Operational Car Lease Agreement For Employees

A satisfied employee often correlates to higher productivity and thereby, higher revenues to the company. There is a sort of competition among companies to retain the best talent by providing generous amounts of perquisites to the employees. Provision of a car is one of the most basic perquisites offered by employers. The car may be either owned by the company or leased from a third party and in turn provided to the employee. The running expenses may be either paid by the employer or by the employee with or without reimbursement from the employer, either in whole or part.

Apart from the traditional methods mentioned above, a new practice called Operational Leasing has been gaining ground in the corporate arena. In this type of arrangement, a company outsources the entire process of car leasing and fleet management to a third party which is a leasing company. The leasing company procures the car, which is then leased to the employee by the company through an agreement.

Operational leasing is beneficial to the employee in many ways. Since the ownership lies with a third party; the risks of service, maintenance, repair and insurance are borne by the third party organisation. The employee is also proffered an option of choosing the risks that he/she wants to bear.

More and more corporate houses are preferring operational leasing for the following reasons-

1. All forms of risks related to the vehicle can be outsourced.
2. Time and manpower devoted to managing vehicle fleet is minimised.
3. Costs compared to dedicated fleet management will be significantly reduced.
4. Time and resources can be saved to focus on core business rather spending on non core area.

The usual leasing period in an operational lease is at least three years. The eligibility of an employee depends upon his/her salary package. The recovery of lease amount starts usually from the month of delivery of car or from the date of raising of bill by the leasing company, whichever is later. The agreement can be foreclosed subject to conditions specified by the company.

The perquisite received in the form of car is taxable according to section 17(2) of the Income Tax Act, 1961, including deductions for fuel, maintenance and driver’s salary.

Usually, the Registration Certificate has to be obtained by the employee while the Insurance formalities shall be completed by the leasing company.

Agreement For Undertaking of Company Leased Car

A car lease agreement is executed between an employee and company as a first party and a second party. The agreement describes in detail about both the parties.

It then goes on to describe about the opportunity given by the company to the employee pertaining to the acquisition of car on lease basis. The name of the leasing company is mentioned in the agreement as well. It is also mentioned that the employee has made an application to avail the benefit of leased car and he/she is eligible for the same. The agreement is in the form of an undertaking on part of the employee. In the agreement, the employee’s designation is mentioned along with the office address. The scheme of car leasing is mentioned briefly along with the details of the third party.

The most important part of the agreement is the undertaking by the employee to adhere to the terms and conditions of the car leasing scheme and that of the company. It is also stated that the company has made such facility available to the employee based on the representations made by the employee in the agreement of undertaking.

Affidavit Cum Undertaking For Delivery And Receipt Of The Vehicle

Another important document which is required to complete the lease process is the affidavit cum undertaking for delivery and receipt of the vehicle. In this document, the employee declares that he/she is participating in the scheme out of free will and discretion and has understood all the terms and conditions of the scheme as well as the agreement and agrees to follow them. He/she also declares that the vehicle model and type has been chosen by him/her using free will and discretion. He/she also undertakes not to violate the laws of the land and maintain good standards of safety while using the car. All other details pertaining to taking delivery of the vehicle and obtaining of requisite documents from the authorities are also detailed in the affidavit.

Most importantly, an indemnification clause is added to the affidavit in which the employee agrees to indemnify the company against all costs and consequences that may arise or accrue in due course of the possession of such vehicle by him/her.

How To Create The Operational Lease Documents Mentioned Above?

LegalDesk caters to all documentation needs for individuals and organisations. Contact us in order to create the requisite agreements and affidavits for car lease. Our website also hosts an array of legal documents and deeds besides online Will template and many more. You can opt any of these documents based on your requirements.

The options are open either to allow us to draft the affidavit and agreement or to get such documents as drafted by you or your company printed and delivered at your address in Stamp papers. Irrespective of your requirement, be rest assured that we shall stand behind you in achieving your little goals in life.