Frameworks · Personal finance · 11 min read

The showroom called it a technology feature. My spreadsheet called it a loan with no end date. Here is the maths I ran for myself, and the three-test framework I now use on any "subscription" pitch.

The showroom moment

I was browsing new electric SUVs when the salesperson pitched a Battery-as-a-Service (BaaS) variant. The sticker price was ₹13.99 lakh instead of ₹19.99 lakh. "You only pay for the car," I was told. "The battery is a small monthly subscription of about ₹7,600."

The popular narrative has three parts: a lower entry price, no battery-degradation anxiety, and flexibility to swap out early. It sounds like software: pay as you go, like cloud storage.

That evening I opened a blank spreadsheet. Within twenty minutes my own logic was clear: a subscription is only a service if stopping it leaves you with something useful. If you stop paying for cloud storage, your laptop still works. If you stop paying the battery fee, the car is a driveway ornament. That is the mark of a financing structure, not a service.

Key numbers in my model

• ₹6.0 lakh: price gap between the two variants
• ₹91,200: rent per year (₹7,600 × 12)
• 15.2%: simple annual cost of that gap
• About 8.3 years: where cumulative cost crossed over

Pulling back the curtain: the maths I ran

1. The implied interest rate

The ₹6 lakh discount is money the manufacturer forgoes today in exchange for ₹7,600 every month. On a simple basis: ₹91,200 ÷ ₹6,00,000 = 15.2% a year. An earlier draft used a ₹5.5 lakh battery and ₹7,500 rent, which gives 16.4%. The answer is mid-teens either way. As a benchmark I used a standard car loan at 8.5% to 10.5%, and 9.5% in the tables below.

A simple rate is incomplete, because a loan ends and this payment does not. So I asked a better question: what is the implied rate if I keep the car for N years, assuming the battery is worth nothing at the end?

Zero battery residual, before GST.

This was my real insight: BaaS looks cheap in years 1 to 5 and gets expensive after year 7. The pitch is optimised for the first window. The cost arrives in the second.

2. Cumulative cash out: 5-year loan at 9.5%

Full car: ₹19.99L loan, EMI about ₹41,983. BaaS: ₹13.99L loan, EMI about ₹29,383 plus ₹7,600 rent, about ₹36,982 in total.

Cumulative cash outflow in my model. Excludes time value of money, battery residual value and GST on rent.

3. Where my own model is weak

A model is only useful if I attack it. Three things could change the answer:

• Battery residual value. An owned battery at year 10 has some value: a trade-in, a replacement avoided, or a resale premium. My zero-residual assumption favours the "own it" case.
• GST on the rent. Some structures add 18% GST to the monthly fee. Whether the quoted ₹7,600 already includes it is something to confirm in the contract. Adding 18% on top lifts every implied rate in the table.
• Upfront taxes. Several sources I reviewed claimed road tax, insurance and TCS are charged on the full ₹19.99L value even though the battery is rented. Treatment varies by state, manufacturer and time, and I could not verify it independently. I treat it as a line item to check on the invoice, not as a fact.

4. Resale and the "assured buyback"

A used buyer inherits a monthly obligation, which may force a lower price on the shell, but I have no market data showing by how much. An "assured 60% buyback" after three years is calculated on the shell value (₹13.99L × 60% ≈ ₹8.4L). It does not refund the roughly ₹2.7L of rent paid over those 36 months. Both are things I would price into my own case, and neither can be verified from a brochure.

Battery warranties also deserve a look. Many models carry an 8-year or similar battery warranty whether the battery is owned or rented, so warranty alone does not argue for BaaS. The model's own terms decide.

The three-test framework

This is the repeatable part. I run any "pay-as-you-go" pitch through three tests. It works for BaaS, device subscriptions, solar leases and "zero down" offers alike.

Test 1: Residual utility. If I stop paying, does what I own still work? A cloud service passes. A battery-less car does not. A failing score means the fee is rent on something you depend on, which behaves like debt.

Test 2: Implied rate over my horizon. What annual rate does the upfront discount imply over N years? Compute it at 3, 7, 10 and 15 years, not once. Include GST and the asset's residual value. If the rate moves from negative to mid-teens as N grows, the product is priced for short holders.

Test 3: Capital arbitrage. Can I raise the same money more cheaply elsewhere? Compare the implied rate with an ordinary loan (8.5% to 10.5% in my example) over the same horizon. A persistent gap is the premium paid for the label "service".

A sanity-check step: read the contract for exit terms: transfer on resale, who bears the fee if the battery is replaced, and what happens at the buyback date.

Questions I asked myself

Who might rationally prefer a subscription? Anyone for whom the fee is a deductible business expense, anyone with a short fixed holding period, or anyone limited by loan eligibility. The framework prices that convenience. It does not say the convenience is worthless.

Is the fee ever cheaper than a loan? In my numbers, yes: at a 5-year horizon the total rent is below the discount. The rate only turns expensive as the holding period lengthens, which is why the horizon matters.

What would change my conclusion? A confirmed high battery residual value, a contractual fee cap or step-down, or evidence that resale discounts are small. I would update the model, not defend it.

The Smart Investor summary

The educational takeaway: strip the vocabulary, find the debt, and price it over your own horizon. In my numbers BaaS is cheap early and expensive late: negative implied interest at 5 years, roughly 9% at 10, roughly 14% at 15. That gap between marketing and maths is worth learning to see, whatever product wears the label.

This is my own logic applied to my own assumptions. It describes how I think, not what anyone else should do.