To lease or to buy a car: What should you choose?

Car leasing is a strategy, which is increasingly finding penetration in the global automobile market. In the Indian market as well, car leasing is increasing. Several well-established car brands such as Nissan, Mahindra, Maruti Suzuki, Hyundai previously opted for such strategy.

However, the segment is majorly dominated by third-party players such as Revv, Zoomcar, Avis, Orix etc. These companies offer car leasing to the customers instead of a complete purchasing plan. In the two-wheeler segment as well, several companies have started offering leasing programs for users.

In the recent past with growing demand for personal mobility, car leasing is growing fast. While the car leasing market is yet to catch up with vehicles sales including both new and pre-owned vehicles, a large number of young users are finding leasing an easier and hassle-free experience than owning a vehicle.

Here are some key reasons, why car leasing is growing.

Ownership experience without owning a car

Leasing a car offers the user a similar experience as owning a personal vehicle. The user doesn't need to pay a hefty monthly EMI for a car loan to own the vehicle. Instead, he or she pays the rental amount. The major cost saving in leasing a car comes in form of not paying for registration charges, insurance etc separately.

Also, leasing a car saves the user from the hassle of these procedures, as the lessor takes care of these. Overall, leasing a car gives the user a similar ownership experience as owning a vehicle, but with more convenience. In many cases, the user can buy the vehicle at the end of the lease for a pre-arranged price.

Growing demand for personal mobility

Demands for personal mobility has been increasing fast for the last few years. The Covid-19 pandemic has further accelerated the pace of this trend. The fear of contamination from the Covid-19 virus by travelling in public transport systems or using shared mobility mediums is fuelling the demand for personal mobility.

At the same time, economic uncertainty is restricting consumers from buying a vehicle. Instead, they are opting for vehicle leasing. People who shift from one city to another city due to their changing jobs, find vehicle leasing much more useful than owning a personal vehicle.

Assessing ownership experience before buying

Many buyers are opting for a vehicle leasing plan for testing the ownership experience of a vehicle before buying the same model. This allows them to assess a specific model and a brand in a much better manner than just researching online or word of mouth.

Accessibility to a wider range of models

Young buyers often prefer changing their personal vehicles every two-to-three years. However, this doesn't become feasible for a majority of consumers who purchase a personal vehicle. However, leasing a vehicle offers them flexibility. Leasing a vehicle allows them to change the model in a short period of even one month. This way, they can experience driving multiple vehicles without owning them.

The growing use of fleet

During the pandemic, the last-mile delivery services witnessed massive growth, which is continuing even when the economy has reopened. The groceries or suppliers of other consumers goods who deliver products to consumers' doorstep, often opt for vehicle leasing programs. Through this, they take a large vehicle fleet on lease.

A majority of these vehicles are usually electric two-wheelers. According to Nikhil Aggarwal, co-founder and CEO of Grip Invest, in such cases, the lessee doesn’t have any upfront cost and only pays a monthly rental which is blended for Capex and operating cost, making the EV leasing more cost-efficient than an ICE vehicle.