Leasing Or Buying A Vehicle: What Should You Do?

While buying a vehicle can be a goal for many in a year from now with some planning correctly in force, nonetheless, the millennial generation is now treading on a new path and instead are taking on to leasing a vehicle as this is emerging as a new normal.

History of renting or leasing a vehicle in India:

In India, it started with leasing of vehicles for corporate by luxury car makers and is slowly and steadily covering the retail masses. Mahindra and Mahindra is offering some of its models on lease directly to customers. And in the latest development, Hyundai in association with ALD Automotive India will offer leasing facility across the company's entire product line up at an extremely attractive monthly lease rental.

How leasing of a vehicle works?

Leasing as against buying does not involve huge money and for the period you wish to lease the vehicle, you need to pay regular monthly instalments. And this monthly payment is computed based on the cost of the vehicle, insurance, maintenance, recurring expenditure, taxes etc.

And within the car leasing space, there are two working modes:

1. Operating lease: In which at the end of the tenure, the lessee is required to either return the vehicle to the lessor or purchase it at the prevailing market price.

2. Financing lease: In it the title or ownership of the car is transferred to you at the end of the lease term.

Tax benefit of leasing a car

Owing a car or buying it on loan comes with no tax advantage but leasing a car or vehicle has a major advantage, as the salaried class is allowed to claim the entire rent paid towards the leasing of the car as an expense, so a straight tax advantage of up to 30%.

How leasing makes sense over buying?

Leasing makes sense only under circumstances when you change cities too often for work-related purposes etc. say 4 or 5 years as leasing companies do not allow vehicle transport. And the second reason is when you wish to upgrade your vehicle at a relatively higher rate.

Though you end up paying a higher amount than the cost of the vehicle when leasing it, the advantage comes because of the taxation part, so your net cost that goes into leasing a vehicle comes down substantially.

It is a good deal all in all in comparison to opting a loan for buying a vehicle.

Few other points to consider when buying or leasing a car

Buying a car entails regular maintenance, insurance costs whereas it comes inclusive in the rental when we lease a car.

GST on a new car is 18-28% plus the cess component based on the engine and size of your vehicle. Road tax is also there that is as per the pricing of the vehicle.

Buying a car also is a better deal when you in a complete cash deal with no EMI.

There is a cap in leasing with respect to the number of miles you can drive during the leasing period.

No upgradation in the car is allowed without lessor's consent.

GoodReturns.in