Almost every new or near-new car purchase is financed in some way, but your choice of how to fund your next car is probably greater now than it has ever been. Depending on your needs, a car subscription could be just what you need.
The key to a car subscription is that you have a rolling short-term lease on a vehicle, rather than being locked into a lease or finance agreement for 3-4 years. There’s also no hefty up-front payment required, which makes a subscription ideal if you only want a car for a few months, or if you’re not sure how your plans may change in future.
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How does a car subscription work?
Most types of car finance are advertised on the basis of lowest-possible monthly payments. But in order to get the lowest possible monthly payment, you have to commit to taking the car for a long period (usually four years) and you need to have a whacking great payment up front (usually thousands of pounds). You also have to pay for servicing, maintenance and any consumables like tyres over the course of the finance agreement.
A subscription works differently. You have a single monthly payment that covers all or most of your ownership costs, and you keep the car for as long as you like – whether that’s a few weeks or a few months. If you really want to, you can keep the car for a few years, but if that’s your plan then you ay as well get a lease or a PCP.
Since you’re not paying a large deposit and you’re including maintenance costs, your monthly payment is usually a lot higher than it would be for the same vehicle on a PCP or lease. But if you look at total cost of ownership, the difference is far less than you might think. And if you want or need to give the car back on short notice, there are no penalty fees. Try to do the same on a regular vehicle lease and you’ll potentially have to pay thousands of pounds to get rid of the car.
A subscription is a form of lease, so you’re simply renting the car from the subscription provider. Usually, you’ll need to provide your own insurance cover (although some providers can include this as well), but the rest of your costs are covered.
Car subscription vs short-term leasing
Most car subscription providers also offer short-term leasing, and some will conflate subscriptions with leasing. The two are similar but they are different products.
Both are rentals, and don’t usually require a significant up-front payment, but a short-term lease will be for a fixed period (usually 3,6 or 12 months), while a subscription is an open-ended rolling monthly rental.
Exiting a subscription is easily done with no more than a month’s notice. A short-term lease is subject to penalties if you want to exit early, although they will be a lot less than trying to exit a long-term lease if you still have a couple of years to run.
Car subscription pros and cons
Pros:
- Maximum convenience: You can have a car for a few weeks, a few months or a few years
- No upfront payment (usually several thousand pounds on a PCP or lease)
- Servicing, maintenance, consumables and road tax are all included
- Most cars are usually available for immediate delivery or on fairly short notice
- No more than a month’s notice to cancel, with no penalty fees
- Cheaper than a PCP or lease if you only want a car for a year or less
- Cars are usually delivered and collected to/from your home or work, so you don’t need to visit a dealership
Cons:
- All-inclusive nature of the product means monthly payments are higher than a PCP or lease
- Usually limited to available stock rather than a custom vehicle order
- Limited choice of vehicles and providers compared to PCP or leasing
Summary
Car subscriptions are still new in the UK, so there are not as many providers as there are for conventional long-term leasing. That limits your choice to a degree, although there are still plenty of options to cover most needs.
Being a new type of financial product has meant that some providers have bailed out in recent months. Volvo has recently withdrawn its ‘Care by Volvo’ subscription service, while EV-only providers Onto and Elmo have both ceased trading. However, these are probably best views as inevitable teething troubles of a new type of service. Other providers, like Wagonex and DriveFuze (both partners of ours here at The Car Expert), appear to be steadily growing their businesses as more people come to appreciate the opportunities available with car subscriptions.
As with any type of financial product or service, make sure you understand your financial obligations, both up-front and throughout the course of the agreement, before making any commitments.
