Vip Auto Lease

BMW financial & operational lease- how does it work?

Automobiles can be leased. This notion, like self-driving, is not as popular in India as it is in other countries. Only high-end automotive manufacturers such as BMW, Mercedes-Benz, and others provide leases in India. In this article, we'll go through the fundamentals of leasing an automobile.

We contacted BMW and Merc to inquire about their leasing programs after one of my senior colleagues expressed interest. While BMW representatives responded with an invoice within a few hours, Merc representatives have yet to respond. It's also clear that these companies' call centre personnel aren't qualified to address lease-related issues, and they frequently refer customers to the appropriate department.


What is the difference between leasing and financing a car?

When an automobile is leased or for BMW Auto leasing, the leasing company retains ownership of the vehicle. The customer pays a monthly fee to use the vehicle. The consumer has the choice to either relinquish the vehicle or purchase it by making a residual payment at the conclusion of the lease period. At first glance, this may appear to be a ridiculous idea: why would someone pay a monthly rent when they can own a car for a nearly identical EMI?

The answer is straightforward: EMIs do not qualify for tax benefits, whereas lease rentals do. Let's look at an example.

BMW 320d Ex-showroom vehicle 31.5 lakhs in Chennai, 38 lakhs on the road.


Option 1: Take out a three-year loan for 31 lakhs at a rate of 10.8%.

  • · A 7 lakh down payment is required at the time of purchase.
  • · EMI of 1.01 lakhs per month
  • · Insurance costs Rs 11000 each month (1.26 lakhs per year)
  • · You'll have spent 63 lakhs on your car over the course of three years (7 lakhs down payment + 31 lakhs loan amount + 5.5 lakhs interest + 2.5 lakhs on insurance + 1 lakh on other maintenance + 14 lakhs in income tax (i.e. 30% income tax paid on your salary, which was spent on EMI and other car expenses) + 2 lakhs in missed down payment interest.
  • · After three years, the resale value of your BMW 320d will be around 17-20 lakhs, despite the fact that you paid 63 lakhs for it (Total cost of ownership). However, you will be the owner of the vehicle and will be able to use it as you like.

Option 2: Lease the 320d on a long-term basis.

  • · 0 for a one-time down payment
  • · Monthly leasing rental: 2.2 lakhs in the first month, 1.1 lakhs in the second month, and so on until the 35th month.
  • · Pay 3 lakhs to totally own the car at the end of three years or return the car to the firm.
  • · Your employer will pay you a lower income and the lease cost to the car firm. Instead of earning a salary of 2 lakhs and paying 30% of it in income tax, you take a salary of 1 lakh and save 30% right away, while the firm records the remaining 1 lakh as an expense and pays the automobile company as the lease payment.
  • · After three years, you'll have spent 52 lakhs on your automobile (450000 lakhs in rental, or 1.25 lakhs per month for 36 months plus VAT and service tax) + 3.5 lakhs in residual value + 2.5 lakhs on insurance + 1 lakh on other upkeep.
  • · After three years, the resale value of your BMW 320d will be around 17-20 lakhs, despite the fact that you paid 52 lakhs for it. As you can see, this model has a lower total cost of ownership than option 1, owing to a 30 percent tax savings when the firm pays you a lower wage and utilizes the difference to pay the rental.

Option 3: Lease the 320d for a year.


· BMW Car Leasing owns and operates the vehicle under an operating lease, as well as taking care of maintenance and insurance. A mileage limit is included in the operating lease. The example below is for a rental with a 20000 km annual mileage. Rent will be slightly higher if usage is higher.

  • · A one-time deposit: 0
  • · The monthly lease rental is Rs. 1.15 lakhs for a period of 36 months. This includes insurance and upkeep.
  • · After three years, the corporation returns the car to you, and you receive nothing.
  • · Your employer will pay you a lower income and the lease cost to the car firm. Instead of earning a salary of 2 lakhs and paying 30% of it in income tax, you take a salary of 1 lakh and save 30% right away, while the firm records the remaining 1 lakh as an expense and pays the automobile company as the lease payment.
  • · You'd have paid 41.5 lakhs on your car after three years (1.15 lakhs in rental+rental tax * 36 months). There will be no insurance costs, no maintenance costs, and no money will be lost due to income taxes or down payment taxes.
  • · After three years, the resale value of your BMW 320d will be around 17-20 lakhs. You only spent 42 lakhs for this car, but at the end of the day, you own nothing. Option 1 would have cost 63 lakhs, but you would have ended up with a car worth close to 20 lakhs if you had paid 63 lakhs. As a result, this option (option 3) is still viable.
  • · Please keep in mind that there is a mileage limit, and any car damage must be paid for separately.

Final Thoughts

When on a lease, it is simple to switch automobiles in the middle of the term. For example, at the conclusion of the second year, if your financial situation has improved and you can now afford a 5 series instead of a 3, you can terminate the 3 series leasing deal and join a new 5 series lease contract with minimal paperwork. Option 1 is difficult since you must find a buyer, sell the automobile, and then acquire a new car.

In conjunction with the dealer and the best BMW Lease Deals, lease options can be designed (like step up, step down etc). Unfortunately, lease schemes for cheap cars are not commonly accessible in India, unless your employer and dealer have reached an agreement. Tata Motors had considered starting such a program in the past, but operational concerns forced them to shelve their plans. It's worth noting that your employer may have its own leasing terms and conditions in place to make things easier for you. Examine your company's policies.

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