[anjan_c2007]

Yes as GTO says to avail tax benefits its a suitable option for companies.
In the scheme of things to be implemented by MBIL, we pay 50% of the car's cost. The car's ownership is with MBIL.It is leased out to the buyer (only name sake) for a period of three years.Upon the completion of the 36 month ownership MBIL terminates the lease, takes back the car leaving the lessee high and dry! The lessee in short pays 50% of the cost of the car and the company takes it back for free.
In the western countries this concept is fine as older cars depreciate very fast. But here in India, I cannot believe that a Merc will depreciate 50% in three years . These depreciate on an average by 50% in about five to six years, depending on the respective model.

[Poitive]

Originally Posted by GTO

Lease is a good option for companies as they can claim the monthly lease payments as an expense and hence, get a 30% benefit (or whatever tax bracket they are in), when filing taxes.
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Depreciation and thus, tax benefits. Even though you are using the car, it's registered in their name. Mercedes / their financing arm will avail of full tax benefits on the car (running into lakhs of rupees).

Am no Financial whiz.

Do we see "value" (rather a saving) by saving taxes two times?
If the company owned the car, I guess they would only be able to claim depreciation. Now, they claim the lease payments as expense and the manufacturer (Merc in this case) claims depreciation. So this saving is creating "value" (for want of a better word) and may be one reason in favour of this model to work.

Guys who understand taxation and finance better, please comment.

[GloryManUnited]

Personally, I am quite intrigued by this development. Assuming this concept is adopted by other manufacturers, I can go out and lease a BMW 3 series at the cost of a Honda Civic and drive it for 3 years. I can enjoy a car of double the price that I would normally afford. And a brand new one at that. Not bad at all!

[GTO]

Originally Posted by rammkp

we should be able to walk into a Merc showroom and bargain a pre-owned 3 year old Merc for 50% of the cost of the new car????!!!!!

Some brands, including Mercedes, control the supply & thus prices of their used cars. Strong resale value greatly enhances the value of the brand in the eyes of the customer. Not to mention, the profit margin on a used car is easily more than that of a new car (well, mostly).

Some Mercs (especially the diesels) retain their value well, while the other (more expensive range like the E Class) can be had for 50% less once 3 years old.

Originally Posted by anjan_c2007

I cannot believe that a Merc will depreciate 50% in three years .

The higher you go, the harder you fall . While the rate of depreciation for the C Class is lesser (thanks to its lower new car price), you can easily get 3 year old E / S Class for 50% of the original price.

Originally Posted by Poitive

Do we see "value" (rather a saving) by saving taxes two times?

It's the same for any equipment that is rented out. The equipment owner can claim depreciation, while the one who rents can write off monthly payments as expenses (thus, lowering his taxable income).

Originally Posted by GloryManUnited

I can enjoy a car of double the price that I would normally afford.

Not really. The 1/2 price car you would buy otherwise (in your example, the Civic) would still fetch you some resale at the end of 3 years. With the leased car, you get zero.

Like I mentioned earlier, leasing makes immense sense for companies who can write off the monthly payments as expenses.

[MaxX]

Not only companies but even self employed business people can write off expenses of monthly payments on a lease. The merc lease plan sounds interesting.. would be sweet if one could buy the car out after 3 years at 50% of the cost too!

[condor]

The Lease option now available for individuals from Honda/Orix directly:

https://economictimes.indiatimes.com...w/71064577.cms

[jetsetgo08]

Again, a noob question. Can I directly approach Honda/Orix for a car lease if I am a salaried employee? My employer does have a lease policy but for selective group of employees only. How does it work in such case?

Thanks in advance.

[condor]

Originally Posted by jetsetgo08

Again, a noob question. Can I directly approach Honda/Orix for a car lease if I am a salaried employee? .. How does it work in such case?

Reach out to Orix - cite this news article. If Orix confirms, then you check their preferred Honda dealers.

[arin_12]

Just thought of sharing. Today Toyota is also giving an option.


https://www.toyotafinance.co.in/smart-lease/

[Jeroen]

For decades leasing cars was the way to go for business in Europe. No matter how you calculate it, leasing tends to work out more expensive. But with the appropriate contractual requirements it can be hassle free.

Also, if a company buys it's own cars, they will be added to inventory, show up in the balance sheet and you need to keep track of depreciation. So many companies prefer to lease and take the cost in the P&L.

The leasing company also deals with all the hassle company drivers bring, the admin, the complaints, the traffic fines, the accidents etc. etc.

However, for the last 5 years or so, in Europe, leasing for private individuals is sharply on the increase.

Interest rates, i.e. the cost of a loan/lease are very very low. A monthly lease fee of Euro 300-500 will get you a very nice car. Completely free. People typically go for a full operational lease. Which means everything is included in the lease price (purchase price, all maintenance no matter what, (winter) tyres, depreciation, full comprehensive insurance, road tax, road assistance etc etc). The only add on cost you would have is the cost for fuel, parking, toll.

You drive the car for 2-3 years, or a certain mileage, and you hand it back to the lease company. Very convenient. And because of the low finance cost, compared to owning it privately it becomes quite attractive.

Most lease companies offer you the option to buy the vehicle after the lease period expires. That could be very attractive. You know the car well, it has been maintained well by the dealer and the lease company wants to get rid of it, so you are very likely to get a very good deal.

It is also an additional source of revenue for the various Car manufacturers and dealers. They usually offer pretty good deals.

Jeroen

[aadya]

Is there a GST to be paid on the Lease amount? This could bring down the overall benefit.