[prabhuferrari]

Originally Posted by hserus

Keeping the car on after the lease is what you must not do - you automatically become a second owner on paper though you have retained the car all along.

While the tax benefits are significant you must also take into account that you are actually paying out much more money for the vehicle due to higher than average interest rates at private sector leasing finance providers that companies routinely tie up with, compared to cheaper rates available from nationalised banks / using your own saved money to do an outright cash purchase in which case you will get fantastic deals compared to any financing.

1. The tax benefit is more than the saving from lesser interest rate especially if you are in the 30% tax bracket.
2. You can put the money that you would have otherwise spent for down payment, road tax etc on a FD or bonds or some other savings and get interest on it.
3. If you intend to keep the car for longer duration, you can transfer to your name. Over 6 or 7 or 8 years the difference in second hand vs third hand will be lesser than the tax benefit and interest component you gained over the years.

Main disadvantage of lease is if you switch jobs in between it is a pain. Either you sell it and incur some loss or some lease providers like Sundaram allow you to continue to pay the lease amount month on month after they transfer the car in your name. But you lose the biggest benefit, the tax!

[reignofchaos]

New car leases have been withdrawn in our company now. It is no longer a viable tax saving option.

[anubhav22]

Ditto for many other organisation.
For a car under 49% GST, the lease rental/interest also attracts 49% GST.
So a typical 15% interest and lease charges actually become 22.5%
Add ~9% of perquisite tax at end of 3 year lease period and it makes it unviable for even 30% tax bracket folks.
Any fuel/driver salary typically gets negated by foreclosure risk and perquisite charged unless it is very high value.

So car lease companies have to come out with innovative products or revive operational lease model with lower charges or reduce interest on financial lease to ~9% with 0 penalty on foreclosure.

Win-Win-Win siuation has unfortuanately ended.

[NiXTriX2004]

Is it still viable to go for a new car lease program if insurance, maintenance, and fuel are part of it?

[avisidhu]

Hello everyone, Requesting guidance from those well versed with this employer lease plan!

A fellow employee is leaving the company and wants to let go the Creta Petrol Automatic which he purchased through vehicle lease. Its 16 months old. He's willing to pay some money alongside getting the car lease transferred. 20 odd months of lease period are left.

1) What would typically be the residual value at the end of the 36 month lease that I would have to pay to get the vehicle? Is 6 odd lakh a realistic number?

2) The current EMI is around 24K, and with the 30% tax saving the effective EMI would be around 15K per month, for the next 20 months. So for a residual value of 6L, I'll end up paying 9L (6 + 1.5 * 20) overall. Is this assumption correct?

3) Assuming an around 70% possibility of me leaving before this period expires, should I even think about this option?

3) To the larger question of whether I need the car: my third gen City is still going good at 9 years, and I'm quite happy chugging it for another 4-5 years, although it will sell for pennies by then. It's just that the proposition is mouth watering. AT would be a boon, the City is already giving 11 odd in Hyderabad traffic so FE hit wont be substantial. I could sell the city right now, and park the money to buy back the Creta at lease expiry.

Thoughts/Suggestions/Queries anything is most welcome

[Wanderers]

Originally Posted by avisidhu

Hello everyone, Requesting guidance from those well versed with this employer lease plan!

I have a car under company lease. The lesser is "Clix".
Company lease program is also about duration till you remain under such program to get added tax benefits like fuel and driver allowance. If you are entering midway, you reach end of lease period very soon and you either transfer the car to your name or sell the car to re-enter the lease scheme.

I would not suggest for transfer of lease. To answer your questions, you need to pay around 30-35% at the end of 3 years to get the car ownership or sell out. It will not be 6 lakhs but it can differ from company to company.
Also if you plan to change job, just imagine yourself into the current seller shoes and feel the pain of getting out of such schemes. Moreover in your case it will be third hand car (difficult to sell)

[nitinhegde]

Originally Posted by avisidhu

Hello everyone, Requesting guidance from those well versed with this employer lease plan!

Thoughts/Suggestions/Queries anything is most welcome

To get clarity, ask for the complete xls based calculation for the entire lease period from the financing company(under which vehicle is hypothecated).

If the entire lease period is 3 years only then it's not worth the hassle. If you also plan to exit the company sooner then the tax saving vs the cost/hassle of transfers etc may not be worth it.

[avisidhu]

Thank you for your valuable inputs guys. My intent is to err on the side of caution in this case, and you have certainly helped make the decision easier

Originally Posted by Wanderers

.... Moreover in your case it will be third hand car (difficult to sell)

Thank you Wanderers, heeding your advice. But just curious, since the car is in the company name and its just a lease transfer, wouldn't it technically still remain second hand?

Originally Posted by nitinhegde

....
If the entire lease period is 3 years only then it's not worth the hassle. If you also plan to exit the company sooner then the tax saving vs the cost/hassle of transfers etc may not be worth it.

Thanks Nitin, yes agree with you, might not be worth the hassle.

The thing is, I am now utterly convinced that it makes no sense investing in a new car, but second hand requires significant moolah to be invested. This option seemed like I'm getting the best of both worlds, a hugely depreciated vehicle and monthly lease which I can afford.

[nitinhegde]

Originally Posted by avisidhu

Thanks Nitin, yes agree with you, might not be worth the hassle.

The thing is, I am now utterly convinced that it makes no sense investing in a new car, but second hand requires significant moolah to be invested. This option seemed like I'm getting the best of both worlds, a hugely depreciated vehicle and monthly lease which I can afford.

Have a look at the attached xls for the working done for an Innova purchase for car lease(very recent). You should ask for a similar xls to decide how much you really save(remember that there is a residual value too that needs to be paid).

[swiftnfurious]

Originally Posted by Wanderers

... you need to pay around 30-35% at the end of 3 years to get the car ownership or sell out...

How is it 30-35%? Guess this again depends on the company - in my org, it's 25% for 3 year & 20% of the vehicle price for 4 year lease period. The lease is provided by Orix.

In my previous company, I think the residual value hovered about the same % IIRC.

[sanchari]

Originally Posted by avisidhu

Hello everyone, Requesting guidance from those well versed with this employer lease plan!

A fellow employee is leaving the company and wants to let go the Creta Petrol Automatic which he purchased through vehicle lease. Its 16 months old. He's willing to pay some money alongside getting the car lease transferred. 20 odd months of lease period are left.

1) What would typically be the residual value at the end of the 36 month lease that I would have to pay to get the vehicle? Is 6 odd lakh a realistic number?
...
Thoughts/Suggestions/Queries anything is most welcome

All leasing companies will provide the xls sheet for monthly payments and residual amount. Ask your colleague to share the details, he will have it, or contact his lease coordinator to get it. You will get a clearer picture.

I see many in my company taking over leases. Check the residual value + (monthly amount * tax bracket) and see if its less than or equal to current price of similar used car in market place (olx/quikr etc). Then you can make a decision.

[Wanderers]

Originally Posted by avisidhu

Thank you Wanderers, heeding your advice. But just curious, since the car is in the company name and its just a lease transfer, wouldn't it technically still remain second hand?

Yes it would remain second hand. I was incorrect.

Originally Posted by swiftnfurious

How is it 30-35%? Guess this again depends on the company - in my org, it's 25% for 3 year & 20% of the vehicle price for 4 year lease period.

You are correct. Even in my company it is 20% for 4 years and 25% for 3 years. However there is tax impact of 4-6% and this would remain even under GST regime.

The residual value depends upon the depreciation rate agreed between company, which again depends on rate of returns (lease rate) negotiated between both companies. A big or large fleet company can negotiate a lower rate.

[sathish81]

My company has just introduced a car lease program. Is it common for companies to ask employees to pay RTO+insurance costs for the car in car lease program.

[rajiv.kulkarni]

Originally Posted by sathish81

My company has just introduced a car lease program. Is it common for companies to ask employees to pay RTO+insurance costs for the car in car lease program.

It depends on what kind of arrangement company has with the lease provider. My company has recently changed the lease provider. When I availed the lease with the earlier company, lets call it "A", they financed the entire on-road car price along with insurance premiums for the entire term of lease. For the entire duration of 3 years I had to spend only on Fuel (reimbursed) and Maintenance (own cost).

The present lease company finances the insurance for only the first year and then charge that to the customer over the period of lease.

IMO there is no hard and fast rule that the leasing company has to sponsor Insurance and RTO Tax. You can speak to dealers and get insurance for free for the first year though. Hope this helps.

[raaj.bhalla]

Hi Guys,

My wife's company has a car lease option which looks very good to my inexperienced mind in this domain but I wanted some expert opinion so that I can make a right decision.

Following is what the car lease option says:

1. Funding by the leasing company would be limited to 85% of the total price (Ex Showroom) of the vehicle. Base down payment of 10% shall be deposited by the employee upfront with the leasing company as adjustable security deposit and balance @5% would be deposited at the end of the term as residual value.

2. Leasing company would fund the ex-showroom price, registration & road tax, 1st year insurance, accessories (max up to 10% of ex-show room cost) and Insurance for future terms (2nd, 3rd & 4th Year).

3. It says perquisite tax is applicable. I would like to know what is it and how much tax will be charged.

My wife will get full 30% tax benefit.

Please let me know if this is a good option to go for? I am planning to buy Tiago Petrol XZ ex showroom of which is about 5.25 lacs.

Also, do I need to pay any additional charges or taxes over and above the residual value after 4 years?

Thanks,
Raj