Car subscription vs car lease
Car subscription vs car lease
If you’re in the market for a new car and want to avoid the expense and hassle of traditional car ownership, you may be considering a car lease or subscription.
Subscriptions and leases are becoming increasingly popular among drivers looking for a hassle-free way to enjoy the most up-to-date vehicles. According to experts, by 2025 around 10% of new vehicles on the road will be on car subscription deals. With so many options, knowing which option best suits you and your lifestyle can be hard.
Whether you're currently interested in a short-term option, such as subscription services, or a longer-term commitment, such as a lease agreement, we have all the information to decide what's best for you.
What is a car subscription?
Car subscription offers the freedom of a car, without a long-term commitment or hassle of other ownership models.
The defining feature of car subscription is flexibility. Like Netflix, as you’re on a monthly rolling agreement, you don’t have to have a car for years, you only keep the car for as long as it suits you. You also have the freedom to change your car as your lifestyle changes.
The other main difference is clarity. A whopping 65% of people don’t know how much they’re paying to run their car each month; but with car subscriptions, all the running costs, other than fuel, are included; giving you the freedom to live your life.
What is a car lease?
Within the automotive industry a “car lease” is actually a specific term used in business to business car agreements. However, most people use it interchangeably to describe one of three purchasing options:
- PCP (personal contract purchase) - You split a percentage of the vehicle's value into a deposit amount and a series of monthly payments. Each month, part of the vehicle's capital cost is paid off with the option of owning it at the end of the contract, usually by making a final balloon payment – or taking out a new contract.
- HP (hire purchase) - The cost of the new car is divided into a first-time deposit, followed by monthly payments with plus interest. Once the agreement terms are concluded. At the end of the agreement, you will have complete ownership of the vehicle. As a result, you can sell it or keep it for your personal needs.
- PCH (personal contract hire) - You pay an initial deposit and monthly payments over an agreed lease period, typically 2-4 years. At the end of the agreement you can hand the car back or get a new car, but you can’t purchase the car you have.
While all slightly different, all the “car lease” options share some similarities. They all require a large upfront deposit for the vehicle, the monthly fee only includes the car, with maintenance, servicing, insurance and things like tyres are an additional cost, and while you can spec your car, there can be long lead times if your car isn’t currently in stock.
Key differences between a car subscription and a “car lease”
While we’ve briefly discussed what’s included in car subscription and leasing, and they make look similar, let’s go through the main differences.
Deposits and upfront payments
When it comes to car leasing, the deposit or upfront payment involved is usually quite significant, typically up to 6 monthly payments, which is commonly thousands of pounds. This deposit is used to cover costs like taxes and insurance, as well as any potential damage to the vehicle. Customers have the option to increase their deposit if they wish to reduce their monthly leasing costs.
In contrast, car subscriptions typically involve a single month's subscription upfront, potentially under £500 depending on the car, which is refunded at the end of the contract.
Lead time and vehicle delivery
Lead time is an important factor to consider when deciding between a car subscription and a car lease agreement. Knowing how long it will take to receive the vehicle after signing the contract is essential in helping you plan.
While you may get a wider choice of car from car leasing, and some ability to define your spec, the downside is this can result in delays of 6+ months in getting your car while it is built, and you may have no exact delivery date.
While there may be a more limited choice when looking at car subscription, car delivery can be under 7 days from when you place your order. You also have the freedom to change your car if you need to change your spec.
Maintenance, repairs, tax & insurance
Potentially one of the biggest differences between car leases and car subscription is around additional costs; specifically around maintenance, repairs and insurance.
Car leasing contracts require customers to pay for any servicing and repair costs (not covered by the warranty), as well as for items such as tyres, insurance and tax. These costs could potentially be significant; for example, to replace all four tyres you could be looking at paying between £200-£2,800 depending on the quality of the tyre.
However, with a car subscription service, these costs are included in the monthly fee, and no additional fees should be expected. Additionally, car subscription services include breakdown cover as part of their monthly fee as well as tax and fully comprehensive insurance.
When looking at the advertised price of the car, the monthly costs of a car subscription service are typically higher than those of a car lease agreement. However, as explained above they also include a lot more.
In addition, your overall contracted commitment is significantly lower than for a car lease, where you’re committed to 2-4 years of payments, as opposed to just the next 30 days. This approach provides greater freedom in changing vehicles or cancelling subscription, should your circumstances change.
Because there is only a rolling 30-day contract, car subscription services allow customers to switch their vehicles, giving them access to different models and styles without having to wait for their contract to end.
Conversely, when it comes to car leasing agreements, customers are required to wait until their contract has ended before they can make any changes. This means customers are tied into a specific vehicle for the duration of the agreement and may not be able to access different vehicles if their needs change.
No end of lease and residual value issues
Depending on the type of “car lease” agreement, you will have either paid off the car, can make the final balloon payment to purchase the vehicle or use the value to get another car. This presents an issue that the residual value of the car may be higher or lower than expected, meaning you potentially may overpay for your vehicle, need to make an additional payment or you may not have as much money to put towards your next car. Equally, if you chose to just hand the car back, you won’t get the initial deposit back.
Due to the nature of car subscriptions, this is not an issue as you won’t have made a large deposit payment and you will have had the freedom to change your car regularly throughout the agreement.
Car subscription or lease - which is right for you?
Ultimately, the choice between leasing and subscribing to a car boils down to your personal situation. The sorts of questions you should ask yourself are:
- How much can I afford? And not just the car payments, but the additional potentially hidden costs
- What upfront cost am I happy with?
- How much flexibility do you want and need?
- How much time do I have to find a car?
- How long can I wait for a car?
If you value the freedom of an all-inclusive solution that will take care of every aspect of vehicle financing and keeping your car on the road, then a car subscription is probably the right choice for you.
Start your own flexible car subscription today
Here at Drive Fuze, we understand that modern life is always evolving so we provide freedom to change, live your life, move forward and focus on what matters. No complicated contracts, no long-term commitments - just cars in a range of prices to suit whatever you need right now, with the ability to change when you need to.
Check out our range and let us get you on the road quicker.