All You Need To Know About Leasing A Car In India

Published on
May 13, 2022
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    Leasing A Car In India

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

    Leasing a car is when 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 buy or return the car at the end of that specific period.

    Many individuals are now venturing to lease a car in India instead of 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

    These are the 4 major benefits of leasing a car

    1. Insurance: When you pay lease rentals for a car, you already pay for the insurance. This 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 to maintain 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 must pay a particular down payment before sanctioning the loan. In leasing, however, no down payment is required. The lessee will have to pay the rentals.
    4. Taxation: Salaried and self-employed individuals can claim up to 30% tax on lease rentals, a major benefit.

    Things To Keep In Mind While Leasing A Car

    These are the 3 things you need to remember when you lease a car.

    • Time Period: A car can be leased for 6 months to 5 years. Analyze your needs and then agree.
    • Do Not Make A Down Payment: No prior down payment is required per lease laws. Therefore, when you agree, ensure you aren't being asked for a lumpsum amount initially.
    • Regular Payments: You will have to make regular lease payments. This 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: INR 5,00,000
    • Number of Years: 3
    • Amount to be paid per month (including insurance and maintenance): INR 15,000

    A spends a total of INR 5,40,000 in 3 years. But here comes the good part. A can get a tax benefit of 30%, which reduces the actual price spent to INR 3,78,000.
    B's Spending

    • Cost of the Car: INR 5,00,000
    • Number of Years: 3
    • EMI: Approximately 9%
    • Amount to be paid per month: INR 15,899
      Therefore, when you get a loan, you pay INR 5,72,364, an extra INR 72,364.

    Of course, here we see that leasing is cheaper. However, if you want to buy the car from the lessor, you must 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 approximately INR 11,000 to INR 50,000 per month, depending on the contract.

    Wrapping It Up

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

    Happy Leasing!

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