The advantage of leasing is that you can get a new car every few years.
You can also get to drive a high-end car without paying its entire price.
Planning to get a car? Besides buying, today you also have the option of leasing it.
"India was predominantly an ownership market where people either paid the entire cost themselves or took a loan. Now, however, a segment of buyers goes for non-ownership options like leasing or subscription. These options are akin to renting, where you get the right to use the vehicle," says Ravi Bhatia, president and director, JATO Dynamics, an automotive research firm.
Buy and customise
When you buy a car, you own it. Since it's your car, you have complete control over it.
You can customise it to your taste. It also fetches a resale value, which partially funds your next car. You can use the car as much as you want.
Buying a car is a longer-term commitment.
"Especially if you buy the car on loan, you are stuck with it for a longer period if you want to get maximum value out of the purchase," says Puneet Gupta, director, S&P Global Mobility.
You are also responsible for all the repairs and maintenance.
These expenses tend to rise as the car gets older.
Many people don't want to take a vehicle loan post-pandemic.
"Especially in the larger cities, some of our clients wish to avoid the liability of a large loan to own a high-end end car. They would rather focus on managing their cash flows to pay the rental of a high-end model each month," says M Barve, founder, MB Wealth Financial Solutions.
In leasing, the cost is based on the model, the amount of usage, and the tenure.
Its advantage is that you can get a new car every few years. You can also get to drive a high-end car without paying its entire price.
Gupta says, "Leasing needs a commitment of two-four years, going up to five years." Some companies even offer cars on lease for one-three years.
This option is more common among corporates who utilise it for their senior executives.
Garima Misra, managing director, Group Landmark India, says, "Corporates go in for leasing because it keeps their books asset-light. They also get the depreciation benefit and thereby reduce their tax burden."
Interest in leasing has been on the upswing among individuals also in recent times.
"Leasing a car can be a preferred option for individuals if they don't want to make a large down payment or commit to a long-term loan," says Adhil Shetty, chief executive officer, BankBazaar.
Those using the car for business purpose can claim the lease amount, the maintenance, etc. as deductions.
The monthly payment is fixed and includes the maintenance cost.
The person leasing the car also doesn't have to bear the hassle of reselling it in the market once he doesn't want to use it anymore.
Car leases, however, come with mileage restrictions. The person leasing a car also has to put down a security deposit.
While you can claim a deduction, there is a flip side.
"You need to pay almost 30 per cent GST including cess. This wipes out a good chunk of the tax rebate you can claim," says Shetty.
Buy or lease?
If you wish to personalise the car, and are looking to have it for the long term, then buying makes more sense.
On the other hand, if you don't want the hassle of owning an asset, or wish to change cars frequently, then leasing may work out better for you.
Those who get transferred often may also prefer this option.
The monthly payments could be lower than if you buy the car on a loan.
But note that this will depend on the exact model you are interested in and the offers available.
Finally, if you need a car primarily for commuting limited distances, leasing might be a good option.
However, over a longer tenure of five years or more, leasing becomes more expensive than buying.
Remember, the monthly payments will vary depending on the company and the model.
Check the monthly payments for the car lease vis-a-vis the interest cost of the loan, maintenance charges, and the resale value in case of a purchase.
Run the numbers before arriving at a decision.
Short-term need? Get a car on subscription
Subscription is similar to leasing and works best for individuals.
Garima Misra, managing director, Group Landmark India, says, "Subscription, a new trend, is another option for having your desired car without buying or leasing it."
You pay a monthly subscription fee. The tenure is more flexible here.
"It can be as low as six months," says Misra. The tenure can extend up to 36-48 months, sometimes more.
For the monthly subscription fee, you get insurance, maintenance, and roadside assistance till the completion of the tenure.
The subscription model offers flexibility and convenience and is better if you want a car for a short tenure.
Subscription, however, doesn't come cheap.
"Subscription is more about convenience than cost. It is a more expensive option than leasing or buying," says Gupta.
It doesn't come with any tax benefits. It works best for people who are moving from one city to another, need a car for a short tenure, and don't mind paying more for the convenience.
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