[itwasntme]

Another point to factor in is whether reimbursements for personal cars (fuel, insurance, driver salary, repairs, maintenance) are allowed by your employer or not. If they anyway are, it reduces the charm of the CLC even further.

Some employers have a hybrid model where they cap the personal vehicle reimbursement to a smaller figure and have a much higher cap for the CLC vehicles.

[Thilak29]

The organization I recently joined offers car on lease, when inquired I was told that I just need to submit a proforma invoice and fund will be released for initiating purchase. While EMI is calculated 14% of interest rate will be considered and I need to pay the outstanding amount (inclusive of interest) if I decide to separate from organization during the lease period. At the end of the lease term, company will offer NOC and I need to get ownership transferred to me.

I see that the EMI will reduce taxable income and offer benefits of fuel, maintenance expenses, driver wages through FBP.
However in comparison to bank loan (@9.85 ROI),for an amount of 9 Lakhs I end up paying 64 thousand more in interest for a tenure of 3 years.

So in order to break even, overall tax benefits alone must be at least 1800 rupees per month!

How do i choose between these two, is there something more to it than what meets the eye?

[ontheroad]

Hi, I "own" a swift vdi registered with my employer. This month end it will be transferred to my name as maximum lease period of 6 years will be over by this month. Here starts the confusion.

I am fully satisfied with my car and don't really need a new car, for its utility purpose.
But there is income tax benefit if I opt for car lease from my employer. I belong to 30% tax category. Company will buy the car of my choice (not exceeding ex showroom price of 8 lakhs) at interest of 7.55% and emi will be deducted from my salary. Emi will come around 20k (4year lease). Also road tax and insurance etc will be paid by company for the lease period. Also I can claim drivers salary (8k pm), fuel expense (12k pm) and get income tax benefit out of it.

Which will be more financially beneficial? Does anyone have a excel calculator which shows the math more simpler.

[soumobakshi]

This Thread has had less responses than it deserves, just curious to know if all of us can contribute the leasing companies that their Employers have tied up with and at what Interest Rate. I searched a lot but couldn't find any information in Open Domain which has this information.

Hope that would be legal to disclose.

[rajiv.kulkarni]

Previously ALD with ROI around 12.5 to 13%, recently shifted to Car lease with ROI around 10.60 to 10.80 depending on tenure choosen which varies from 24 months to 60 months.

Regards,
Rajiv

[LonelyPlanet]

Collecting some information for revamping the car lease policy in my organisation.
What are the various components for a an ideal car lease policy what would you really wish it had ? Specifics please

[gadiyar]

Does anyone here have experience with leases from LeasePlan (www.salaryplan.co.in)? Specifically, do you know if the price they quote to buy the car from them at the end of the lease period matches the estimated residual value (RV) quoted at the start of the lease, or if they ask for a different price at the end?

[harishpr]

Mine is with Orix with 4 yrs tenure. Took in 2013. I didn't get lower rates (13%) then since my company gave very small volume of business, coupled with market conditions back then.

[amitpunjani]

Originally Posted by ontheroad

Hi, I "own" a swift vdi registered with my employer. This month end it will be transferred to my name as maximum lease period of 6 years will be over by this month. Here starts the confusion.

I am fully satisfied with my car and don't really need a new car, for its utility purpose.
But there is income tax benefit if I opt for car lease from my employer. I belong to 30% tax category. Company will buy the car of my choice (not exceeding ex showroom price of 8 lakhs) at interest of 7.55% and emi will be deducted from my salary. Emi will come around 20k (4year lease). Also road tax and insurance etc will be paid by company for the lease period. Also I can claim drivers salary (8k pm), fuel expense (12k pm) and get income tax benefit out of it.

Which will be more financially beneficial? Does anyone have a excel calculator which shows the math more simpler.

I am in the exactly similar situation, I actually don't need another car but from the income tax is seems beneficial

[hrishig]

I have one question

I see that the Constant Residual Value mentioned at start of this thread.
30% for 2 years
25% for 3 years
20% for 4 years

But with lease plan it is said to variable and on company discretion based on condition of the car. The tentative value is shown around 35% even after 4 years.

If there any better offer other leasing company is providing ?

[ajayclicks]

Originally Posted by amitpunjani

I am in the exactly similar situation, I actually don't need another car but from the income tax is seems beneficial

When i did the back of the envelop calculation, a few months ago, the tax saving was not all that great. This is because, while we calculate the potential tax savings @ 30% (or 33% due to cess), the fact is we DO NOT pay that much tax. If you factor in various deductions like EPF/ Sec 80C, medical bills (that 15K p.a. thingie), the fact that the first few lacs are taxed at a lower slab, your effective tax should be in the region of 22%- 23%.

I walked away from my company's car lease program for the following reason:
1. Car is registered at a higher amount

2. It is a three year lease, where at the third year, you pay 25% of your on road price (i.e. the price you paid)

3. They take care of insurance, and you have no idea how much you are charged for it.

4. My colleagues who took a car from the lease program where unsure of the amount they were paying- be it registration or insurance. I was personally not comfortable with this lack of transparency.

4. While they claimed that everything was interest free (as we are paying 25% at the end of 3rd year), they imposed some 0.33 multiplier when we allocated the car lease amount into our calculator

5. You get locked into the firm for 3 years- the penalty for pre-paying the lease amount is not disclosed upfront.

Had I gone in for the car lease program, I would have, at best saved a lac or so. Please note, this is keeping in mind the fact that I am not a savy investor. The down-payment saved would have been parked in an FD, and not in some high flying 200% return giving stock.

YMMV.

Cheers,
Ajay

[blorebuddy]

Right on the point. At least in our organization the point 1&3 is not valid. However there are additional costs. However there are additional VAT or Service Tax for the EMI which is 15% or so. So your effective tax saving becomes 22 or25% minus this amount...

[gearedup]

Originally Posted by ajayclicks

When i did the back of the envelop calculation, a few months ago, the tax saving was not all that great. This is because, while we calculate the potential tax savings @ 30% (or 33% due to cess), the fact is we DO NOT pay that much tax. If you factor in various deductions like EPF/ Sec 80C, medical bills (that 15K p.a. thingie), the fact that the first few lacs are taxed at a lower slab, your effective tax should be in the region of 22%- 23%.

You need to look at it from an incremental perspective. Suppose your net taxable income is 11 lakhs - then yes you are not paying an average of 30% tax, but any income beyond 11 lakhs will always be at 30%+cess etc..
So, suppose you are taxable income without CLC is for example 18 lakhs - then subject to other T&Cs you will save some tax.

[ajayclicks]

Originally Posted by blorebuddy

At least in our organization the point 1&3 is not valid.

I was under the impression that it was an RTO thingie. Vehicles are registered in the name of a commercial organization, and hence it is at a higher rate, as compared to registration in an individual's name.

Originally Posted by gearedup

You need to look at it from an incremental perspective.

Where I am coming from is this:
Me: "Hey, you purchased a car from the car lease program. Are you benefiting?"
Colleague: "Yes! My monthly emi is 15,000 and I am saving Rs. 4,500 (30%) as tax alone"

Wrong, you are not saving Rs. 4,500 as tax. It is much lower. When I ask them to look into their salary slips and tell me the actual difference in tax saved, they never get back.

I have nothing against car lease programs per se. Just that my company's car lease program is a quite opaque, and I have seen many colleagues rushing in, salivating at the thought of saving 30% tax. And they never factor in costs like higher rate of registration, insurance, cost of transferring car in their name (after the three year lease is over).

[itwasntme]

Originally Posted by ajayclicks

I was under the impression that it was an RTO thingie. Vehicles are registered in the name of a commercial organization, and hence it is at a higher rate, as compared to registration in an individual's name.

You are partly right. As far as I know, this difference is up to individual states whether they levy differential rates for individual and corporate registrations.

In Karnataka at least the rates are the same if I remember correctly.