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Car leasing – fun without responsibility

If you are crazy about owing the latest cars and do not want to be enmeshed in car loan EMIs for one car type, you can go for car lease finance.

Literally it means that the car is leased out to a person other than its owner. It is undertaken after an agreement and the period is always stipulated in months. It is never leased for more than two years but in exceptional cases only. The concept of leasing cars is based on price depreciation. Of course the car user has to make monthly payments. A person who opts for lease need not to make any down payment, but has to pay a part of the car cost, which could be understood as costs involved while driving it in the initial period. The car maintenance costs are taken care of by the owner of the car.

In case of a loan you will be required to pay sales tax as per the government tier system. For leasing a car these taxes are called prevailing sales tax and special financial return. In some cases of leasing the lending companies may insist on security deposits.

The car lease finance is divided in two parts – depreciation charge and finances. The leasing company calculates the payments vis-a-vis the vehicles value and the depreciation during the period of lease. The finances constitute the interest accrued during the term of lease.

In most case leasing is chosen by companies who provide cars for their executives. It is also practices by fleet owners, who keep changing their cars often. Car lease finance is also a good option for those who like to change their cars regularly. Some people even lease out the vehicle and eventually buy it at the end of lease tenure. But this can be done if you have a personal attachment to you car, otherwise the total price of the car will prove costlier than a new one of the same class.

There are four types of car lease finance :

Personal Contract Hire - In this type of lease one has to pay monthly rent for a fixed contact term. The car is return back to the owner at the end of the term.
Purchase - It provides an option to the leaser to buy the car at the end of the term. Companies may offer varying terms from 3-5 years. However, there is no obligation on the part of the user to buy the car at the end of the term.
Hire - This type of lease is offered to executives working for companies who are provided with transport allowance (for a car) according to their contract. This type of agreement takes places directly between the executive and the car leasing company. Hence these companies insist upon the proof of transport allowance and agreement with company to lease out their vehicles.
Business Contract Hire - Business contract hire is similar to Personal Contract Hire. The company gets various benefits under this scheme.

As the car lease finance does not include maintenance costs and there is an option to own the car after the lease period is completed, it is best for those who want to own cars, without the documentation and loans involved in new car purchase. Along with this tax benefits can also be availed. There are few companies in India offering these schemes currently, but it is slowly gaining acceptance as mode of financing.

So, if you are a car freak, like to change cars frequently and don’t want to pay heavy down payment can go for this option.

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