RoyalBrothers long term bike rental vs purchase

After car rental companies like Zoomcar and Revv have tried to push car subscription model (comparison here), bike rental companies are trying to push long term rentals. This model was already there- OnnBikes had monthly rental scheme.

In this post, let us analyse pros and cons of renting a bike on monthly basis compared to purchase.
Photo by Kudpi Raj, RB Activa in Mangaluru
Indians are not much used to leasing or renting vehicles long term. The concept is emerging only recently. Below is a comparison of how much a Honda Activa will cost approx if you purchase it without loan, with loan and on monthly rental scheme.
Honda Activa Bengaluru – Rent vs Buy comparison
Factor
Purchase (without loan)
Purchase (with loan)
Monthly Rental
Upfront payment
68000
22000
0 (Refundable deposit may apply)
Monthly EMI/Rent
0
1900 (* 36 months)
2965 + 18% GST
Usage limit
None
None
1500 kms/month (50 kms a day)
Extra km
NA
NA
2 Rs/km (fuel extra)
Annual recurring expenses
3000 Rs approx (Insurance, service etc)
3000 Rs approx (Insurance, service etc)
None (Damage if any penalty applies)
Choice of colour, variant, accessories
Yes
Yes
No
Option to switch cities or bikes
No
No
Yes (terminate and take another bike)
Bike condition
New
New
Used bikes
Hopefully good condition
3 year expense (Excluding fuel)
68000 + 3000*3
= 77000 INR
22k+ (1900* 36) + (3k*3) = 99400 INR
3500*36=
1,26,000 INR
Resale value
40000 approx
40000 Approx
0
Net
37000
60000
1,26,000

Key takeaways:
  • Renting is not a good idea if you intend to use your bike for long term. Rental usually costs more than EMI, has no residual value (you have to return the bike unlike you get to keep the bike after loan is repaid)
  • Rental schemes do come with some limitations- monthly usage limits, high 18% GST (usually not disclosed upfront) and risk of not getting a good quality vehicle.
However long term bike rental might be worth in following scenarios
  • You need a bike only for very short duration like say two to three months- you don't want to buy a new vehicle for this short term
  • You change cities often- using vehicle registered in one state in another will attract fine or will require re-registration paying a fee. Renting locally might be more convenient. RB is operational in 40+ cities.
  • You don't have money to pay down payment, don't want to commit to a long term EMI and are fine paying a bit more monthly rental
If rental amount is less than EMI the scheme would have been tempting to many, but then rental company has to cover its overhead, maintenance, partner commission etc in addition to vehicle purchase cost, so rental amount is usually higher than EMI in most cases. Same is true for car rental also. 

Points to note:
  • Above calculation is based on info available on 3rd party websites. Do your own math depending on type of vehicle, loan duration and other factors
  • Rental agencies may give some discount if you commit to long term, but still it will be more than buying a vehicle.
  • Many rental agencies do not own the bikes- they source it from owners and give it on self drive rental. Some of these bikes will be poorly maintained. You might be charged a penalty for damage/failure etc.
What are your thoughts? Does the rental option looks interesting to you?

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