Here is a clear, practical and number-driven comparison of Lease vs Loan for a luxury premium car used in your IT consulting proprietorship.
This is written specifically for ● proprietors ● consultants ● professionals under Income Tax Act rules.

🚨 FIRST — A Reality Check (Important!)

For professionals / proprietorship, Income Tax law does NOT allow full deduction of car cost, even if used for business.

• Only depreciation + interest + running expenses are allowed (with reasonable personal use disallowance).

• Luxury cars (like Mercedes, BMW, Audi, Lexus) have:

  • Cost > ₹10 lakh → only ₹10 lakh is eligible for depreciation, not the full cost.

  • Depreciation rate: 15% WDV.

This is the biggest reason many professionals prefer leasing, because lease rental is 100% deductible (subject to personal-use disallowance).

🔍 Now the Core Question: Loan vs Lease

🅰️ OPTION 1 — BUYING ON LOAN

Tax Treatment

1. Depreciation Allowed:
   Max ₹10 lakh written off @ 15% WDV.
   (Even if your car costs ₹70 lakh or ₹1 crore.)

2. Interest on Loan:
   Allowed as business expense (proportionately).

3. Fuel, driver, repairs, insurance:
   Allowed proportionately for business use (normally 70% allowed for sole proprietors, 30% personal disallowance unless justified).

✔ Pros

• You own the vehicle

• Useful if you want to keep the car 6–10 years

• No dependence on leasing company

• Lower total cost vs lease (in many cases)

✘ Cons

• Huge tax inefficiency for premium cars
  (depreciation capped at ₹10 lakh, regardless of actual cost).

• Big down payment

• EMI hits cash flow

• You bear resale risk

• Limited deductions compared to lease

🅱️ OPTION 2 — LEASE (Orix, Mercedes-Benz Lease, BMW 360, etc.)

Tax Treatment

1. Entire lease rental is deductible (with personal-use disallowance).

2. No depreciation claim (lessor claims it).

3. No loan interest (because it's operating lease).

4. Many leasing plans include:

   • Maintenance

   • Insurance

   • Tyres

   • Buyback guarantee

All these bundled payments are 100% deductible (business proportion).

✔ Pros

• MUCH higher tax benefit vs loan

• No cash tied up in down payment

• No resale risk

• Easy upgrades every 2–4 years

• Better suited for professionals

• Lower GST (leasing companies claim ITC and pass on benefit)

✘ Cons

• Total payout may be slightly higher

• You don’t own the car during lease

• Buyout at end may be expensive

• KM restrictions in some contracts

🧮 Quick Numerical Comparison (Example: ₹80 lakh car)

Assumption → 70% business use (typical for proprietors)

Loan Option

• Allowable depreciation = only ₹10 lakh × 15% = ₹1.5 lakh year 1

• Allowable interest: ~₹3–4 lakh

• Total deduction: ~₹5–6 lakhs (limited)

Lease Option

• Lease rentals ~₹1.2–1.3 lakh per month = ₹14–15 lakh per year

• Allowable expense @ 70% = ₹10–11 lakh deduction each year
  ➡ Tax saving almost 2×–3× vs loan for luxury models.

This is why almost all high-income professionals (Doctors, Consultants, CAs, Architects, IT consultants) choose leasing for luxury cars.

🎯 WHEN LEASE IS BETTER

✔ If you earn high income & want maximum tax deduction
✔ If you change cars every 3–4 years
✔ If you prefer low cash outflow upfront
✔ If resale value risk concerns you
✔ If leasing company provides maintenance package

🎯 WHEN LOAN IS BETTER

✔ If you plan to keep car for 7–10 years
✔ If you want ownership in your name from day 1
✔ If your business income is low → tax savings less important
✔ If you dislike lease restrictions

⭐ MY RECOMMENDATION (for IT Consultants / Proprietors)

👉 Choose LEASE, particularly if:

• Your taxable income is high (30% bracket)

• You upgrade every few years

• You value tax optimisation

Lease delivers the maximum tax benefit + hassle-free ownership + protects you from resale loss.

Most premium OEMs (Mercedes, BMW, Volvo, Audi, Lexus) strongly push leasing for this exact reason.