Automobile manufacturers report a growing interest in non-ownership options for vehicles
You can drive your favourite car without owning it: leasing will make that happen. (Stock photo)
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Planning to buy a car? You don’t have to when you can subscribe or even lease one. “India was predominantly an ownership market. Buyers paid in cash or took a car loan. Now there is a segment of buyers who are into non-ownership options like leasing or subscription. It’s like renting, where you get the right to use the vehicle,” says Ravi Bhatia, president and director, JATO Dynamics, an automotive research firm.
The country’s automobile manufacturers report a growing interest in non-ownership options for vehicles. Maruti Suzuki India recently announced a partnership with SMAS Auto Leasing to offer a range of vehicles on subscription. “Car Subscription is gaining popularity among Indian customers across all major segments be it individual buyers, professionals, business owners or corporates,” says Meherban Singh, general manager & head: Strategic Sales & Business Planning, SMAS Auto Leasing.
Many people prefer hassle-free car experience without taking a vehicle loan. “Post-pandemic, especially in large cities, some of our clients prefer renting instead of owning to avoid liabilities. Buying a high-end car model is no longer an investment goal and managing cash flow every month for high-end rental models is on the plans,” says M Barve, MB Wealth Financial Solutions.
Buying and owning a car gives you complete control, will also fetch a resale value and there is no restriction on mileage usage. Maintaining the car, however, has its own cost. тАЬIf you are buying the same on the loan you are stuck with it for a longer period and more if you want to make the most of the purchase,” says Puneet Gupta, director, S&P Global Mobility. Miscellaneous expenses pile up as a car gets older.
Leasing
Leasing a car is like renting. You can get a new car every few years by returning the old one and leasing a new one. This option is used mostly in the corporate space but retail has also seen interest. Companies choose this option for their senior executives. Gupta says, “Leasing needs a longer commitment of 2-4 years, can even go up to 5 years.”
Car leases have mileage restrictions and the cost is based on the model, usage, and tenure. “Leasing a car can be a cost-effective option if you don’t want to make a large down payment or commit to a long-term loan,” says Adhil Shetty, chief executive officer (CEO), Bankbazaar.com. Leases have additional fees such as a security deposit or early termination fees. Leasing gives you the flexibility to drive a high-end car at an affordable cost. Moreover, the lease amount as well as additional expenses such as driver charges, maintenance, etc., can be claimed as deductions if you are using the car for business.
“However, the flip side is that you will need to pay almost 30 per cent GST including cess. This more or fewer wipes out a good chunk of tax rebate you can claim.” Bhatia says,” says Shetty.
Subscription
Subscription is another option for having your desired car without buying it or leasing it. Bhatia says, “You can get a new car of your choice with zero down payment, with or without maintenance cost hassles.” You can pay on a monthly basis for a car with flexibility on the tenure with a minimum period of 12 months on and extending up to 36 -48 months or more in some cases. You have to pay a monthly subscription fee and get insurance, maintenance, and roadside assistance as a part of the package at no extra cost till the completion of the tenure. However, a subscription does not come cheap. “Subscriptions are more about convenience than cost and are more expensive than leasing or buying a car,” says Gupta.
Cost is an important parameter to look into. However, do remember that it will vary from model to model and company to company. Check the value of the car along with the monthly payments for the car lease and loan. The numbers will change as per your choice of model. There are no blanket answers. Factor in the lack of maintenance charges. Leasing may be cheaper than subscribing or taking a car loan in a general sense. However, over a longer tenure, leasing becomes more expensive than buying.
If you need a car primarily for commuting, leasing might be a good option. The subscription model is better if you want flexibility and convenience. For those who need to personalize, and are looking for long-term use, buying a car makes more sense.
Compared to a car loan, a lease may offer lower monthly payments. A car subscription for a short period can be expensive. If you plan to move cities or are in a transferable job, leasing or subscription makes sense.
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