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Short-term leasing vs car subscription

If you want a car for a few months, a short-term lease or a car subscription could suit you. We explain these two types of financing a car.

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If you want a car for a few months, a short-term lease or a car subscription could fit the bill. We explain what they are and the pros and cons.

Over the last few years, there has been a growing demand for shorter-term alternatives to conventional leasing or PCP car finance. Many people don’t want to be locked into the same vehicle for several years, either because they know their needs will change or they’re simply uncertain about what may happen over that time. Plenty of people have had their personal and work circumstances turned upside-down over the last four years, for example.

Previously, if you wanted a car for a matter of months, you’d be looking at a long-term car rental from the same companies that normally handle daily rental and holiday rental cars. But there’s been strong growth in recent years for two newer options; short-term leasing and car subscriptions.

These two terms are often used interchangeably, but they are different things. Let’s look at both of them and how they each compare with a traditional (long-term) car lease.

FeatureLong-term leaseShort-term leaseSubscription
Term12-48 months6-12 months1-12 months+
Contract typeFixedFixedRolling
Monthly paymentLowerAverageHigher
Initial paymentUsually highLowerVery low or none
Insurance and servicingExtra costExtra costIncluded
Flexibility to change vehicles?NoNoYes
Penalty for ending contract earlyVery highHighVery low or none
Choice of vehiclesVery largeLimitedLimited
New or used vehicles?Usually newNew or near-newNew or near-new

What’s a lease?

Traditional leasing is also called personal contract hire (PCH). It’s basically a long-term car rental – usually a new car – for a fixed period, usually for two to four years. Insurance and servicing are not included but can be added. You don’t own the car.

You pay a fixed monthly fee, with an upfront payment (also called an initial payment) that is equivalent to several months’ payments, although you can choose to increase or decrease your initial payment to consequently decrease or increase your monthly payment amount. This is not a returnable deposit, but part of the overall cost. It’s very simple but very strict – you’re contractually locked into that car, and there are expensive penalties if you want or need to end the contract early.

All leases are subject to a credit check – it’s a stipulation of the Financial Conduct Authority (FCA) – and is classed as a loan, to see if you have any history of missed payments. If you don’t have a good credit score, you may not be able to get the advertised prices.

Read more: The Car Expert’s car leasing advice hub

What’s a short-term lease?

If you don’t like the idea of being locked in for three or four years, some leasing companies now offer much shorter terms, which get close to the minimum length for subscription cars and without big upfront payments. Like any lease, you simply return the car when the contract ends and start a new contract with another car if you like.

Some providers boast of being able to supply lease cars from stock. It’s likely that if you only want a car for a few months, you’re more likely to want it at shorter notice as well. This could be a used car – which shouldn’t deter you – but if you want a specific car, colour and options, there could be a wait of a few months. Because there are so many leasing companies with links to all manufacturers, the choice of available cars is still fairly wide.

Your up-front payment will be smaller, and you’re only taking the car for a matter of months rather than years, so you’re monthly payments will be significantly higher than for a longer-term lease. But if your circumstances change, or if you’ve chosen a can that’s simply not right for your needs, you only have to put up with it for a few months rather than being stuck with it for a lot longer.

Leasing pros:

  • Can start with a new car to exactly your specification
  • Long-term financial planning
  • Can have a full maintenance and insurance package
  • Some providers offer the ability to tailor the lease payments to your needs

Leasing cons:

  • Often large upfront payment
  • Heavy penalties for ending the lease early
  • Can’t swap cars within the agreed period

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What’s a car subscription?

Subscription schemes go under many different names: flexible lease or rental; long-term rental, long-term hire or (confusingly) short-term leasing. The essential idea is that you have a car for as long as you like on a rolling contract, from as little as one month to as long as several years. If things change, you can hand it back or swap it for a different vehicle without a penalty.

Like leasing companies, subscriptions are offered by companies who source a wide variety of car makes and models, either new or used. Some also offer vans, if your personal or business needs change over time. In addition, a small number of car manufacturers now offer in-house subscription programmes.

You can usually have a car from 28 days to 36 months and change it when you like – subject to conditions. Depending on the provider, sometimes insurance is included, as is servicing (although if you subscribe to a car for less than a year it probably won’t need a service anyway).

Because subscription cars are usually needed quickly (say for somebody staying from overseas) they tend to belong to a pool, so may not be new. The Car Expert’s Expert Partner Mycardirect runs a pool of around 3,000 cars aged 14-15 months old. It specialises in subscriptions but also offers leases.

Unlike a lease, there is no major upfront charge. There is either a small fee to sign up or a fully refundable damage deposit (£250 is standard but for luxury cars such, as a Bentley, deposits can run into thousands).

You may also be asked to undergo a credit check for a subscription car. Mycardirect is regulated by the Financial Conduct Authority (FCA) as its average length of subscription is 12 months. It carries out a credit and affordability check on the individual. However, unlike a lease, a subscription is not classed as a financial loan but as a rental payment, which won’t appear on a credit history.

The principal difference between a subscription and a lease is flexibility. “My view is the subscription is exactly the same as when you subscribe to Netflix or anything of that nature,” says Mycardirect CEO Duncan Chumley. “It always has a flexibility built in so whilst you can have a subscription for one month, all the way up to four years with ourselves every month you still have the option to hand the car back or to swap it over.”

Cocoon Vehicles also offers what it calls a flexible car contract, shorter than a short lease, and can be looked upon as a subscription. It says that all of the cars can be taken for one month, although the best prices are when a customer commits to 90 days or more (some are higher). The customer can still send the vehicle back before the 90 days are up, but they will have to pay the higher rate plus the delivery charge. Each time you change cars, you start another 90-day period.

Read more: The Car Expert’s car subscription advice hub

Subscription pros:

  • Refundable deposit
  • Ability to swap cars without penalty
  • Ability to end the subscription after as little as one month or keep rolling

Subscription cons:

  • Cars may not be new
  • Long-term subscription can work out more expensive than a lease
  • If you have your own insurance, you’ll have to re-insure with every swap

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Short-term lease vs. car subscription – which is best?

When comparing a short-term lease and a subscription over the same period of time, it’s important to look at the overall costs for the whole period, rather than just comparing the monthly payments. The lease will tend to have lower monthly payments, but a higher initial payment. It will also cost you more if you need to terminate the agreement early.

For both subscriptions and leases, the monthly payments are lower if you commit to a longer contract. But if you signed up for, say, a 12-month subscription but changed your mind after one month, you may have to pay the difference between the one-month rate and the 12-month rate (says between £650 a month and £500 a month). On a lease, you’d potentially be up for paying most or all of the remaining payments.

All monthly subscriptions and leases include a monthly or yearly mileage allowance, typically 1,000 miles a month. If you’re likely to regularly go over this, it’s better to pay more for a higher mileage upfront. Both lease and subscription cars are subject to excess mileage charges and penalties for damage beyond the expected wear and tear.

If your plans look pretty certain and you are unlikely to need the flexibility to cancel the contract early or change cars, a short-term lease will probably suit you better. You will save a bit of money by making a firmer commitment, but you’ll have to pay more if your situation changes.

If you’re not as confident of how your needs might change, or if you just want the freedom to change cars whenever it suits, a subscription gives you much more flexibility to change your mind. For example, subscriptions are proving popular with people who want to switch from a petrol car to an electric one, but are not sure about making a long-term commitment until they know it will suit their needs.

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Russell Hayes
Russell Hayeshttps://amzn.to/3dga7y8
Russell Hayes’ early career was 14 years of motoring journalism in print, television and online. He worked for What Car? and Complete Car magazines, the BBC's original Top Gear programme and Channel 4's Driven. Since 2007 he has written motoring history books on subjects including Lotus, TVR, the Earls Court Motor Show, the Volkswagen Golf, Volkswagen Beetle and Bus and the original Aston Martin V8. Now a full-time author, two more books are in the pipeline for 2023 and 2024.