Top automakers offer vehicles for a monthly rental with no down payment
Top automakers such as Hyundai, Mahindra, Skoda and Fiat have introduced personal lease programmes .
South Korean auto major Hyundai is offering the base version of the SUV Creta at a monthly rental of Rs 17,642, inclusive of road and goods and services tax (GST), for a period of five years. Buying the same version would entail a down payment of Rs 2.73 lakh besides equated monthly instalments (EMIs) of Rs18,901 for five years. Skoda Auto is promising savings of nearly Rs 17 lakh on leasing a petrol-powered, manual-transmission variant of luxury sedan Superb. In the two-wheeler space, Ather Energy has started extending personal lease options on premium, battery-powered scooter Ather 450 for a monthly rental of Rs 2,500. The company refunds the entire down payment of Rs 75,000 at the end of three years.
India’s automakers need to find ways of energising the market—passenger vehicle sales declined 19% in the first two months of this fiscal amid a broader economic slowdown.
In India, where pride of ownership has driven vehicle purchases for decades, the personal vehicle leasing market is at a nascent stage. However, with younger, millennial consumers preferring ride-sharing services, industry veterans say there has been a shift in mindset. Consumers now prefer to drive a vehicle unencumbered by the investment—financial and otherwise--of owning a car and the potential is huge, said Vikas Jain, national sales head at Hyundai Motor India Ltd (HMIL).
Hyundai’s entire portfolio is available for leasing by salaried individuals, working professionals, small and medium enterprises, corporates and public sector companies in collaboration with ALD Automotive India.
“The leasing scheme has been curated keeping in mind the cost efficacy of the product available for lease vis-à-vis a product purchased outright,” said Jain. “Hence the leasing deals are very lucrative for customers who change cars every three-four years and like to try their hand on new products available in the market.”
Leasing options have made Mahindra & Mahindra’s SUV portfolio accessible to a wider section of people.
“The benefits of leasing to the customers include lower or no down payment, zero risk on resale value of the vehicle, hassle-free usage, and a fixed EMI inclusive of maintenance cost,” said Veejay Ram Nakra, chief of sales and marketing at Mahindra & Mahindra’s automotive division. “As a result, leasing is gaining increasing acceptance in the market and offers greater convenience compared to actually owning a car.”
At the end of the lease period, the car goes back to the company. If a vehicle is returned before the term is over, the user will typically have to pay a certain amount to the company, depending on the time remaining for the lease to end. The person can also choose to buy the car.
The car leasing business overall currently has a penetration of less than 1% in India, mostly powered by the corporate fleet segment. That compares with as much as 30% in developed markets such as the US, UK, Germany and France.
The country’s biggest carmaker is keeping a close eye on developments.
Shashank Srivastava, Executive Director (Marketing and Sales) at Maruti Suzuki India, said, “The segment is big in many countries. In India, this segment has started witnessing a positive trend. Once it reaches a certain threshold, it will become very interesting. We will have to see how it develops here. We are keeping a close watch and will gear up accordingly.”
Skoda Auto India, which started offering leasing solutions to customers in partnership with Orix in March, expects incremental sales volume to rise 5-10% in the medium to long term from this avenue.
“The potential can range up to 20% in purchases by professionals like doctors and chartered accountants and up to 15% in small and medium enterprises,” said Zac Hollis, director, sales, service and marketing, Skoda Auto India.
Ather Energy co-founder Tarun Mehta also sees promise in leasing.
“We only started lease a few months back, but we are seeing good interest,” he said. “When we open in Chennai, this will pick up. I expect as much as one-third of our sales to come from leases by the end of this year, increasing more later next year.”