FINAL REPORT
ON
MCB BANK (Car Leasing)
SUBMITTED TO: Professor Gul Shujah
SUBMITTED BY: Muzammel Fiaz
(457-FMS/BSAF/S20)
Sayyam ul Hassan
(463-FMS/BSAF/S20)
Tayyab Basheer
(464-FMS/BSAF/S20)
PROGRAM: BSAF(4th Semester)
COURSE: Corporate Accounting
ACKNOWLEDGEMENT
In the name of Allah the praiseworthy, the passionate whose blessings made it
possible for us to complete this complex and painful task. It is a matter of great
enthusiasm and pleasure for us to complete a report in its real sequence. It is
all because of Almighty Allah's great guidance that made us so able. We are
cordially thankful to our respected Teacher Mr. Gul Shujah who provided us an
opportunity to prepare this Project report and whose benevolent guidance in
discourse and constant encouragement helped us to complete this project .
PROJECT INTRODUCTION
This project is basically about How car leasing works
A lease is basically a long-term vehicle rental agreement, which offers exclusive
use of a car for an agreed length of time (and mileage) at a fixed monthly rate.
Car leasing is a cost-effective way of driving a brand-new car without the hefty
expenditure associated with purchasing.
The biggest cost of any new vehicle is depreciation. As the old saying goes, new
cars start to decline in value the minute you drive them off the forecourt. And
most will lose over half their value after the first three years of ownership. But
with leasing, an allowance for depreciation is calculated into the monthly cost.
CONTENTS
Topics
1 Introduction and history of MCB Bank
2 Vision, Mission, Integrity, Innovation,
Excellence, Customer Centricity, Respect.
3 Professionalism, Responsiveness
4 Products and Services
5 MCB Bank Car Finance
6 Car Leasing of MCB Bank
7 Conclusion
Introduction and History of MCB Bank
Established in 1947, MCB Bank Limited is one of the largest Banks in Pakistan
with a total customer base exceeding 7 million. Renowned for its consumer-
centric approach, the Bank has a vast branch network of over 1,400+ branches
in Pakistan and abroad, in countries such as Sri Lanka, Bahrain and Dubai.
Through remote banking services, consumers can access real time banking from
the Bank’s 1350+ ATMs across Pakistan and via Internet Banking and Mobile
Banking.
MCB Bank’s stellar fiscal performance has been a catalyst for foreign direct
investment and succeeded in attracting, among others, Malaysian based
Maybank International Trust (Labuan) Berhad. Maybank International Trust
(Labuan) Berhad invested a significant stake in the Bank in 2008. Fullerton
Financial Holdings (International) of Singapore, through Bugis Investments
(Mauritius) Pvt. Ltd., became another significant international shareholder
when ex-NIB Bank merged with and into MCB Bank in 2017. MCB Bank has a
tradition of excellence in banking and currently carries an entity risk rating of
AAA (long term) and A1+ (short term) which is the highest category rating by
Pakistan Credit Rating Agency (PACRA).
MCB Bank has always been an industry leader in the region and has received
numerous accolades in the past, including the “Best Bank in Pakistan” award
from Finance Asia and “Best Domestic Bank in Pakistan” four times from The
Asset Triple A Awards. MCB Bank was also awarded the The Asset Triple A
Country Award 2019 for “Best Bank – Pakistan”. It has been recognized as “Most
Outstanding Company in Pakistan – Financial Sector and “The Best Domestic
Bank in Pakistan” on four different occasions by Asiamoney. The Bank also
enjoys the honour of being recognised by the prestigious international finance
publication, Euromoney, on 10 different occasions for being “Pakistan’s Best
Bank”. MCB Bank has also been recognized on numerous occasions for being
one of the Top 25 Companies of the Pakistan Stock Exchange, most recently for
its performance in 2016 and 2018. MCB Bank also has the distinction of winning
ICAP and ICMAP’s “Best Corporate Report Award” for the seventh consecutive
year in 2018; a recognition that the Bank has earned 9 out of 10 times since 200.
Vision Statement
To be the leading financial services provider, partnering with our customers for
a more prosperous and secure future.
Mission Statement
We are a team of committed professionals, providing innovative and efficient
financial solutions to create and nurture long-term relationships with our
customers. In doing so, we ensure that our shareholders can invest with
confidence in us.
Integrity
We are the trustees of public funds and serve our community with integrity. We
believe in being the best at always doing the right thing. We deliver on our
responsibilities and commitments to our customers as well as our colleagues.
Innovation
We encourage and reward people who challenge the status quo and think
beyond the boundaries of the conventional. Our teams work together for the
smooth and efficient implementation of ideas and initiatives.
Excellence
We take personal responsibility for our role as leaders in the pursuit of
excellence. We are a performance driven, result oriented organization where
merit is the only criterion for reward.
Customer Centricity
Our customers are at the heart of everything we do. We thrive on the challenge
of understanding their needs and aspirations, both realized and unrealized. We
make every effort to exceed customer expectations through superior services
and solutions.
Respect
We respect our customers’ values, beliefs, culture and history. We value the
equality of gender and diversity of experience and education that our employees
bring with them. We create an environment where each individual is enabled to
succeed.
Professionalism
We are proficient and efficient in all that we do.
We provide banking services knowledgeably and skillfully.
We uphold regulatory obligations.
Our Professionalism: Our Competence
Responsiveness
We are receptive to the need for change and improvement.
We are proactive and anticipate our customers’ needs and wants.
We act quickly to modify, adjust or prepare for new realities.
Products and Services
We are a progressive bank striving to offer innovative products, easy
accessibility, quality service & convenience to our customers. We offer
customized financing solutions with flexible criteria and convenient loan
tenures. You can avail car, home and personal loans through our various
branches. We also offer a host of Corporate & Investment Banking Services to
our clients, which include financial and corporate advisory services, along with
a wide array of tools to help them achieve their goals.
MCB Bank Car Finance
MCB Bank Car Finance is the most flexible product designed to meet customer
needs.
Life in the fast lane can be really slow without a car!
MCB Car4U, provides a one-stop financing solution to help you own a car of your dreams at
competitive markup and insurance rates.
You can apply for MCB Car4U loan if you have the income source through the following options:
1. Salaried
2. Self-Employed
• Self-Employed Businessmen
• Self-Employed Professionals
3. Agriculturists
4. Land Lords – Rental Income
5. Foreign Remittances
6. Income from Fixed/Term Deposits
7. You can also jointly borrow with Spouse through income clubbing option
Key Features
• Competitive Pricing
• Finance Tenor: Up to 7 years
• You can finance new, used, local as well as imported cars
• Finance up to 80% of vehicle value*
• Comprehensive insurance
• Option to finance a second or third car
• Prepayment Option: allows you to prepay part of full amount of the
loan after incurring prepayment charge.
• Through facility repayment option, upgrade your existing cars loan
with a new loan with no penalty
Eligibility
• Net Income: PKR 30,000 per month
• Minimum Age Requirement: 21 years*
• Maximum Age (at loan maturity):
• 65 years (salaried) and
• 70 (Self Employed)
• Employment Length:
• Minimum: 6 months employment (salaried)*
• Business Length: Minimum: 1 year business (self-
employed)*
• Minimum 6 month’s remittance history through banking
channel (Foreign
Minimum Documentation
• Copy of CNIC
• 2 passport sized recent photographs
• Bank statement (6 month to 1 year)
• Salary slip/ proof of business or other documents.
Car Leasing of MCB Islamic Banking
The Shari’ah compliant auto finance product from MCB Islamic Bank Car Loan
provides the perfect solution for those who wish to purchase their own vehicle
for personal use. The mode of Islamic finance is Diminishing Musharakah and it
is aimed at those who are salaried, self-employed businessmen and self-
employed professionals.
Features
MCB Islamic Bank Car Loan makes it possible for customers to borrow money
of up to PKR 15 million for new cars and PKR 8 million for used cars, spreading
the payments over a period of anything from one year to seven years.
Borrowers have the choice to purchase a wide range of vehicles which includes
new, used and imported vehicles. They will be required to put a 20% deposit
down on used cars and 15% on new cars. As the period of time passes, the
monthly instalment will reduce while profit rates are extremely competitive.
Upon approval of finance, fees are payable but no fees will be paid for
unsuccessful applications.
Car Leasing for 5 Years with 40% Down payment
Diminshing Musharakah- Consumer Car Finance
Calculation Sheet (Tentative)
Applicant name ABC
Tentative Financing Date 20-Jan-21
Vehicle Toyota Yaris GU 1.3
Manufacturing year 2021
Vehicle Price 2,583,0000.00
Financing Tenure(years) 3
No of Installments 36
KIBOR Benchmark 6MONTH KIBOR
KIBOR 11.50%
Profit Spread 5.00%
Profit Rate 16.50%
Customer Contribution% 40.00%
Customer Contribution Amount 1,033,200.00
Bank Contribution Amount 1,549,800.00
Takaful Rate 2.00%
Customer Upfront Payment at start of Musharkah Financing
• Customers Contribution (Equity) 1,033,200.00
• Ist year Takaful@ 2.00% 51,660.00
(to be paid on behalf of both customers and bank)
• Processing/Documentation fee 8000.000
• Applicable Tax on takaful mention above @ 16% 1280.00
Total 1,094,140,00
1 Musharakah Unit = PKR 1/-
Installment Payments (Tentative)
Year Total Takaful Equally Balance
Monthly Contribution monthly Principal
Payment Instalment payment
Year - 122527.2
0
Year 38101.09 38101.09 84426.11
01
Year 42330.54 3874.50 38456.04 42095.57
02
Year 42095.57 3659.25 38436.32 0
03
Total 122527.2 7533.75 114993.45
Accounting for Leases
Lessor Books:
Date Description Dr Cr
1-Jan-21 Lease 122527.2
Receivable
Equipment 114993.45
Unearned 7533.75
Interest Income
31-Dec-21 Cash 38101.09
Lease 38101.09
Receivable
Unearned 7533.75
Interest income
Interest Income 7533.75
31-Dec-22 Cash 38456.04
Lease 38456.04
Receivable
Unearned 3874.50
Interest Income
Interest Income 3874.50
31-Dec-23 Cash 38436.32
Lease 38436.32
Receivable
Unearned 3659.25
Interest Income
Interest Income 3659.25
Lessee Books:
Date Description Dr Cr
1-Jan-21 Lease Equipment 122527.2
Lease Liability 122527.2
31-Dec-21 Lease Liability 38101.09
Interest Expense 0
Cash 38101.09
Depreciation Expense 11,499.345
Accumulated Depreciation 11,499.345
31-Dec-22 Lease Liability 38456.04
Interest Expense 3874.50
Cash 42330.54
Depreciation Expense 11,499.345
Accumulated Depreciation 11,499.345
31-Dec-23 Lease Liability 38436.32
Interest Expense 3659.25
Cash 42095.57
Depreciation Expense 11,499.345
Accumulated Depreciation 11,499.345
CONCLUSION:
If you are okay with the mileage restrictions, maintenance requirements and
being able to select a new car every few years, then leasing is a good option.
If like many people, you grow attached to your vehicle or hope to use it then
trade it in for its cash value, it might be better for you to obtain the down
payment sum and buy outright.
The best cars to look into are ones that retain their book value, both for
purchase and the lease agreement option. Why? Your lease agreement does
take into account depreciation, so a good resale value will help on cost.
However, do read the fine print on your lease contract. If a car is stolen or
damaged before the agreement is up, the insurance company may pay the
lessor but that amount may not cover all the expenses you have put up front.
THE END
