[TusharK]

The Volkswagen Virtus is now available on a monthly subscription starting from Rs 26,987.



Volkswagen is offering customers a chance to drive the Virtus for a tenure of 2-4 years and unlimited mileage. They can subscribe by paying a 1-month security deposit and an advance rental payment. The monthly charges include term insurance, scheduled service and unscheduled repairs.

As part of the Power Lease option, once the lease tenure is over, customers can retain the car by paying 20% of the ex-showroom price. The all-inclusive monthly Power Lease rentals of the Virtus start from Rs 29,991 (ex-showroom, Ahmedabad).

Link to Team-BHP News

[Mumbaiker]

I was a bit surprised to see Rs.26,987 so decided to look at the VW website. I checked the cost for Mumbai, and lease comes to around 32k per month for 4 years for the base model i.e Comfortline MT.
For the top end GT plus DSG version, the lease is Rs.50k per month for 4 years. That is around 24 lacs for 4 years which is more than what the car costs on road in Mumbai.

This doesnt seem to be any value to a customer as the customer can avail a loan and pay the EMI. Or am I missing something?

[condor]

Originally Posted by Mumbaiker

This doesnt seem to be any value to a customer as the customer can avail a loan and pay the EMI. Or am I missing something?

Comprehensive Insurance for the duration, maintenance and repairs. Plus add tax savings - esp for companies that want to go this route. They can treat it as opex. The scheme could be more directed towards companies and service professionals.

[guruji]

Is it possible for salaried employees to claim tax benefit on the lease payment? I think it will deducted from the taxable income.

[yashg]

Originally Posted by guruji

Is it possible for salaried employees to claim tax benefit on the lease payment? I think it will deducted from the taxable income.

Yes. The employer has to agree to take the lease and deduct the rental from CTC. For employer it is deductible expense, for the employee it is tax free. There is Rs. 3300/pm or something that will get added to taxable income as perk.

Catch is that while you are saving 30% tax on the lease rental, after the end of lease period, you still have to pay 20% to buy the car and on paper you will be the second owner. I think the real benefit will be for business owners.

Salaried class always gets the raw deal.

[Captain Slow]

Originally Posted by condor

Comprehensive Insurance for the duration, maintenance and repairs. Plus add tax savings - esp for companies that want to go this route. They can treat it as opex. The scheme could be more directed towards companies and service professionals.

Most small and medium companies will just buy the car and claim depreciation every year.
This lease seems too expensive!

[vinaydatla]

I have done some basic calculations and don't see any benefit for individuals.

[IanNazareth]

Hey Guys!

This is some basic calculation I do to find out true cost of ownership, it's helped me a great deal getting into a bigger car for the same amount spent.

Please do feel free to point out loopholes in my calculations, it would help me too!

Don't see an advantage even for businesses other than the amount of money not being locked away and free cash flow benefit, which is subjective and depends on how you manage the funds.

The total loss column is the total amount lost on the car over 4y assuming the sale price :
ie -Purchase price (ex-show*1.2(20% corporate tax))-(sale price) + interest for 4y @8%

22% saving is because of corporate tax - Pvt Ltd having a 22% tax rate - 30% for partnerships.

[kmaitrey064]

Hi,

I have used car lease in the past under employee lease program and most probably I'll be going for lease again for my next car purchase. Here's what I know from my experience:

1. As mentioned earlier in the thread, the lease EMI gets wiped off one's pre-tax monthly special allowance. In my case, an additional 10k per month from pre-tax special allowance was withheld. I could reimburse upto 10k of fuel bills per month, plus car's insurance premium from this 120k/year and that'd also become tax free. The remainder, if any would be taxed at my income tax slab rate and would be given in March's salary. So if you're falling in 30% tax slab, you get effectively 30% discount on fuel and insurance.

2. At the end of the lease period, I had to pay 25% of base value of the car, that's the ex-showroom price minus GST and Cess. On this amount, I had to pay 28% GST too. This is very important, since considering the criteria that our government has for taxing the cars, this buy-back amount becomes relatively small for long cars with large engine capacity.

3. If you happen to buy a car which 'benefits' you w.r.t. buyback amount, and if it has good resale value in general, e.g., Toyotas, then, depending upon where you live, you can get a very sweet deal for selling the car, despite being 2nd owner. This is because of two reasons: The leasing company will ensure that the car is very well maintained and most buyers of used cars in metro cities understand the concept of lease. They know that you're the only user of this car, despite being 2nd owner.

4. In terms of financial calculations, depending upon your income tax slab, and how hugely your car is taxed, you lease can become equivalent of 0 interest car-loan or even cheaper, if your fuel expenses are also high. This also depends upon the lease tenure. Math for same car and same tax slab, but for different leasing periods (e.g, 3 vs 4 years) can give you different benefits. The key is to calculate how much of your CTC is gone in owning, maintaining, insuring and fueling a car, throughout the lease period and compare it with car loan of equivalent tenure.

I hope this helps.

Note: This is my first post after being a member, so please excuse me if any of the rules of the forum are violated.

[prabhuferrari]

Originally Posted by yashg

Catch is that while you are saving 30% tax on the lease rental, after the end of lease period, you still have to pay 20% to buy the car and on paper you will be the second owner. I think the real benefit will be for business owners.

Salaried class always gets the raw deal.

Things have changed now. Orix for instance nowadays gets into a tripartite agreement with employer and employee. And the car is registered in the employee's name and not in company's name. So you will be the first owner. In addition to tax benefit for lease rental, you also get tax benefit for petrol, maintenance and driver's salary. There is a cap for it though. In my organisation is Rs 200000/annum for petrol and maintenance and Rs 240000/annum for drivers salary.

[yashg]

Originally Posted by prabhuferrari

Orix for instance nowadays gets into a tripartite agreement with employer and employee. And the car is registered in the employee's name and not in company's name.

Yes, I did some reading on it yesterday, even contacted one online leasing broker and they explained me about the tripartite agreement and how it all works. If you take into consideration the opportunity cost of the down payment and the tax savings then the lease option looks way better.

[De-Veer]

Originally Posted by TusharK

Volkswagen is offering customers a chance to drive the Virtus for a tenure of 2-4 years and unlimited mileage.

Mileage seems to be limited to 20,000 per year on the VW website. Is there a specific way to get the Unlimited Mileage option or it was changed by VW after announcing this?

In my opinion, this makes sense for people with high running and who can't afford to have downtime of vehicles. I'm looking at perspective travel of 160km+ daily due to shift in locations, and this comes out as feasible. I still haven't compared this with the electric alternatives, but back of the envelop calculation suggests that might be better yet, still. I'll look at this 3-4 months down the line.

Are there any other manufacturers that offer unlimited mileage options on lease? I did a googe search and nothing promising came up.

[Geta]

Originally Posted by yashg

Salaried class always gets the raw deal.

Off topic.

Having seen both the worlds, I feel salaried class is not always as disadvantaged as it is made out to be. As a self employed professional, I have zero job security, no fixed work hours (often I work more than 80 hours a week), no sick leave, no PF, no gratuity, no company sponsored insurance, no CL/EL/ sick leave, no HRA, no weekend offs, no guaranteed increments, no bonus, no contributory pension and so on. I can never afford to switch my phone off. Tomorrow if I get caught in a road accident and spend the next six months in the bed, nobody is going to pay my family a single penny. All this just to save about 10% on IT? I really don't feel the salaried class gets the raw deal at all.

End of digression. Thanks for bearing with my ranting.

[jaaz]

Is there any benefit to the Self Employed businessmen or professionals with the Lease Plan? Before implementing GST, it was worth. But after GST, it's not worth as the GST is paid on RCM basis. Any new developments on this front?

[Aviator_guy]

My company has tie up with 'leaseplan' for employee car lease. The way it works

- Car is registered on company name.
- Company pays for insurance during the lease tenure (3 or 4 years)
- 80% of ex-showroom and entire registration cost is added to employee lease on which the emi is calculated.
- 28% GST added to the monthly EMI.
- EMI and GST amount is tax deductible from the employee salary.
- At the end of lease, employee has to pay remaining 20% of ex showroom price and get the car transferred to his or her name.
- Employee has option to not pay remaining 20% ex showroom price and let the car go. It is more beneficial to own the car so most of the time employees keep the car and sell later. Employee becomes the second owner.
- Employee is also eligible for tax deduction on fuel and maintenance bills.

I have done the math of the savings and it turns out that with all the tax deductible, GST etc, car lease is like an interest free loan. In simple terms, you save on the interest but end up as second owner.