What is EV Leasing - All the Queries Resolved
H. Karan Kumar
Updated on Sept 19, 2023 | 6 min read
Introduction:
The GT Bharat Survey says that almost 40% of Indian participants prefer leasing an EV instead of paying upfront or EMI option.
The world of automobiles is changing and turning green, literally and metaphorically. Today, an EV costs double its ICE equivalent and has very low resale value due to the limited life of its battery; that’s why EV leasing is getting more popular, as it’s the most favourable option for driving an electric vehicle.
Leasing is common in economically literate countries like America, Norway, the UK, and Europe. But unfortunately, the idea of leasing never touched Indian souls, and it stayed limited among businesses and corporations. According to many economic studies, leasing will be the new normal in India with the emergence of electric vehicles.
But one big issue to solve before leasing an EV is to educate people on the concept of leasing and how this can be a boon for both customers and the automobile market. So, in this article, we’ll see what EV leasing is, how EV leasing works, and what is cheaper, and introduce you to the invisible benefits of EV leasing.
Planning to Buy an EV?
What is EV Leasing
Electric Vehicle (EV) Leasing is a financing arrangement where you get to use an electric car by paying fixed monthly payments for a limited period, similar to renting an apartment. Unlike buying, you don’t own the car but have exclusive access during the lease term. In the end, you typically return the EV to the lessor in good condition.
Now let’s break down this bookish definition:
- A customer gets an EV by paying a fixed monthly leasing fee. The monthly fee would depend on the plan you choose.
- You’ll get a fully insured EV where the leasing company covers all your extra expenses.
- The Owner will have full independence to change the vehicle after completion of the lease term or continue with the same vehicle.
In EV leasing, the owner pays slightly higher than a typical loan EMI but gets far more features and personalized solutions. EV leasing might look costly, but the owner eventually ends up paying much less in the case of EV leasing. We’ll discuss that in the article further.
Types of EV Leasing:
- Corporate Leasing
- Individual Leasing
Leasing an electric vehicle (EV) can be a great option for both individuals and businesses, offering benefits like lower upfront costs, access to the latest technology, and predictable monthly payments. However, there are some key differences between corporate and individual EV leasing that you should consider before making a decision:
Corporate Leasing:
- Who leases: Companies lease EVs for their employees to use for business and personal purposes (depending on company policy).
- Benefits:
- Tax advantages: Businesses can often deduct the lease payment as a business expense upon which they can get the tax benefits by showing it as a business expense.
- Bulk discounts: Businesses qualify for volume discounts on lease rates and charging infrastructure, creating a win-win situation for corporations and leasing companies.
- Fleet management: Leasing companies can handle maintenance, insurance, and other fleet management tasks.
- Employee satisfaction: Offering EVs can attract and retain talent who value sustainability and technology.
- Employee tax benefits: The corporates would deduct the monthly lease fee from the salary itself, with which the employee has to pay lower taxes, and sometimes they even get in a lower tax rate bracket.
- Considerations:
- Contract terms: Corporate leases typically have longer terms (2-4 years) than individual leases, which can limit flexibility.
- Mileage restrictions: Businesses may set mileage limits to control costs, which could impact employee usage.
- Charging infrastructure: Businesses may need to invest in charging infrastructure at their facilities.
Individual Leasing:
- Who leases: Individuals lease EVs for personal use.
- Benefits:
- Lower upfront costs: Leasing avoids the high upfront cost of buying an EV.
- Variety of options: Individuals can choose from a broader range of lease terms and mileage allowances.
- Tax Benefits: As leasing comes under the non-luxury expense, the individual lessee would also get tax benefits in the EV leasing.
- Predictable payments: Lease payments cover most car-related expenses except for charging and insurance.
- Access to new technology: Leasing allows individuals to drive the latest EV models without committing to ownership.
- Considerations:
- Mileage restrictions: Exceeding mileage limits can result in hefty fees.
- No ownership: Individuals don’t build equity in the vehicle after the lease term.
- Depreciation risk: Leasing companies may charge depreciation fees if the car is returned in poor condition.
How EV leasing works:
Now let’s see the start-to-end process of how a typical EV leasing looks like and we’ll also briefly see the business dynamics of EV leasing.
- A customer gets an EV by paying a fixed monthly leasing fee. The monthly fee would depend on the plan you choose.
- You’ll get a fully insured EV where the leasing company covers all your extra expenses.
- The Owner will have full independence to change the vehicle after completion of the lease term or continue with the same vehicle.
- The customer gets all the basic facilities like servicing, 24×7 RSA, maintenance, etc., included in the monthly fee.
Unlike in EMI, the owner wouldn’t have to take the burden of insurance, maintenance and reselling.
Do I Qualify for the Leasing
Before jumping right into the criteria, let’s see why we need to keep a certain entry barrier for the users.
We set certain standards for qualifying users for EV leases for several reasons. This helps us manage risk and ensure a smooth leasing experience for the company and the user. Here are some key reasons:
Financial Stability: Leasing companies want to ensure that users can make their monthly payments on time and in full.
Protecting the Vehicle: We are responsible for the vehicle’s condition throughout the lease term. By requiring clean driving records and responsible credit history, we aim to reduce the risk of damage or excessive wear and tear due to irresponsible driving or neglect.
Maintaining Residual Value: Residual value is the vehicle’s estimated value at the end of the lease term. Having responsible users with good credit and driving records contributes to a higher residual value, as the car will likely be in better condition.
It’s important to remember that these standards are not meant to be discriminatory but rather to ensure a responsible and sustainable leasing ecosystem for both companies and users.
Here’s the guide to know whether you qualify for the EV lease or not:
- Credit Score: Leasing companies typically require a good credit score (often above 700) to mitigate non-payment risk. You can check your credit score for free through various services online.
- Debt-to-Income Ratio: This ratio reflects your monthly debt obligations compared to your income. Lower ratios (ideally below 36%) indicate better financial stability for managing lease payments.
- Employment and Income: Stable employment and sufficient income to cover the lease payment and other car expenses are crucial. Proof of income, like pay stubs or tax returns, might be required.
- Residence: Zeact operates in specific regions or has residency requirements. Currently, we are serving in Delhi NCR, and the future, we may expand in other cities as well.
Connect with Zecat if you have doubts about the eligibility or vehicle-related query. Consider co-signing if your credit score or income falls short; having a co-signer with good credit and income can improve your chances of approval.
What if I lose the car in the Leasing period
A major benefit of leasing an electric scooter instead of buying on loan is the “customer assistance”. If your car is lost, you might need to jostle in case of a loan, but with leasing, you just need to contact the leasing company (zacat), who would assist you, bearing all the legality or hardship on themselves.
Here’s what the typical process looks like:
Steps to Take:
- Immediately contact your leasing company and insurance provider. Report the loss, file a claim, and provide all necessary documentation.
- Cooperate with the police investigation. Provide accurate information and assist with their inquiries.
- Review your lease agreement and insurance policy thoroughly. Understand your financial and legal obligations.
- Seek legal advice if needed. Consult a lawyer specialising in contract law or car leasing issues for guidance on your specific situation.
Here’s what you need to understand:
Financial Responsibilities:
- Total loss: Even if the car is insured, you may still be financially responsible for a portion of the loss depending on the terms of your lease agreement and insurance policy. This could include:
- Excess wear and tear: If the car wasn’t in good condition before it was lost, you could be charged for depreciation exceeding normal wear and tear.
- Lease payments: You will likely still be obligated to make lease payments until the lease ends or the car is replaced.
Legal Repercussions:
- Police report: Filing a police report is crucial for insurance purposes and to demonstrate you weren’t involved in any illegal activity.
- Criminal charges: Depending on the circumstances of the loss, you could face criminal charges like theft or joyriding if suspected of foul play.-
Why EMI looks cheaper but is not:
The “cheaper” EMI for buying only reflects the loan portion, not the full cost of ownership. When comparing costs, consider depreciation, maintenance, potential repairs, and the eventual resale value. Leasing eliminates many of these unknowns, offering a more predictable and potentially cost-effective solution, especially if you value driving the latest technology and enjoy flexibility.
While at first glance, monthly instalments (EMIs) for buying a car through a loan might seem cheaper than leasing options, there’s more to the story than meets the eye. Choosing between leasing and buying should be a holistic decision considering long-term costs, ownership implications, and flexibility. Here’s why leasing can be a compelling choice despite seemingly higher EMIs:
Lower Upfront Costs: Leasing requires significantly lower upfront costs compared to buying. You typically pay a smaller security deposit instead of making a hefty down payment. This frees up your capital for other investments or financial goals.
Predictable Monthly Payments: Lease payments cover most car-related expenses (except charging) into a single, predictable monthly sum. This makes budgeting easier and avoids unexpected maintenance costs that can disrupt your finances.
Always Drive the Latest Technology: Leasing allows you to upgrade to the newest EV models every few years, experiencing the latest advancements in efficiency, safety, and features. This ensures you’re always driving a car at the peak of its technology and performance.
No Worries About Resale Value: The car’s future resale value isn’t your concern with leasing. This eliminates the risk of depreciation, which can significantly impact the total cost of ownership over time.
Tax Advantages (Business Leases): Companies leasing EVs often enjoy tax benefits like deducting lease payments as business expenses. This can translate to significant savings for businesses compared to traditional car ownership.
Peace of Mind with Maintenance: Most leases include scheduled maintenance and warranty coverage, offering peace of mind and avoiding unexpected repair costs. This ensures your car is always in top condition and minimises downtime.
Flexibility at the End of the Lease: At the lease end, you have options: purchase the car at its predetermined residual value, return it and choose a new model, or simply walk away. This flexibility caters to your evolving needs and preferences.
Why Zecat is No. 1 choice for EV leasing:
In simple terms, these are the following services offered by Zecat.
- We offer 7 days of EV experience, intended to give users a first-hand experience of the EV and check the user-scooter compatibility for long-term ownership. (This is a paid service)
- Leasing services: After experiencing this, you can lease or buy the EV from us.
- Charging support: Zecat will install a dedicated smart EV charger at your desired location, which you can use for fast and slow charging.
- Servicing and Maintenance: Zecat will provide “free” doorstep maintenance and expert servicing for your electric vehicle.
- Fully Insured vehicles: The vehicle you’ll get will be fully insured, and you don’t have to spend a single penny on the vehicle’s insurance.
