Lessor procures the vehicle as per specifications provided by lessee and delivers the same to the lessee for the pre-decided tenure (from 3 to 5 years, not exceeding 5 years in any case) on lease along with fleet management services taking away all the hassles of managing comprehensive maintenance, insurance renewal, damage repairs & insurance claims, replacement vehicle, pick up & drop, 24*7 emergency road side assistance for a worry free driving experience during the term. The Lessor charges a fixed lease rental to be paid monthly
The value of the car at the end of the tenure is known as Residual Value. The lease rentals are calculated in such a way that the employee pays only for the usage of the vehicle and not the residual value. It is determined depending on risk profile of asset, the kilometers and several factors that have an impact on it..
In case the vehicle is stolen or is declared total loss, complete documents along with FIR and No Trace Certificate has to be obtained and provided to JMD. In valid claims, the contract will be terminated on the payment of the difference of the Book Value and amount paid by the insurance company.
If the employee is joining another company, lease rental can be transferred to the new company subject to JMD and the new employer agree to get in to an agreement. However, if this is not possible, the contract can be closed as per the terms agreed. Alternatively, the same can be passed on for use to any employee in the same company. Or any employee is eligible to buy the car at the fair market value at the discretion of the leasing company.
Let us take into consideration both these scenarios. EMI paid against bank loan: the consumer pays 100% of the loan amount over the agreed tenure of 3,4 or5 years and at the end of the tenure you usually sells the car at current market value; hence the consumer pays for 100% of the car i.e. greater cash outflow due to higher EMI and also bears the risk of fluctuation in residual value resulting from model discontinuation/accidents etc. Under leasing instead of waiting for 3 to 5 years to sell the car the estimated market value of the car is deducted from the loan amount upfront and you pay EMI only on the net cost - this results in much lower EMI and you also avoid the risk of fluctuation in residual value, being a risk that is underwritten by the leasing company.
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