All You Need to Know About Leasing a Car in India

How is it to lease a car in India

Do you want to use a car without actually owning it? Have you considered leasing?

Leasing a car is the process in which a person uses a car for a specific period of time and pays a lease amount to the lessor.  There are two kinds of leasing models, financial lease and operating lease. In a financial leasing model, the car is returned to the lessor at the end of the specific period. In an operating leasing model, the lessee can either buy the car and at the end of that specific period, or return it.

Many individuals are now venturing to lease a car in India as opposed to buying it, as automobile companies are leasing brand new vehicles ranging from 6 months to 5 years. In fact,  the down payment is minimal and reputed companies like Skoda, Hyundai and Maruti are also leasing their products.

Benefits of Leasing

Benefits of Leasing a car

These are the 4 major benefits of leasing a car

1. Insurance

When you pay lease rentals for a car, you're already paying for the insurance as well. Which means the insurance amount protects the car from accidents, thefts, etc.

2. No Extra Charge for Maintenance

An average person fishes out atleast 3000 or more per month in maintaining the car. In this case, the lessee does not have to pay anything extra for maintenance.

3.  No Down Payment Is Required

When you loan a car you will have to pay a particular down payment before the loan is sanctioned. In leasing however, no down payment is required. The lessee will just have to pay the rentals.

4. Taxation

Salaried and self employed individuals can claim upto 30% tax on lease rentals which is a major benefit.

Things to Keep in Mind While Leasing a Car

These are the 3 things you need to keep in mind when you lease a car.

1. Time Period

A car can be leased from a period of 6 months to 5 years. Analyze your needs and then enter into the agreement.

2.  Do Not Make a Down Payment

According to lease laws, no prior down payment is required. Therefore, when you are entering into an agreement make sure you aren't being asked  for a lumpsum amount in the beginning.

3. Regular Payments

You will have to make regular lease payments. These frequency is specified in the contract and differs from case to case.

Lease Or Loan?

Let's make a realistic comparison between leasing and loans

Let's the case of 'A' and 'B'. 'A' decides to lease a car, whereas B decides to loan a car.

A's Spending

Cost of the car 5,00,000
Number of years3
Amount to be paid per month (Including insurance and maintenance)15,000

A spends a total of 5,40,000 in 3 years. But here comes the good part. A can get a tax benefit of 30%, which basically reduced the actual price spent to 3,78,000.

B's Spending

Cost of the car5,00,000
Number of years3
EMI9% approximately
Amount to be paid per month15,899

Therefore, when you loan you are paying 5,72,364. Which is basically an extra 72,364.

Of course, here we see that leasing is cheaper. However, if you want to buy the car from the lessor you will have to pay a certain amount to him/her, according to the market rate. One must also keep the resale value in mind.

Lease rates in different cities vary from 11,000 to 50,000 per month approximately, depending on the contract.

Wrapping it Up

If you have a fetish for cars and want to try out different models, then leasing seems like the preferred option. However, it depends on you as to what kind of an agreement you want to get into.

Happy Leasing!

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Published on
May 13, 2022
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