Mobility Blog

Leasing is the future for car usership

Leasing is the future for car usership

The manner in which individuals and businesses have begun to approach assets have seen a significant shift. Where once ownership dictated control, being asset-light allows flexibility. Vehicle procurement is just such a space where both, organisations and employees can benefit from the availability of an asset without the responsibilities associated with ownership.

There’s a strong case to be made for car leasing as opposed to ownership. For an organisation, it allows a fleet to be available for employee use, with vehicles either being procured directly or in conjunction with the user. For employees, car leasing offers convenience, efficiency and perhaps even a certain stature, while being affordable and simpler. The recognition of this convenience of leasing comes across through the size of the car leasing market (~5% of the total automobile market) and the expected growth of about 20% compound annual growth rate over the next ten years.

Leasing vs. Subscription

While subscribing a car, there is no question of ownership. The rental company owns the car, which is registered in their name. Hence, the car number plate too is black / commercial. The renter only pays a certain sum for the duration for which they drive the car. 

With leasing, however, the ownership may transfer to the user at the end of the lease term (which is usually significantly longer than with subscription). The car is also registered in the user’s name and the car number plate is white. Depending on the user’s decisions, at the end of the lease tenure, the vehicle may be returned to the lessor or bought over by the user (which may be a company). Many users (whether individuals or corporates) select to return their vehicle and begin a fresh car lease with a new car.

Leasing vs. Ownership

There’s good reason why car leasing has seen tremendous growth. The barrier of a significant down payment (in case of a loan-based purchase) is avoided. A company or employee can take delivery of a vehicle and begin paying lease rentals immediately without any down payment. ALD Automotive provides the option of a tripartite agreement between the leasing company, the employing company and the employee (with options to transfer the lease agreement in case of switching jobs). 

There are other considerations that come into play when purchasing a vehicle. With full-service leasing, the costs of vehicle maintenance are all covered within the car lease agreement, including damage. The headaches of having to oversee vehicle upkeep are completely avoided. Leasing a new vehicle also allows a user to have a car for the period of its best performance. The user isn’t stuck with an old vehicle, or the headache of resale. Buying a vehicle (especially one procured on loan) comes with the additional burdens of insurance and other maintenance fees, besides loan EMIs.

One of the most significant benefits for a user employed with a company is that there are superb tax advantages. Leasing a vehicle allows a tax benefit of up to 30%. Compared with owning a vehicle where there are no or low tax benefits, leasing offers savings over a period of time. 

Why leasing is the future of car usership

These days, vehicle models, technologies like safety and in-vehicle features change or evolve rapidly, often every year. In such an environment, vehicle users will want to upgrade or switch to a more modern car every two or three years. Owning a vehicle comes with the downside of losing over 20% of the vehicle’s value as soon as it’s brought onto the road. This means that vehicle ownership becomes valuable only if the car is being utilised over a long period of time, but only till maintenance costs begin to become burdensome. 

In such a scenario, car leasing becomes the optimal solution. For employees, a company that offers car lease circumvents just these concerns. It allows the flexibility of using a new car for a short duration, without the worry of maintenance, insurance or repairs, or the need to dispose of the vehicle after a few years. At the end of the lease, the user may simply opt for a fresh vehicle, equipped with the very latest convenience and safety features.

An enterprise with a fleet will want to consider leasing because of these very reasons. An organisation that wishes to be perceived as modern will always ensure its employees have the very latest and most well-maintained cars for their business commutes.

A globally recognised car leasing partner like ALD Automotive can ensure a smooth experience. Opex focussed leasing models are best suited for businesses, while lease plans that bring along tax advantages are good for employees.