[TheWall]

Hi All,

Need advice on a situation I am currently in.
I have a car lease plan with my current organization for 3 years and have completed a year till now.
Unfortunately due to various factors, I had to quit the organization and switch to a different one.
My new organization also offers a car lease plan but my current organization does not allow transfer of lease to the new organization.
I have the following options now.

1. Pay the remaining amount of the car (approx. 10lakhs) and obtain NOC, transfer the car to my name and be done with it.
Pros: I become permanent owner of my current car.
Cons: Need to spend 10lakhs from my pocket, will lose out on tax benefits.

2. Surrender the car to the current organization and take another car under lease plan in my new organization.
Pros: Need not spend a rupee from my pocket.
Cons: Will lose the car and some attachment towards it
Will have to wait for weeks before I can get a new car given the current market demand.

Please suggest what should I do? Also, please feel free to suggest any other options as well.

[condor]

Not a black and white situation.

Transfer of lease on a car between organizations is not done even if the leasing company is the same for both companies.

In present situation, it may be better to go for a fresh lease with the new company. You could get a newer version of the same model, or may be another model altogether.

[pmbabu]

Best to surrender now and cut the losses, instead of burning a big hole in the pocket. And choose a brand new car in the new company, definitely there would be more options now

[JediKnight]

Originally Posted by TheWall

Hi All,

1. Pay the remaining amount of the car (approx. 10lakhs) and obtain NOC, transfer the car to my name and be done with it.
Pros: I become permanent owner of my current car.
Cons: Need to spend 10lakhs from my pocket, will lose out on tax benefits.

2. Surrender the car to the current organization and take another car under lease plan in my new organization.
Pros: Need not spend a rupee from my pocket.
Cons: Will lose the car and some attachment towards it
Will have to wait for weeks before I can get a new car given the current market demand

Am no expert on car leases hence please forgive me if i am asking a stupid/obvious question. But if you go for option 2 won't you loose the money already paid as part of the lease payment. How much is your car on road and how much money have you already paid? Also if your car is BS-4 diesel you may want to keep it to avoid BS6 diesel DPF hassels. Also if you want to buy the same car again the price may have risen. If you are in Hyderabad please factor in the hiked road tax.

[toothless]

I had been in a similar situation about 12 months back and evaluated a third option, which you may want to think about as well.

Get the car evaluated by Cars24 or other second hand car buyers. If the value is more than the 10L, pay the 10L and sell it to them. Most likely, the market value of the car will be 20-30% more than the balance lease obligation of ~10L that you estimate. This way, you can realize the difference, without having to spend money. Down side, you block your working capital for probably a month. Positive: You get to pocket the difference in the value and avail a fresh car lease from your new employer.
When I quit my organization, the market value of the car was ~8L-8.5L and my payment obligation was ~4.2L. Dint make sense to let go of the car.

Side note, do not forget GST when estimating your foreclosure amount. If possible, seek a detailed foreclosure calculation from the leasing agency.

[TheWall]

Originally Posted by toothless

I had been in a similar situation about 12 months back and evaluated a third option, which you may want to think about as well.

This actually is a really good idea. Let me get the car evaluated which gives me more clarity to make this decision.

[GTO]

This is for your 5th-gen Honda City, right? It is surely worth more than 10-lakhs. If you're happy with the car, pay the 10 lakhs and take full ownership.

On the other hand, if you want to change the model, then toothless' suggestion is brilliant.

But the City is phenomenal midsize sedan and I'd personally retain it. Cars depreciate the steepest in the initial 3 years and the value you get out of your City is surely worth more than its resale price today. Additionally, new car prices have shot through the roof since you bought your car, so you'd pay a lot more for an upgrade. Keeping these points in mind, you tend to lose a lot of money than meets the eye, by letting go of your City.

[ajayc123]

Irrespective of the option you choose, please ask for detailed calculations and review those carefully. In my last case, I had observed that they had done an error (typical, not limited to me, but some colleagues as well) which I had got them to rectify, thereby reducing my payout. These guys sometimes play such tricks, so be watchful.

[vigsom]

Originally Posted by TheWall

1. Pay the remaining amount of the car (approx. 10lakhs) and obtain NOC, transfer the car to my name and be done with it

2. Surrender the car to the current organization and take another car under lease plan in my new organization.
Pros: Need not spend a rupee from my pocket.
Cons: Will lose the car and some attachment towards it

It is a heart vs head situation. If I were you, I'd go with option2. Argument from my own experience:

Own car

a. Typically, tax benefits on fuel, maintenance and driver's salary are not "lucrative" enough in most companies under the Own Car plan . The max benefit one gets by way of exclusion from taxable income is INR1600 a month (INR21,600 a year) for running expenses for cars under 1600cc engines, and 2400 a month (INR28,800 a year) for engines larger than 1600cc. An additional INR900 a month is allowed as a deduction in case a driver is employed. In the case of company leased plans/company owned car, the number is way way higher based on limits defined and bills submitted.
b. The EMI and insurance paid is also deducted from net taxable income in the case of a car bought through company lease. Insurance for one's own car only qualifies under the total deduction of INR21,600 or INR28,800 as explained in point a.

This motor tax calculator will help in understanding taxation around this aspect. The rules are leveraged by companies based on their interpretation and risk appetite.

While tax benefits under the lease plan or company car option are huge, the negative of using a car through company lease is it is like an indirect bond, if broken can leave one's bank broken. I almost went for a company lease in 2012 but ended up with a used Corolla to remain unbonded. Got nothing by way of tax benefits but breathed easy.

In your case, please do the math around what the new company's lease plan options provide by way of tax benefits and then take a call.

[SR-71]

First of all I am surprised to hear that leases cannot be transferred out. Companies that I have worked for never had this clause, and am not sure how that's enforceable either. The typical condition is you need to close the lease. You can close the lease by

1. Surrendering the car
2. Buying the car
3. Transferring it to a collogue who is interested in buying it
4. Transferring it to your new employer

The options are listed in the worst to best in terms of financial impact to you.

As for option 1, you have already paid 1/3rd the price of the car and I highly doubt you drove the car any more than 10/12K Kms in the one year you have owned. Despite the tax benefits you enjoyed, you are looking at loss here. Additionally please account for the fact that lease providers typically charge you penalty for pre-closing the lease, if you haven't already. Different company works out a different agreement with different lease providers.

Buying the car as suggested in option 2 will mean you loose out on tax benefits for the remaining window. But do compute to see really how much you loose out on. I doubt its too much if compared against typical loan based purchase. If you cannot come up with such a dough immediately, try to get it refinanced. Yes some loss here but not bad as option 1.

Option 3 will work decently for you if your company supports that and if you find a decent buyer in your company. It can actually be win win.

Option 4 is best if you are able to transfer the lease to your new employer. Do check with your internal policy if it explicitly states that you cannot transfer or if simply states you have to close the lease. And more importantly do check if your new employer allows a transfer in.

Hope this helps.

[ph03n!x]

After owning 3 cars under lease, one of which I had to break-lease for, here's my ₹1 - we buy cars under lease to save on taxes. And breaking a lease midway invariably results in a loss. Keep the heart at bay, listen to the head - cut the losses!

[d.j]

Hi, Safest decision would be to get the car on your name. No doubt one must always be smart about tax savings at the same time we must understand the car leasing company sits a level above then us on this value chain, point is either ways (lease/buy) the benefits cannot be proved in black & white in all cases and sometime too small to cling a decision to.

With car at hand you can always change your decision In time to come. In other words, it’s your own run car, you love it and have not set your eyes on any upcoming new car in near future, then my call would be to get the car transferred to ownership.

DJ

[swarnava.ch]

Originally Posted by TheWall

Hi All, Need advice on a situation I am currently in. Please suggest what should I do? Also, please feel free to suggest any other options as well.

Hi TheWall, As a person on his 5th Set of company lease car, I think I have some insights to offer you here. If your new company has a lease option, I find it always best to go for a car lease. No headache of maintenance, insurance, repairs - all taken care of easily. If you are emotional on your car, its a different thing, but if you are thinking with your brains, I have a few more options for you below:
1. Usually, companies also offer lease transfers. That means if you are leaving the company, you can transfer the car lease to another fellow colleagues provided they agree to take over the remaining EMIs. Usually good cars like Honda City have a lot of takers. Even in this case, I recommend getting the car evaluated externally, ask for some difference amount from your colleague and cut your losses. In this case no upfront investments for pre-payment.
2. If you can afford to bear 10 lakhs temporarily, then go for the complete take over and sell externallly option. That means you will have to pay residual value + GST and the company will provide you Form 29 / Form 30 with sellers name blank. You can then sell it to an agency or direct seller in the market. It depends how much you loose out in this option. For some brands like Toyota etc, you will not loose a single penny even in this scenario as resell prices are high. Be careful, in this case, till the name transfer happens on the company car. For your previous organization, you are the legal owner of the car.
3. Assume you go for a surrender option, think of your losses. You would be paying a monthly EMI of around 25k. On top, you would get some fuel benefits, driver salary benefits and tax benefits. Assume that the final net outflow from your salary will be around 15K. So you have paid till now 12 * 15k for the whole year which is roughly 1,80,000. Now this is something will you be willing to write off as a car usage fee for one year? Your call.

[R_Gowardhan]

Been in the exact same situation 6 months back when I decided to change my job with just 1 out of 5 years done on my company car lease. I chose to buy out the car I.e. Skoda Rapid 1.0 TSI. My thoughts:

1. Financially, it makes sense to let go of this car as long as you have to pay back the company nothing/nominal amount above the resale value from your pocket. You can buy the exact same model of a newer year or choose to upgrade as per your preference in the new lease. Remember, howsoever good a car may be, it is a rapidly depreciating asset and that makes it a financially unwise option to own a new car by paying a full/high value. If you have the option to lease, that should be your first option any day.

2. Do check the car lease policy of the new employer before taking the decision. Two companies can have very different terms. Also check weather you are elegible for a car lease on day 1 of your job or you have to wait for the probation period to get over. Even after getting confirmed, the procurement process will take 1-2 months till you finally get the car keys. Factor this time in between. Add additional time in between if your model of choice hs a waiting period. You may have to make alternate arrangements if this is your only car.

3. Analyse your usage pattern in the past and present job. Were you able to cover enough kilometers and generate enough fuel bills to fully utilise your reimbursement limits? Ideally your reimbursements should offset your car lease deduction. Else its just like you are paying EMIs by overly complicating the equation.

4. Should you choose to retain the car, understand the exact amount that you may have to pay to buy out the car. Important to note that if you are getting the transfer documents made in your/your close relatives name, you will be subject to perquisite tax of 30% of the car value and that's a huge price to pay.

5. If you choose to buy out this car, remember, 10 Lacs is a lot of money and it may be better put to investments in these markets rather than on a depreciating asset.

Why I retained my car:

1. Had planned to buy a Slavia/Kushaq under the new lease. Both didn't entice me enough and Rapid felt more engaging to drive.



2. Dad was planning to buy a new car I.e. Brezza for the house around the same budget as Rapid's buy out value. In turn, he financed the buy out and Brezza came home on new company's lease. A Win-win situation indeed 🙂

[vineetklkrn]

Originally Posted by TheWall

Hi All,

Need advice on a situation I am currently in.
I have a car lease plan with my current organization for 3 years and have completed a year till now.
Unfortunately due to various factors, I had to quit the organization and switch to a different one.
My new organization also offers a car lease plan but my current organization does not allow transfer of lease to the new organization.
I have the following options now.

1. Pay the remaining amount of the car (approx. 10lakhs) and obtain NOC, transfer the car to my name and be done with it.
Pros: I become permanent owner of my current car.
Cons: Need to spend 10lakhs from my pocket, will lose out on tax benefits.

2. Surrender the car to the current organization and take another car under lease plan in my new organization.
Pros: Need not spend a rupee from my pocket.
Cons: Will lose the car and some attachment towards it
Will have to wait for weeks before I can get a new car given the current market demand.

Please suggest what should I do? Also, please feel free to suggest any other options as well.

Hi. Selling the car will be better option. If you purchase the car, you become second owner of your own car.