Car Leasing Set To Vroom

After fostering concepts such as ride-hailing and ridesharing, the millennial mindset that favours access rather than ownerships is set to boost car leasing and car subscription in the country

- Avishek Banerjee

S Viswanathan, founder & CEO of Chennai-based Inspace Technologies, was recently in the market for a new high-end SUV. But unlike his last SUV, a Ssangyong Rexton that was bankrolled by an auto loan, this time he picked up a Rs 28.5 lakh Hyundai Tucson SUV (2018 version) on a five-year lease from OTO Capital, an automotive leasing startup. All he had to do was shell out Rs 2.85 lakh (10 per cent refundable security amount) as upfront payment for the car in addition to the monthly lease rental of Rs 50,000.

Leasing the SUV made perfect financial sense to Viswanathan, 45. “Why should I invest in an asset (a new car) which is depreciating? I compared the bank rates with the leasing rates. The asset is with them (lessor) which is okay. But the good thing is liability is not in my (company’s) books. It is only coming as an expense for me per month,” he says.

Viswanathan explains that since the car will be an expense in his company’s books, he stands to save Rs 2 lakh per year in income tax benefit as well, which will add up to Rs 10 lakh over five years. “My book value after five years is only Rs 8-8.5 lakh. I can give the car back or continue the lease for another year. Furthermore, I can sell the car in the market if the price is going higher than the book value,” he adds.

While the tax efficiency of a leased car in the hands of the lessee is an important factor in favour of leasing, there is a growing shift in consumer preference for leasing a vehicle rather than owning one due to a host of factors. For one, in times of economic and regulatory uncertainty, it makes sense to keep one’s liabilities low.