Magma Auto Lease FAQs

What is Car Leasing?
Car leasing is the globally preferred method for acquisition of an automobile; it provides a one stop solution for all needs in relation to the vehicle starting with unbiased choice of the right vehicle, financing, procurement and related paperwork, insurance, troubleshooting and ultimate disposal thus covering all required aspects during the entire period that the vehicle owner wants to own/use the Vehicle.

Car lease denotes procurement of vehicle through lease. It”s a alternative way of funding or acquiring a Vehicle without having the title of it.

Lease is a contract between the owner of an asset (the lessor) and its user (the lessee) for the right to use the asset during a specified period in return for a mutually agreed periodic payment (the lease rentals). Its a financial and service instrument which reduces the effective cost of ownership through the following:
a. Lower NPV of cash outflows
b. Lower and better insurance facilities
c. Greater Tax benefit
Why is car leasing the preferred choice of the corporate sector?
Financial reasons:
  • Lower EMI as compared to bank loans
  • Benefit of resale value of vehicle given upfront 
  • Greater tax benefits as compared to depreciation tax benefit 
  • Off balance sheet funding prevents capital blockage in non-core assets 
  • All inclusive lease rentals with insurance costs 
  • Better vehicle discounts 
Qualitative reasons: 
  •  Very effective HR tool 
  • Expert advice on choice of vehicle as per your specific needs 
  • Saving of management time and effort 
  • Hassle free trouble free usage 
Under lease, one pays EMI for 3 or 5 yrs but doesn't own the car - why should one take it?

This is a wrong perception. Leasing usually works out cheaper for a Vehicle owner than buying a vehicle outright or through Loans. This is because when you compare, Vehicle ownership under a loan or outright, a Vehicle is purchased & used for a period of 3 to 5 years and then ultimately it is sold; in certain cases, based on the choice of the individual the vehicle can be retained for a longer period but ultimately it is sold.

Whereas under leasing, the same is also true – i.e. you can hold the vehicle as long as you desire; the Acquisition cost of the vehicle is itself reduced by the estimated resale value of the vehicle and thus lease rentals on a vehicle will always be lower as compared to loan.

To conclude, under both loan and lease, an individual buys the vehicle and then sells it subsequently – under leasing, the timing of sale is changed to lower the EMI per month. This results in substantial savings per month through increased available take home salary which invested in a safe and secure way will result in greater financial benefit or lower cost or alternatively, can be used to buy the vehicle at end of the lease period.

What are the leasing documents required to close a leasing transaction?
  • Master Lease Agreement
  • Transfer of title (Tax Invoice).
  • Vehicle Request Letter & Lease Schedule
  • Rental Repayment Instruction for the lease rent.
  • Other documents as maybe required or on a case by case basis.
What are the VAT implications in Leasing, does it not make leasing more expensive?

No. Leasing is subject to VAT (currently at 12.5% in general – varies with state to state) however, the VAT included in the purchase price of the vehicle is deducted as a result of which the impact is nullified i.e. the VAT included in the ex-showroom price of the vehicle is deducted from EMI and then VAT is charged to the customer on the reduced EMI – impact is that customer pays only one interest component and there is no double charge of VAT.
The above approach/VAT treatment may vary with state to state, please talk to the Magma Auto lease team for more detail.

What is the typical lease period?

3 to 5 years. Most beneficial being a 4 year lease.

What are the Lessee’s options at the end of the lease term?
In a finance lease the Lessee can exercise one of the following options:
  1. Acquire the asset by paying a nominal value of ‘Minimum Value’. 
  2. Return the asset to the Lessor.
  3. Extend the lease period for a ‘secondary lease period’
Can the lease contract be terminated?

Yes. The Lessee must pay the Outstanding Acquisition Cost or Net present value of the future lease payments as per the agreed Terms & Conditions.

What is the payment method?

The usual payment method is through an irrevocable standing order instruction on the Lessee’s bank account or Post Dated Cheques to transfer lease rents to Magma Fincorp Ltd.

Who bears the insurance and maintenance costs?

The Lessee. Insurance costs can be included in the Lessee’s monthly payment.

In which states can Magma provide its services?
15 states namely, Telangana, Delhi, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttaranchal, Uttar Pradesh and West Bengal. With national level tie ups with leading Vehicle manufacturers, workshops, specialized service providers and local partners for specific functions we are in a unique position to offer you services across India.