UK consumers have shown a significant shift from buying cars to leasing or subscriptions. This convenient alternative has gained popularity since the 1990s, with over 1.6 million people now choosing to lease cars over buying.
Short-term car leasing and car subscriptions, each offer a unique set of benefits and considerations. In this article, we will explore both of these options.
While most new buyers choose Personal Contract Purchase (PCP), the popularity of leasing has been rising, with an estimated five million vehicles being leased in the UK.
Car subscriptions also provide flexibility with shorter contracts and the ability to easily switch vehicles. Both options have gained traction due to economic factors, the desire for newer vehicles, and the ease and convenience they offer compared to buying a car outright.
What is car leasing?
Leasing is a long-term rental agreement, typically lasting between 24 to 48 months. You make monthly payments towards your lease and can choose a car of your liking, the length of the lease, and the expected mileage.
You are responsible for insurance, servicing, and maintenance (if not included) and any additional fees such as excess mileage. With leasing, you need to put down an initial deposit of one to 12 months, and the bigger the deposit, the lower your monthly payments will be.
What is short-term car leasing?
A short-term car lease is an agreement between a driver and a leasing company that allows the former to use the car for a fixed amount of time, typically less than 18 months.
Benefits of short-term leasing:
- Flexibility: More flexible than traditional leases, allowing for shorter commitment periods and the ability to switch vehicles more regularly.
- Lower initial payment: Lower initial payment compared to traditional leases or car purchases.
- Newer vehicles: Short-term leases often offer newer or pre-registered vehicles.
Disadvantages of short-term leasing:
- Higher monthly payments: Monthly payments tend to be higher due to the shorter lease term and lower initial payment.
- No customisation: Limited customisation options compared to traditional leases or vehicle purchases.
- Early termination penalties: Early termination fees or penalties if the lease is ended before the agreed-upon term.
- Mileage restrictions: Mileage restrictions and excess mileage fees may apply.
What is a car subscription?
Car subscriptions are a form of long-term rental, similar to leasing, but with more flexibility and a shorter commitment period. With a subscription, individuals pay a monthly fee to access a vehicle, and the fee typically includes insurance, maintenance, road tax, and breakdown cover.
Benefits of a subscription:
- Flexibility: Subscriptions offer more flexibility compared to traditional leases or ownership. You can typically choose a shorter commitment period, often as short as one month, and you have the option to change vehicles or cancel your subscription with shorter notice.
- Convenience: Subscriptions are designed to be convenient. All-inclusive packages typically cover insurance, maintenance, road tax, and breakdown cover.
- Variety of vehicles: Subscriptions often provide access to a wide range of vehicles, including new models and different types of vehicles. This allows you to try out different vehicles and find the one that best suits your needs.
Disadvantages of a subscription:
- Limited mileage: Subscriptions often have mileage limits, and exceeding these limits can result in additional charges.
- No option to purchase: Unlike leasing or ownership, subscriptions do not allow you to purchase the vehicle at the end of the subscription period.
- Fewer customisation options: Subscriptions may offer fewer customization options compared to buying or leasing a car. The available vehicles and features may be limited, and you may not be able to choose the exact specifications you want.
What are the similarities between short-term leasing and subscription services?
Short-term leasing and subscription services share similarities:
Flexibility: Both options offer more flexibility compared to traditional long-term car leases. Short-term leases typically range from 6 to 18 months, while subscriptions can be as short as one month, allowing drivers to commit to a shorter period.
Shorter commitments: Both short-term leases and subscriptions provide shorter commitments compared to traditional leases, which typically last for two to four years. This flexibility allows drivers to change vehicles more frequently or adjust their transportation needs as circumstances change.
New or nearly new vehicles: Both options often offer access to new or nearly new vehicles, ensuring drivers get reliable and up-to-date vehicles.
Cancellation options: While early termination fees may apply, both short-term leases and subscriptions generally allow for more flexibility in canceling the contract compared to traditional long-term leases.
What are the costs involved?
The costs involved in a car subscription or short-term lease include the following:
- Monthly payments: These payments cover the cost of the vehicle, insurance, and maintenance (if included). The amount of the monthly payment will vary depending on the type of car, the length of the lease or subscription, and the credit score of the driver.
- Initial payment: Some subscription and short-term lease providers require an initial payment, which is typically a refundable security deposit. The amount of the initial payment varies depending on the provider and the type of car.
- Mileage limits: Most subscription and short-term lease agreements include a monthly mileage limit. If you exceed the mileage limit, you will be charged an additional fee per mile.
- Excess mileage charges: If you drive more miles than the mileage limit allowed in your lease or subscription agreement, you will be charged an excess mileage fee. The amount of the excess mileage charge varies depending on the provider and the type of car.
- Wear and tear charges: At the end of your lease or subscription, you may be charged for any excessive wear and tear on the vehicle. The amount of the wear and tear charge will vary depending on the provider and the condition of the car.
Both short-term car leasing and car subscriptions offer flexibility and the opportunity to drive newer vehicles without the commitment of long-term ownership.
