With vehicle scrappage policy in picture, is it feasible to lease a car?

Mar 11, 2021 3 min read
With vehicle scrappage policy in picture, is it feasible to lease a car?

Vehicle scrappage policy will make car ownership costlier. Cars that are over eight years old would have to go for a fitness test. A green tax of 10-25 percent would be charged every time you renew the fitness certificate.

Finance Minister Nirmala Sitharaman has recently announced the vehicle scrappage policy for India. In a bid to control vehicular pollution, cars that are older than 15 years will have to undergo a mandatory emission test. And if you car fails the test, it will become unfit to drive on roads.

Not just that, cars older than 8 years will also have to undergo a fitness test. And if they fail the test, the car will become unfit to drive on road immediately. However, if your car passes the test, you will have to shell out up to 25% as green tax to obtain the fitness certificate. The next fitness certificate would be valid for a period of 5 years.

In a nutshell, owning an older vehicle will become costlier in 2021 and future. Well, that makes use ponder is it feasible to buy a car with a long-term outlook? Why not lease a car?

What is car leasing?

When you lease a car, the car company gives you a brand new model. You can lease it for a period of 12 to 60 months. Today leading car manufacturers including Hyundai, Maruti, Skoda, BMW, Mahindra & Mahindra, and Volkswagen  are offering cars on lease.

The lease on car is available with various mileage options of 10,000 to 25,000 kms annually. For instance you can get Maruti Suzuki Ignis for around Rs 13,324 and Wagon R for around Rs 12,513 in Kochi for a tenure of 4 years.

One of the major benefits of leasing a car is that you don't have to shell out hefty down payment or pay interest on a recurring basis. On top of that, car leasing services now also cover features like insurance, road side assistance (RSA), maintenance, and more under the lease cost. It is a good option for users who don't want to own a car for a longer period of time and love to change cars every 3-4 years.

And with vehicle scrappage policy in enforcement, more car users will be discouraged to buy a car.

Pros and cons of leasing a car

Limited usability

A leased car comes with limited number of kilometers that you can. After you drive the car for the agreed amount of kilometers, you will have to surrender the car. Also, the lease is limited to a few years and you might not get the option of buying the car after the lease is over. You are also not allowed to customized the leased car as per your preference.

Leasing is not attractive for car users who have the capacity to buy a car without taking an auto loan.

Car leasing is good for users who change cars frequently

Leasing gives you the flexibility to instantly change your car model once the lease tenure is over. It saves from the hassle of selling and buying your car. The monthly cost of lease is also lesser the car loan EMI. It also enables you to own a high-end car for a shorter period of time that you can't buy in normal circumstances.

However, leasing is still expensive in certain car segments. Especially in the lower end, where it is not adding significant value for car buyers to change their minds. And after the repayment of the loan, you become the owner of the car. You can also sell used car to gain some more value.

Never-ending payments

EMIs of your auto loan will eventually end. But it is not the case with car lease. You will have to shell out a recurring cost on a monthly or quarterly basis. Hence, car leasing is a good option only for families who are on the move or people with job of short tenure at particular place. This will help them in saving RTO registration costs, insurance, and other miscellaneous costs.

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