Why car leasing and subscription-based models are gaining traction among consumers

The car market is a dynamic place; it changes its contours to provide the best convenience to consumers.

The concept of leasing a car for regular use is not esoteric, but is gaining increased salience. With all the latest cars available for lease, with the advantage of no capital expenditure, no administrative hassles, or fixed cash flows, it is an apt choice for many. Especially for those who are looking to get the convenience of having a car with the least outflow.

India’s middle-class population is expected to be the largest globally by 2025. To cater to this segment’s mobility needs, several subscription- or lease-based options and car rental services offer smart solutions.

Leasing cars through a subscription-based model is the new way to get your favourite car. You can have the car at your disposal 24/7, just like an owner, but you are free from the liabilities that come with it. Doesn’t that sound great?

Buy vs Lease: How are they different?

Leasing a car is an easier way that allows individuals to drive a car of their choice for a limited time, which may vary for different people, but it is generally between three to five years.

You fully own the car while buying it, you have to pay for all the added costs, and you end up with a heavily depreciated car.

On the other hand, in the lease or subscription model, you will have a car 24/7 under a pre-decided contract when you subscribe or lease it from a leasing company. You will have to pay a fixed monthly fee; the added costs associated with car ownership, like EMIs, insurance, and maintenance, are paid for by the company selling the subscription or lease.

Car leasing services in India have tapped into a market comprising a burgeoning middle-class with ambitions of being mobile without going outside their financial comfort zone. For the same outflow, you get to have a higher category car under lease or subscription.

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From an auxiliary concept to the new driving force

From the above, it is clear that leasing a car is an apt option for customers who prefer to optimise every rupee spent on a depreciating asset. It comes across as the smartest choice for a consumer.

The vehicle scrappage policy, launched on August 13, 2021, shifted the argument clearly away from car ownership to subscribing to or leasing a car since the owner of a car now has to not only deal with a depreciating asset but also contend with getting the car scrapped within a specific period of time.

According to the policy, any personal vehicles more than 20 years old will have to be scrapped subject to a fitness test. If the car fails the fitness test, it is deemed unfit to be driven on the roads. If your vehicle passes the test, a "green tax" (about 10–25 percent) will be levied at the time of certificate renewal.

It loosely translates to your car either being scrapped or being a financial liability. This policy further strengthens India’s already proliferating car leasing market, which stands at a worth of Rs 1,500 crore. It is further expected to grow at a 15-20 percent CAGR in the next decade.

Leasing a car would therefore be a wiser choice in this modern-day and age. It also provides advantages, like flexible choices to renew your lease with the latest car every time. There are no maintenance costs and no stress about your car’s falling trade-in value.

You don’t have to be hassled about reselling it when it's time to move on. One of the most significant advantages of leasing a car is that you can treat the entire subscription fee as an expense, as the lease amount qualifies for tax relief. Therefore, you can save up to 30 percent based on the tax slab.

How does it work?

If you are on a tight budget or looking for alternate options for mobility that can be convenient, the automotive market has opened its doors for you to make it happen.

Some leading car lease companies make made-to-measure plans for customers to help them bring their favourite cars to their garage. Customers can apply for a subscription or lease with a car leasing company based on pre-laid terms and conditions. The tenure can vary - 12, 24, 36, 48, or 60 months. Once the contract is over, it can be extended, upgraded, or downgraded based on the requirements.

These companies provide services like pickup and drop, repairs and maintenance, 24/7 roadside assistance, registration services, and insurance cover to attract customers. Thus, leasing or subscribing to a car presents a great solution for self-reliant mobility without any financial liabilities.

With the vehicle scrappage policy and the green tax adding financial liabilities on an older vehicle, buying and holding on to an old car can be a costly option.

Leasing as a solution allows you to be free of an encumbrance and enjoy the benefits of self-reliant mobility without making a dent in your pocket.