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Lease or Loan ? Which one do you prefer to own a vehicle ?

Created by : Deepak Bezbaruah, Product Development Manager, Maruti  | 02 04 2009 10:05:30 +0000
Industry : AutomobileFunctional Area : Autos(Personal Interests)
Keywords : insurance loan automotive ownership emi agreement mileage lease
Activity:  453 views;  last activity : 07 06 2010 20:18:09 +0000

Planning to own a new vehicle ?

You have options either to finance it yourself or by loan or by lease. Here I want to know what do will prefer a lease rental or loan to drive home a new car?

Make your choice

 
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Lease Vs Loan
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Dear Sarika i know of some lease in the market  where the car's registered owner is the Lessee (ie client of the leasing company) and the car is just hypothicated to the Lessor (ie the leasing company).At the end of the Lease period and after the clearence of all the rentals the Lessee has got the option to buy it back at a pre agreed Residual Value(RV) or return it to the Leasing company.

If the former wishes to retain it the Leasing company in whose name the car is hypothicated just issues the No Objection Certificate(NOC) ie Form 35and a No objection Letter. Then the purchaser can cancel the hypothecation from R.TO. and carry on with the vehicle.

If the Lessee buys it back it still remains 1st hand(itself being the registered owner from the start) vehicle and if the Lessee returns it back to the Lesser then the latter can sells it in the market to dispose it off at the minimum RV or more ,thus with profit and issue the NOC(Letter + Form 35)and Form 29, Form 30 to the purchaser who in turn  can then change the Registration Certificate in his name together with cancellation of the Hypothetication.

In this case the car is a Second Hand car.

Thanks,

Nayan Deb 

   
By Nayan Deb, Automobile Consultant, Autovision Point  03 13 2009 15:46:51 +0000
 
Top Argument
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I would go for loan, because I don't want to drive a rental car.... :) :)

In lease when you own a car, you will become a second owner and when you sell that car, the value you get for it will be much lower than what you get when selling a first owner car.
By Parag Arora, Product Development Manager, Tata Motors  02 25 2009 12:59:07 +0000
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Mehul i agree with you that if you are having tax benefits and all by leasing a vehicle then you should certainly take advantage of that.Moreover by taking loans for the vehicle you will pay the interest to the bank and that will cost you more compared to having a lease on the vehicle.So leasing a vehicle is a better option to own a vehicle rather than taking loan for it.

What do you guys think?
By Jyoti Rath, Sr. Associate, Barclays  | 04 12 2009 14:08:07 +0000
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Dear Parag,

In Lease it is possible that the Lessee(the client of the Leasing company) be the registered owner and the Lessor(ie the Leasing company)remains as just a hypothicator. Its called a Novated Lease.All you have to do is just clear all the rentals throughout the Lease period and get the NOC from the Leasing company to remove the Hypothication in the Registration Certificate.

In case of Loans your car is still hypothecated to the Bank or an NBFC.So its the same here too.

In case to want to remove the hypothecation early before the lease tenure end you are also having the option to Foreclose the Lease too.

If you modify the car you anyhow lose the Manufacturer's Warranty be it a Loan or a Lease.For any Repairs arising out of the modification you have to pay for yourself only.If your car is in Maintenance Linked Lease(MLL) the Lesing company would refuse to cover the repair due to the modifications as because the manufacturer would also revoke its warranty cover.

Lease is preferred by Corporates and Professionals as they want to avail the tax benefits while enjoying the asset which is Off Balance Sheet and show the rentals as an expense thereby reducing the Net Profit before Tax.

If are a modification freak Lease package is not for you as there is no tax benefit in modifications unless you show it as your car maintenance expense in your I.T.File if you are shown as a professional in your I.T. File  
By Nayan Deb, Automobile Consultant, Autovision Point  | 03 13 2009 16:00:07 +0000
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It doesn't make any difference vehicle is in whose name. Because no lease company prints their name on vehicle like commercial vehicle. So until u show the Registration Book to others nobody Knows. Further after three four years it doesn't make any difference whether it is first or second and buyers always understand that first name is financiers. So it is advisable to take the benefit of lease rentals.
By Mehul Shah, Head/VP/GM/Financial Controller Gremach Infrastructure Equipment & Projects Ltd  | 03 04 2009 16:26:12 +0000
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I would  go for lease rental because of the tax benefit which is higher than the depreciation @15 percent for motor vehicle. Since we can claim the entire lease rental as an operating expense in the Profit & Loss Account and enjoy higher tax benefit.

What do you say?
By Deepak Bezbaruah, Product Development Manager, Maruti  | 02 04 2009 10:08:54 +0000
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As per my understanding , Company Lease is basically a perquisite that the company gives to its employees.The employee can benefit till the time he is associated with the compnay. If he leaves before the completion term then either he has to  buy out the remaining term or the company takes the ownership of the car.


By santosh kumar, Marketing Manager, AUTOMOBILE  | 08 05 2009 05:35:12 +0000
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Mr.Deepak you may enjoy tax benefit but the vehicle will not be in your name. Its just like driving a rental vehicle.
By Sarika Pal, Product Development Manager, Tata Motors  | 02 04 2009 10:16:09 +0000
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