Car subscriptions have suddenly become a hot ticket in the automotive industry, the four-wheeled equivalent of pay-as-you go phones or online TV plans. They are predicted to account for nearly 10% of all new car registrations in the US and Europe by 2025.
Subscription schemes go under many different and confusing names: flexible lease or rental; long-term rental, long-term hire or short-term leasing. The essential idea is that you have a car for as long as you like; from one month to several years. There is either no fee or a small charge to sign up and you can end the contract or swap the car when you feel like it, subject to conditions.
A standard monthly mileage allowance (typically 800 or 1,000 miles) is included or you can pay for a higher mileage if you need it. Subscriptions promise freedom of choice, no commitment, and no unexpected bills – in theory.
What’s the difference to a lease?
Traditional leases like personal contract hire (PCH) are fixed for a set period time, usually for three or four years. You pay a fixed monthly fee, with an upfront or initial payment that can amount to several months in advance. Insurance and servicing are not included but can be added. It’s very simple but very strict – you’re contractually locked into that car for the next three or four years, and there are enormous penalties if you want or need to end the contract early.
Car subscriptions, on the other hand, often have no joining fees or a one-off charge which is less than a month’s hire. You sign up for a shorter period – maybe as little as a month. If you’re happy with the car, you can keep your contracting rolling along for as long as you like. If you need or want to change your car or end your contract, you can do so at very short notice.
Neither car subscriptions nor leases offer an option to own the car. When the term is up you hand it back. Nor is a subscription the same as a personal contract purchase (PCP), which is a fixed-term purchase agreement (like a mortgage) where you end up buying the car outright if you complete all your monthly payments as well as the final balloon payment.
Subscriptions usually include servicing, warranties, road tax and often insurance. Cars are collected and returned for servicing and to deal with any repairs. Some leases also offer this, although it’s usually at extra cost.
Subscription services reserve the right to swap your car for a similar model during the rental. For example, the car may have reached a certain mileage at which point the finance company will sell it on. Like a lease, the whole process of putting together the subscription package can be done online, supported by live chat or a call centre. Most providers will deliver the car to your door and collect when you decide to finish or swap. Subscriptions are predominantly managed by an app on your mobile phone.
The pros of car subscription
For many, the biggest positives will be not needing to make a long-term financial commitment or put down a large initial payment. You can start and stop a subscription quite easily – for example, if you don’t need a car for a few months. It’s difficult and expensive to end a fixed-term lease, PCH lease agreement or PCP finance agreement early.
Having all your motoring costs built into one monthly payment is appealing for many. If you’ve been used to having a company car and all the support that comes with it, a subscription offers pretty much the same experience. If you are given a company car allowance, you can use this on a car subscription.
The cars available on a subscription are usually new or up to a maximum of three years old. If you’re a car enthusiast or you just like a bit of variety, some services allow you to chop and change to try the latest models or have a sports car for a weekend away. At the premium end of the market, you can have a car configured to your specification.
If you’re thinking about making the switch to an electric car, a car subscription offers you the opportunity to try an EV for a few months to see if it suits your needs. If it doesn’t work out, you’ve only paid out for a couple of months instead of being stuck with the car for several years (or have to pay eye-watering penalties to end a lease early).
The cons of car subscription
All schemes have age stipulations which vary according to the car. For example, to have a Cazoo subscription (mixed brands) you must be at least 25 and have had a full UK licence for at least a year. Even stricter conditions apply elsewhere – you won’t be getting into a Land Rover or a Jaguar under its Pivotal scheme unless you’re at least 30 years old.
You’ll need to check the car insurance provisions carefully, although that’s not really any different to leasing or buying a car. Some providers include insurance in the monthly fee and cover you under a fleet insurance policy. Others give you the option of a headline price without insurance but offer it at additional cost. There may be extra charges for additional drivers or for taking the car abroad and there can be large excesses for damages.
Most providers let you use your own insurance policy but it must be comprehensive and it will need to be approved by them. Also, if your provider has a fleet policy, you are not a named driver, so you won’t build up a no-claims bonus for any future insurance of your own.
If you park your car on the street with a residential parking permit, it can create a fair bit of hassle if you’re changing cars on a regular basis. The more often you swap your car, the more paperwork you’ll have to deal with to change the registration number and prove the car is attached to your address.
Although the terms tend to be shorter and more flexible than with traditional leasing, there will almost certainly be hefty cancellation fees if you want to end your agreement early. Make sure you check the T&Cs. Of course, the upside is that a shorter-term contract means you are more likely to be able to stick with it until the end rather than triggering early cancellation fees.
All schemes differ in their details, but the websites usually have exhaustive FAQs and they are open to questions.
What kind of subscriptions are on offer?
The offerings are changing all the time, but can be divided into those from car manufacturers, independents, fleet and rental companies.
We have a comprehensive guide to the UK’s top car subscription providers, which is updated on a regular basis. Have a look through and see if there’s a car and a price that suits you.
Is a subscription cheaper than leasing or buying?
Comparing the price to a lease or a PCP is not straightforward because they are quite different products and you can shop around for your own insurance. What’s crucial is the total cost of ownership (TCO) once you add in all the costs of running the car.
Although the monthly fee for usage may initially seem expensive versus traditional leasing and PCP rates, the total cost of running the car is generally comparable once you take into account the absence of any lump-sum deposit and the inclusion of insurance, charging and servicing costs.
Rather than a bargain, the value of a car subscription is the price you put on no long-term financial commitment and being able to drive and change new or recent-model cars when you like.
Is a subscription right for you?
Car subscriptions have grown enormously in popularity over the last year and they’re set to expand even further in 2022. Here are just some of the reasons you may benefit from a car subscription:
- You don’t need a car (or a second car) all year round but you do need it for more than a week
- You’ve ordered a new car but it won’t arrive for several months
- Your job situation is uncertain so you don’t want to commit to a PCP or PCH agreement for the next three or four years
- You’re interested in trying an electric car but you’re not sure if it’s going to work for you
- You’d like the flexibility of changing your car on a regular basis
- You’d rather spend a bit more each month instead of paying a large sum up-front
- Your working environment is seasonal, so maybe you would benefit from having a van in summer and an SUV in winter
- You don’t spend all year living in the UK so don’t want to pay for a car to sit on your driveway for months while you’re away
If any of the above sound like your situation, then it may be worth considering a car subscription. The Car Expert has commercial partnerships with four of the UK’s leading car subscription providers, so have a look at what they have to offer.
More car subscription information
Additional reporting by Stuart Masson. This article was originally published in April 2021, and most recently updated in August 2021.
The Car Expert has commercial partnerships with Cocoon, Elmo, Loopit, Mycardirect and Wagonex. If you click on any of the links on our site and go through to their sites, and/or take out a subscription, we may receive a small commission. This does not affect the price you pay.