Daimler Financial spreads leasing mantra

The Indian luxury car momentum is well and truly in place, says Sidhartha Nair, Managing Director, Daimler Financial Services. This is a result of flexible auto financing options, the growing preference for leasing and a wide range of luxury cars.

Today, the choice has moved beyond the German trio of Mercedes Benz, Audi and BMW to Jaguar, Land Rover, Ferrari and what have you. The list will grow as Toyota brings in Lexus and General Motors follows with the Cadillac.

According to Nair, extending the reach of these brands is the job of dedicated NBFCs like Daimler Financial which offer more than standard hire purchase options.

In the three years the company has been here, it has given customers multiple choices of owning cars, be it hire purchase, operating lease, buy back and differentiated payment regimes. “We are able to structure a solution based on your cash flow. No bank can do that,” Nair says.

He believes leasing as a value-added solution is gaining ground. Two years ago, Daimler Financial began with nearly six cars leased each month. This number has now risen to 15. “Roughly 10 per cent of our business in cars is leasing where half comprises individual owners who take it in the name of their business for tax benefits. We would like to hike this to 20-30 per cent,” Nair says.

Yet, the challenge is to exorcise the ownership obsession that is so typical in Asian countries. In mature markets like the US and Germany, about 80 per cent of sales are generated through lease. People there are aware there is no point buying cars and getting bogged down with the hassle of daily maintenance.

“If you agree to the wear and tear terms, and do not end up covering the upholstery with cigarette burn marks, it is a seamless operation. You know exactly how much you pay for three years and after 36 months turn in the key and take the next car,” Nair says. For a Mercedes C-class, a 36-month loan works out to about Rs 80,000 a month while this is nearly Rs1 lakh for a lease. However, the businessman accounts for this expense and saves on tax.

Clearly, the luxury car landscape is changing in India. Three years ago, total sales were 18,000 units annually and accounted for less than one per cent of car sales. In 2014, this number will have grown to 40,000-45,000 units (with over 12,000 coming from Mercedes) and 1.5 per cent of total car sales. “With India car sales expected to touch 6-7 million units by 2020, even a four per cent luxury component works out to 250,000 cars,” Nair says. Today, one in three Mercedes Benz cars is funded by Daimler where it is one in two globally.

“We have turnaround times of less than eight hours and are targeting to cut this by half. So by the time you do a 45-minute test drive the credit approval is in place. Once the buyer submits documents we can give the credit and deliver the car the same day,” he says.

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