India's car leasing market: Does it have scope to grow?

More and more auto companies are luring  customers with attractive car lease options. But, choosing whether to lease a new vehicle instead of buying totally depends on the individual priorities. For some, leasing or buying is purely a matter of money. For others, it’s more about forming an emotional connection to the car.

Car leasing and rental is one of the most lucrative and fast-growing segments of the Indian automobile sector. Despite representing only 4-5% of the market its future prospects are strong. As currently, the car leasing market is worth Rs. 1,500 crore and is poised to grow at a 15-20% compound annual growth rate (CAGR) over the next decade.

A car can be leased at ranging from Rs 9,500 per month to Rs 51,000, depending upon the duration and the models. Let us understand everything about it in detail.

How car leasing is different from owning?
Leasing a car is an easier process that allows you to drive a car of your choice for a limited period of time, generally around 3-5 years. A leasing company will provide you with a car you wish and you will use the car 24/7 but will not own it. In return for using the car, you will have to pay monthly rentals as decided by them.

Unlike buying a car, other costs like paying the road tax, insurance, maintenance expenses, etc would be paid by the company. At the end of the chosen lease period, you will have to return the car to the company. If you wish to take over ownership of the car, you will have to pay an amount specified by the company.

Which companies are providing car leasing?
Companies like Mahindra & Mahindra, Maruti Suzuki, Hyundai, Tata group, Volkswagen, Nissan, Skoda, Fiat, and luxury brands like BMW, Mercedes-Benz, etc. have also opened their doors to provide the lease facilities. Even car rental firms like Zoomcar, Revv, Myles, and Drivezy are offering subscription or leasing programmes.

As this is the initial stage, OEMs are not directly entering the leasing market but via leasing platforms like Orix India. Avis Lease, Ald Automotive, Lease Pan, Smas Auto are other market leaders in vehicle acquisition and fleet management.

Which cities are offering it?
Car leasing is being offered in almost every city in India for corporate requirements with around 40,000-50,000 active cars on lease.

Leasing is relatively new for retail customers. Currently, 2-3 leasing players are into it. As of now, they operate only in eight cities with 600-800 active cars every month. Mumbai, Delhi, Kolkata, Bangalore, Ahmadabad, Hyderabad, Chennai, and Pune are the only cities as of now offering car leasing facilities. More cities would soon see their entry.

In the coming years, the car leasing market in India will be prospering as most car brands have now started to expand their services to even leasing now, which wasn’t prevalent until the last 4-5 years. The leasing market will be flourishing in India especially in millennials on the move from one city to another with jobs of short tenure.