Leasing Industry in India: What Today & Tomorrow Holds?
By SMAS INDIA
7 April, 2020
Other than renting a house, the traditional mindset has always been to purchase it. And for big-ticket possessions such as cars, the purchase is always accompanied by a lot of fanfare and pride. But if you enter millennial India, you’ll see the concept of purchasing or renting has taken a back seat, and leasing is the new normal.
Who would have thought that leasing was even an option to enjoy the luxury of having a car? But with the world undergoing a paradigm shift, it untapped its energies into establishing and providing better services for its customers; thus, leasing has paved its way into existence. Most industries have adopted this concept, and accordingly, they’ve structured their services in order to offer the best they can to their customers. And this concept of leasing is not only limited to houses and properties, but with the advent of MNC’s, start-up companies, and (precisely) vehicle leasing companiesthey have widened the scope of bringing in the concept of leasing vehicles.
Status Of Vehicle Leasing In India
Earlier, the concept of auto leasing India was limited only to the senior corporate executives that were known as ‘corporate leasing’ and were mainly for the luxury car brands. But gradually, with time, it has trickled down and become accessible to commoners and to middle-income families as well. Companies like Mahindra & Mahindra made some of their models available for leasing. Following this concept, several other car brands, including the luxury ones like BMW, Mercedes etc. have also opened their doors to offering this leased facility.
Car leasing is one of the most lucrative and fast-growing segments of the automobile sector in India. Although it currently represents only 4-5% of the market in terms of the absolute number of vehicles, it holds strong future prospects.
The growth of the auto leasing market in India is to ensure manifold growth in its CAGR by 15-20% in the coming decade. Corporate car leasing companies like SMAS India have made the concept of vehicle leasing simpler. In fact, you will be surprised to know that most car making companies are making about 40% of their business by leasing cars. Therefore, this has significantly helped in changing the mentality of customers and imbibed the fact that ‘why buy when you can lease it’!
Why has Vehicle Leasing Services in India gained popularity in recent times?
Introduction of Goods and Services Tax (GST) comes out to be a source of relief in time of distress for the Indian markets. It was introduced on July 1, 2017, with the aim of bridging the gap between rich and poor in the long run. And since its introduction times have changed for the consumers, dealers as well as for the manufactures- it has helped to bring stability and balance in the economy by considering every person and their transaction at par.
To understand its significance in the automobile industry, let’s consider an example.
When you buy a car on loan, it requires an initial down payment to the seller which is followed by instalments on a monthly/quarterly/annual basis. This down payment creates an extra outflow on the part of the buyer on loan along with additional instalments. On the other hand, no down payment is required when you lease a vehicle from vehicle leasing companies in India.This makes its overall outflow on the lower side when compared to buying a vehicle on loan.
Also, in case of lease transactions, the lessor takes the exposure on the residual value of the vehicle; this eventually brings down the lease rentals per month.
Vehicle Leasing: The Promising Future!
The concept of Vehicle leasing in India is here to stay! In the coming years, the vehicle leasing market in India will be prospering as most automobile brands have now started to expand their services to leasing now, which wasn’t quite prevalent until the last 4-5 years. With this competitive spirit, more and more well-developed brands are expected to undertake this strategy for enhancing their customer base. Also, currently, the statistics of a number of cars being sold is going through a falling spree, and it is expected to fall further. But the auto leasing market will flourish in the coming years. It provides the ‘Best of Both Worlds’ by providing benefits to not just the customers, but to the owner as well they still retain the ownership of the cars and gain benefits out of it.