Most corporate houses are opting for car leasing as part of their cost-cutting measure, which not only saves substantial amount of money but also reduces the burden of maintaining vehicles  As the Indian economy is inching steadily towards the revival phase post the worldwide economic slowdown, car leasing opportunities have developed as the next big thing in the automobile sector. The corporate sector is increasingly leasing vehicles in order to improve their financial ratios and reduce their administrative hassles. Although this concept will take time to gain prominence, the corporate sector already accounts for nearly 33 lakh vehicles of the 128 lakh cars running on Indian roads. Last year alone, corporate fleet accounted for approximately 12% of total new registrations in India.Earlier, most Indian companies preferred to self-fund their fleet or include the company car as part of the employee CTC. However, times are now changing; companies increasingly view this as an extra expense on their balance sheet. Car leasing not only helps take these assets off the balance sheet but also provides a completely risk-free solution at zero administrative effort.
Key advantages of leasing
The business of leasing involves making monthly payments that cover not only the use of the vehicle but also all the services required to use the vehicle such as maintenance costs, tyre replacement etc. Making of these payments depends on several factors such as the model of vehicle, the length of the contract and anticipated kilometres and the associated services chosen. Car leasing eradicates uncertainties and provides efficient services. Some of the key advantages of car leasing are as follows:
· Cost control – One has to pay a fixed monthly amount, so one can control vehicle costs, thereby improving cash flow.
· Maintenance management - Since regular servicing and maintenance is included in the monthly sum one does not have to worry about separate costs involved in vehicle maintenance.
· Savings – Through leasing a substantial amount of money is saved, which can be used by the company to invest in other areas of development. Leasing also gives one the option to make car services available only to those employees who indeed need them.
· Risk-free and flexible – Car leasing removes the risks on residual values and maintenance. At the same time it is flexible in the sense that at the end of the contract, one can simply hand back the car without worrying how much it might be worth, and select a new one.
· Reduces administration burden – Car leasing relieves one of the burden of buying and maintaining a fleet. It saves money and allows the firm to focus on its core business.
· Tax efficient – Leasing companies can offset the value-added tax (VAT) on the purchase price and build this benefit into the monthly rental.
Currently, there are around 27,000 cars under operating lease in India. The leading car lease companies in India are leaving no stone unturned to consolidate the future of car leasing in the country. With a slew of new models being launched in the Indian market, equipped with the latest technologies, the mindset of buyers is witnessing a rapid change. Now nobody wants to keep the same car for a long period of time. And car leasing provides a perfect option for such corporate users.
Liam Donnelly, managing director, Arval India, a leading car leasing company based in Mumbai |
