Mahindra & Mahindra on Wednesday announced a scheme to lease out cars to customers in return for a fixed monthly payment.
These leases will have a tenure of four to five years. VS Parthasarathy, group CFO, Mahindra & Mahindra, said the scheme was not an alternate to funding and financing the car. “The idea is to provide the customer with an experience of
owning a vehicle without problems of ownership and maintenance,”Parth-asarathy said.
The lease rental for a XUV500 works out to Rs 32,999 per month while for KUV100NXT, it is Rs 13,499. Any problems relating to owning the vehicle ranging from its insurance, accident damage, maintenance, roadside assistance and resale guarantee will be taken care of by M&M. After the lease period expires, customers can buy the vehicle from M&M at a pre-determined price. “We are giving a guarantee that we will sell the vehicle to the customer at a pre-determined price,” Veejay Ram Nakra, chief of sales and marketing, automotive division, M&M, said.
The cost of an XUV500 starts at Rs 15 lakh for a petrol variant while for a diesel variant is Rs 12.5 lakh. The company said some customers may prefer to lease the car and buy and change it after five years without worrying about its resale value.
M& M in partnership with Orix and ALD Automotive will be offering customers a choice of Mahindra’s vehicles including XUV500, Scorpio, TUV300 and Marazzo on lease for five years depending on the city and model selected.
While the vehicle will be registered in name of the customer, the ownership will be with the leasing companies Orix and ALD Automotive, provided to the customer through M&M dealerships.
The targeted customers of Mahindra’s lease offering range from individuals to working professionals and SMEs. In the first phase the scheme will be available in six cities — Pune, Delhi, Mumbai Hyderabad, Bangalore and Ahemdabad.
It will be extended to 19 other cities in the second phase. The new scheme is likely to improve Mahindra’s sales
According to Nakra, car leasing is nascent in India and has a penetration of less than one per cent while in developed markets it is as high as 45%.
Rakesh Batra, partner and sector leader automotive, Ernst & Young, said, “Couple of factors like taxation system, cost of interest rate and our traditional mindset of owning the vehicle might keep the penetration as low as 1% in India. For instance, if interest on loan to buy a car is 10%, interest on lease is 14-15% . Unless we are given certain tax advantages, there is no real drive for the segment to grow.”