If we go by its literal meaning, the word automobile Leasing primarily means, letting a car provide services for some other person other than its owner under an agreement or a term of contract. The main principle upon which this concept of leasing of automobiles is based upon is price depreciation.The period for which an automobile is kept on lease is known as the lease term. This lease term, generally expressed in number of months, in most of the cases is found to be 24, 36 or 48 months. However, lease periods can also be more than these stipulated terms in some of the rare cases.
Though the concept of automobile leasing in India is relatively new, it is fast catching up. A number of automobile leasing companies have come in and offer automobile leasing service to the intended consumers. One needs to pay only a part of the automobiles cost which is consumed while driving the same. In leasing you need not worry about making a lump sum down payment. However, you need to pay the pRevailing sales tax (as per the country's rule) and also a special financial rate of return, which is better known to be the Money Factor. This Money Factor is somewhat similar to the interest rate you need to pay in case of a loan. In some special cases of leasing, you may also be asked to pay a security deposit.
All the automobile lease payments are primarily constituted of two parts. The first part is called the Depreciation charge. It refers to that payment which is needed to counterbalance the vehicles value which might be lost during the tenure of the lease. The second part is called the finance part and is the interest which is intended to be realized in the process of leasing.
However, this concept of automobile leasing can also get confusing at times with all the residuals and money factors. Some people are found to lease their cars with the intent of buying it at the end of the lease period, or even before hand. If this is practiced, it will eventually turn out to be a more costly proposition than normal buying. So, if you are crazy about new cars and want to drive them every now and then, and want to pay lower amount as your monthly payments for the same, then you should always go for automobile leasing and rule out the idea of buying them.
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