Car lease calculator

Car lease calculator

Graphical Analysis

In this blog, We will be going through calculation to understand how leasing a car can be beneficial than loan or even cash. Lease should be preferred over cash if you fall in 30% income tax slab.

Supposed you wanted to buy Ford Aspire Titanium. Now let’s understand the cost of owner ship of car in case of lease over various term i.e. 3 years, 4 years and 5 years.

Assumption for car lease calculation,
1. Car’s cost on road price is around Rs 1000000 (excluding insurance)
2. Residual value after 3 years is 30%, 4 years is 25% and 5 years in 20%. It varies from company to company.
3. Income tax slab consider is 30%.
4. FD interest calculation is with systematic withdrawal plan. i.e. FD is used to pay EMI and keeps reducing.

Now, I will explain the calculation a bit from the excel attached.
1. Lease interest rate @14%
2. Term in months(60 months i.e. 5 years)
3. Residual value = Rs 2,00,000 [ 10,00,000 (car cost) @20% ]
4. Total amount = Rs 13,80,000 [ 10,00,000(car cost) with 14% (interest) for 5 years ]
5. Actual Payable = Rs 11,79,995 [ Rs 13,80,000 – Residual cost after 5 years]
6. Monthly EMI = Rs 19,666 [ 11,79,995 (total amount) divided by 60 months ]
7. Tax save yearly = Rs 70,800 [ yearly EMI x 30% ]
8. Total tax save = Rs 3,54,000 [ 70,800 (tax save yearly) x 5 (years) ]
9. Ownership cost = Rs 10,26,000 [ 11,79,995 (payable amount) + (2,00,000) residual value – 3,54,,600 (saving on tax) ]
10. Interest from investment in FD is @8% simple interest = Rs 2,08,000
11. Actual ownership cost = Rs 8,17,500 [ 10,26,000 (ownership cost) – 2,08,000 (interest on FD) ]

2019 car lease quotation from lease company

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Eyeing investment. Please note that the views given in this website are meant for reference and guidance of the readers to explore further on the topics and take informed decisions. These should not be construed as investment advice or legal opinion.

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1 Response

  1. PP says:

    These calculation are INCOMPLETE.. And does not show the actual COST of Ownership thru Lease Rental.
    Lease rental billing have additional “Lease/Fleet Maintenance charges” which are around 4K~5K per month and additional GST 28% on top. Making around 6K per month, which becomes for 5 years tenure as 60*6K =360000.. This is similar to the amount of tax you save in 5 years.. Hence instead of paying tax to Govt, actually you pay to Lease company(This is their Business model above Loan disbursement)..
    This nullifies your benefit to NULL.

    Now the additional BURDEN part.. For Residual value say 200000 (above example),
    When the Residual value is charged to individual, this is Second sales invoice and change in registration from Company to Individual name. Hence additional GST is applied to the Invoice @65% of applicable GST rate. (ie 18% for 28% category) + Cess applicable on GST amount 11% of 18%. Hence that comes out around 50K ADDITIONAL as Tax on Residual value Invoice.

    Also, now the worst part.. Because this is second sale of Car as per registration.. Now when individual want to sale this car, this is treated as Third sale. Therefore the resale value is further reduced (within 5 years sold three times). This is ADDITIONAL Loss which further adds to your Cost of Car Ownership.

    Hence, There is NO benefit to Employee for Lease rentals.

    Then what is better??
    You buy Car thru personal loan and just REPAY the actual loan amount.
    You save additional GST amounts and Reduced Car value (as you remain first owner in registration).

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