Mahindra Offers Leasing to Individuals: Better Than Buying A Car?

Individual leasing offers a new avenue to car ownership instead of buying a vehicle.

A 2011 Mahindra XUV500 W8 besides the new 2018 Mahindra XUV500 W11 AT AWD

(Photo: The Quint)

Leasing as a car ownership option hasn’t really caught on in India, although it is fairly prevalent in other countries. India mainly has corporate lease options - where cars are bought in company names under a lease plan, so that the companies can claim depreciation for tax benefits.

Now Mahindra is offering leasing to individual buyers as well, which it hopes will change the way in which cars are bought or owned.

A few brands such as Mercedes and BMW also offer leasing as part of their car ownership options, but these too are mainly tailored plans for large businesses and companies, rather than individuals.

How Does Mahindra’s Leasing Work?

Mahindra is offering its individual leasing plan in a tie-up with Orix and ALD. The lease plan is being offered in six cities to start with - Ahmedabad, Bengaluru, Hyderabad, Pune, Mumbai and New Delhi.

The benefits of a lease plan is that a person doesn’t technically get to “own” a vehicle. Instead it is leased to him/her for a particular tenure, and one just needs to pay a monthly lease. One doesn’t need to pay the down-payment as well. At the end of the lease tenure (5 years), you get the option to play a “residual value” and buy the vehicle or you can just discontinue the lease, return the vehicle to the company and get a new one instead.

The monthly lease is like an EMI that you pay. For instance, for a Mahindra KUV100, the monthly lease is Rs 13,499 for five years, while for a Mahindra XUV500, it works out to Rs 32,999 a month. Once the lease tenure is over, the vehicle can be returned to Mahindra and a new lease on a new vehicle taken out. That way, customers get a new vehicle every five years.

Included in the lease plan is roadside assistance, insurance and service costs.

Does a lease plan make sense? Yes, if you don’t want the hassle of owning a vehicle. But it does become more expensive if you decide to discontinue the lease before five years - as you have to pay a foreclosure penalty.

In the UK, nearly 45 percent of vehicles are leased. In the US, 33 percent of vehicles are leased. In India, it’s less than 1 percent at the moment, and that too on company leases.