2007, 10:11

I agree with dadu, most of these companies generally are OK taking up your existing vehicle under the same policy. I think you should exhaust this option first before you try anything else.
Financially company owned car works out much better than having your individual vehicle.

WhiteKnight · 28th June 2007, 10:23

Quote:

Originally Posted by himanshugoswami

Am in a real dilemma here. Please help me out guys!

Option 1: As dadu said, negotiate hard with your organization whether your existing car could be included in this deal. Company may ask you to transfer the ownership to them and swith the financing organization. Anyway, give it a shot
Option 2: Gift the company car to your FIL

and use Baleno.

Option 3: Keep Baleno. You'll still get car maintenance and running allowance after tax (30%?)

Option 4: Sell Baleno- you'll loose money. Run the numbers and see which side is more profitable. I mean check what % would be the "Book value" for the company car after 4 years, and do the comparison.

Also look at "What if" scenarios, like what if you quit the organization before completing 4 years, could you still be able to buy out the car? if so, what is the depreciation applicable? If not?

ajmat · 28th June 2007, 10:30

Using the opportunity cost of the money locked in the Baleno (ie missed opportunity to invest the money at 10% per annum). Assuming you put in 3.5L and get Rs 2l after four years - you lose 7.8 lakhs overall

If you take a hit, sell car for 4.5 lakhs, get a tax rebate of 33% of emi and invest that 2.0 lakhs (assuming you need to repay loan) at 10% return, you are better off by 6 lakhs lakhs overall. But since

Check the tax implication when transferring over after four years also any emi cost hidden in the car. it my be higher than buying. Remember, tax is payable between written down cost and market value

tsk1979 · 28th June 2007, 10:45

The company deal is good. But our finance ministry does not like to make us happy. So now there is something called a perk tax. It was revised some time back.
Before you do the maths, find out exactly what will be your take home impact after all such taxes.
Also do you plan to stay for atleast 4 years? Company policies are such that you will be at loss if you pre-terminate your lease.

himanshugoswami · 28th June 2007, 12:46

thanks for the responses guys,

To answer your questions,

the company does not have the option ofcoverting my Baleno to the company car.

The chioce of the company car is upto me, the ex-showroom should not exceed 8 L- So looking at the sx4-zxi and the safari Dicor as options if I go in for the company car.

I have the option of buyback at the book value at any point of time that I decide to leave the company.he company.

The number crunching is in favour of the company car in teh medium to long term perspective.

Keep teh suggestions coming in.....really helps!

gemithomas · 28th June 2007, 12:55

hey! himanshu that is real sad new. i guess we were in the buying process almost during the same period. And selling off a new Baleno is sort of very difficult since i feel this is one car that people buy since they love the performance.

Why cant you leave the car with someone in your family. someone who would take care of it. Also if you consider the loss you might incur while selling this one, willit still be profitable to convert the company car at book value after 4 years!!!

dadu · 28th June 2007, 13:03

then If you will not need 2 cars I would suggest sell it off, repay your loan liability and be happy with the new car as offerred by your company, keeping a car in a garage doesnt make sense if you are not going to use it and add to it the maintenance cost and forced running you will need to do over the years.

A car is a depreciating asset, it will loose value every year.

noviceDriver · 28th June 2007, 23:51

Another work-around, will work only if your company allows you to buy 2nd hand cars (my company supports 2nd hand car buying as part of the car-owning policy). Transfer the ownership of your Baleno to someone you know, then buy it back from him / her.

Certainly then the valuation of the car needs to be done by a 3rd party when you are buying it back, there are many such entities who does this kind of evaluation.

shuvc · 29th June 2007, 00:12

If your company were sponsoring an Accord I'd have suggested otherwise. But since you'll still end up with a car from the same price bracket, I'd say let not the carrot tempt you.

Keep the Baleno, pay the 55K tax for AP. You'll probably lose a LOT more if you try to sell a 07 Baleno.
This will also keep the option open for leaving the new org. IMO company lease car option should be taken after you've spent some time in the new org and are convinced that you can spend the next few years there.

Enjoy the Baleno ...

georgexavier · 29th June 2007, 00:15

Himanshu - I suggest that you keep your existing car and get the AP road tax reimbursed by the company (most company has it as per policy. do check with your HR). I don't see any point in trying to dispose off a Jan 07 car.

Zappo · 29th June 2007, 01:22

Himanshu, shuvc's assessment of the situation is the most balanced one. Mate you have just joined. Let it ride for a while. I think you will like to stick here for a while, maybe even 4 years

So what is the hurry. Take your call after a year. It may prove much easier then to decide. Only that you will start getting the tax benefits a year later (and will also last one more year than if you take now). So at worst it will be a deferred benefit for you.

28th June 2007, 09:40	#1
himanshugoswami Senior - BHPian Join Date: Oct 2004 Location: !!!! Posts: 2,303 Thanked: 2,619 Times	Big dilemma - please help urgently! Guys, I need you to help me out a bit here. I have recently relocated from bangalore to hyderabad on a new job. As part of my compensation, i am entitled to a company owned car, that gets transferred to me on book value after 4 years. also, if I take this company car option, i save on: 1.taxes on account of car maintenance and running allowance. 2. No EMI (so save 10K a month there) 3. No expense on paying AP road tax for my current car (approx 55K) Now my dilemma is that I recently purchased a Baleno LXI(Jan 07) in bangy that i drove down to Hyd. I really love this car and do not want to sell it so soon. But my head says that it will be a good financial move to go in for the company car option. I have parking for only 1 car in my apartment so the option of 2 cars is also ruled out. Am in a real dilemma here. Please help me out guys!
	() Thanks

28th June 2007, 09:58	#2
esteem_lover Senior - BHPian Join Date: Jul 2006 Location: Madras/Py Posts: 7,556 Thanked: 502 Times View My Garage	himanshu, i pity & envy you man. Its going to be very difficult to let go of the brand new baleno, but i think that would the sensible choice considering that you have to pay the AP tax & the EMIs. Harden your heart & bid goodbye. A sentimental sort that does not mind the expense will take the baleno to AP.
	() Thanks

28th June 2007, 10:05	#3
dadu Senior - BHPian Join Date: May 2007 Location: Bangalore Posts: 3,803 Thanked: 462 Times View My Garage	Why not ask them for an option to get the same benefits on the existing car including road tax payment through the company, they can consider the market value of the car and calculate accordingly for the benefits.
	() Thanks

28th June 2007, 10:08	#4
CrAzY dRiVeR Team-BHP Support Join Date: Jun 2006 Location: Bangalore / TVM Posts: 17,181 Thanked: 73,505 Times View My Garage	May i ask what are the options you have for a company car? It must be hard to let go of the car you love. trust me, have gone through that situation, and still tears come to my eyes at times when i think of my previous car. However, its a fact that life moves on... If you have better options available, and since its makes financial sense, you better take a sensible decision with the head, not the heart. Or start looking for parking space at office, or any friend's apartments.
	() Thanks

28th June 2007, 10:11	#5
xbox360 BHPian Join Date: Mar 2007 Location: Hyderabad Posts: 251 Thanked: 89 Times View My Garage	I agree with dadu, most of these companies generally are OK taking up your existing vehicle under the same policy. I think you should exhaust this option first before you try anything else. Financially company owned car works out much better than having your individual vehicle.
	() Thanks

28th June 2007, 10:30	#7
ajmat Team-BHP Support Join Date: Feb 2004 Location: Bangalore Posts: 14,864 Thanked: 27,975 Times View My Garage	Using the opportunity cost of the money locked in the Baleno (ie missed opportunity to invest the money at 10% per annum). Assuming you put in 3.5L and get Rs 2l after four years - you lose 7.8 lakhs overall If you take a hit, sell car for 4.5 lakhs, get a tax rebate of 33% of emi and invest that 2.0 lakhs (assuming you need to repay loan) at 10% return, you are better off by 6 lakhs lakhs overall. But since Check the tax implication when transferring over after four years also any emi cost hidden in the car. it my be higher than buying. Remember, tax is payable between written down cost and market value
	() Thanks

28th June 2007, 10:45	#8
tsk1979 Team-BHP Support Join Date: Feb 2005 Location: San Jose, CA Posts: 23,717 Thanked: 22,825 Times View My Garage	The company deal is good. But our finance ministry does not like to make us happy. So now there is something called a perk tax. It was revised some time back. Before you do the maths, find out exactly what will be your take home impact after all such taxes. Also do you plan to stay for atleast 4 years? Company policies are such that you will be at loss if you pre-terminate your lease.
	() Thanks

28th June 2007, 12:46	#9
himanshugoswami Senior - BHPian Join Date: Oct 2004 Location: !!!! Posts: 2,303 Thanked: 2,619 Times	thanks for the responses guys, To answer your questions, the company does not have the option ofcoverting my Baleno to the company car. The chioce of the company car is upto me, the ex-showroom should not exceed 8 L- So looking at the sx4-zxi and the safari Dicor as options if I go in for the company car. I have the option of buyback at the book value at any point of time that I decide to leave the company.he company. The number crunching is in favour of the company car in teh medium to long term perspective. Keep teh suggestions coming in.....really helps!
	() Thanks

28th June 2007, 12:55	#10
gemithomas Senior - BHPian Join Date: Jan 2007 Location: Trivandrum Posts: 2,366 Thanked: 143 Times View My Garage	hey! himanshu that is real sad new. i guess we were in the buying process almost during the same period. And selling off a new Baleno is sort of very difficult since i feel this is one car that people buy since they love the performance. Why cant you leave the car with someone in your family. someone who would take care of it. Also if you consider the loss you might incur while selling this one, willit still be profitable to convert the company car at book value after 4 years!!!
	() Thanks

28th June 2007, 13:03	#11
dadu Senior - BHPian Join Date: May 2007 Location: Bangalore Posts: 3,803 Thanked: 462 Times View My Garage	then If you will not need 2 cars I would suggest sell it off, repay your loan liability and be happy with the new car as offerred by your company, keeping a car in a garage doesnt make sense if you are not going to use it and add to it the maintenance cost and forced running you will need to do over the years. A car is a depreciating asset, it will loose value every year.
	() Thanks

28th June 2007, 23:51	#12
noviceDriver BHPian Join Date: Jun 2006 Location: Madison, WI Posts: 75 Thanked: 0 Times	Another work-around, will work only if your company allows you to buy 2nd hand cars (my company supports 2nd hand car buying as part of the car-owning policy). Transfer the ownership of your Baleno to someone you know, then buy it back from him / her. Certainly then the valuation of the car needs to be done by a 3rd party when you are buying it back, there are many such entities who does this kind of evaluation.
	() Thanks

29th June 2007, 00:12	#13
shuvc Senior - BHPian Join Date: May 2005 Location: Kolkata Posts: 2,913 Thanked: 352 Times View My Garage	If your company were sponsoring an Accord I'd have suggested otherwise. But since you'll still end up with a car from the same price bracket, I'd say let not the carrot tempt you. Keep the Baleno, pay the 55K tax for AP. You'll probably lose a LOT more if you try to sell a 07 Baleno. This will also keep the option open for leaving the new org. IMO company lease car option should be taken after you've spent some time in the new org and are convinced that you can spend the next few years there. Enjoy the Baleno ...
	() Thanks

29th June 2007, 00:15	#14
georgexavier Newbie Join Date: Jun 2007 Location: Hyderabad Posts: 1 Thanked: 0 Times	Himanshu - I suggest that you keep your existing car and get the AP road tax reimbursed by the company (most company has it as per policy. do check with your HR). I don't see any point in trying to dispose off a Jan 07 car.
	() Thanks

29th June 2007, 01:22	#15
Zappo Team-BHP Support Join Date: Oct 2005 Location: Hyderabad Posts: 5,922 Thanked: 2,699 Times	Himanshu, shuvc's assessment of the situation is the most balanced one. Mate you have just joined. Let it ride for a while. I think you will like to stick here for a while, maybe even 4 years So what is the hurry. Take your call after a year. It may prove much easier then to decide. Only that you will start getting the tax benefits a year later (and will also last one more year than if you take now). So at worst it will be a deferred benefit for you.
	() Thanks