Lease or subscribe? Which one should you choose, what's the difference, and what does it even all mean? Over the years, many car owners have leased their vehicles, but now you also have the option to subscribe. And we're here to break down these two car financing options, so you can see the difference and decide which one is best for your needs.
What is car leasing?
Personal Contract Hire (PCH)
Leasing is a long-established way of paying for the use of a car over a set time with monthly payments. It's often referred to as a personal contract hire (PCH) and allows you to use a new or used vehicle and pay for it off over the agreed period, usually between 12 and 60 months. But you don't own the car and don't usually get the option to buy it at the end.
Not as complicated as Personal Contract Purchase (PCP)
It's sometimes less complicated than hire purchase (HP) or personal contract purchase (PCP), as there's usually no option to buy at the end of the lease, and you won't have the option to pay a balloon payment at the end to purchase as there is with a PCP. You simply hand back the keys and are finished with the agreement.
Car leasing works for drivers who regularly change their vehicle and don't want to deal with selling their car every time they get a new set of wheels. You can usually customise car leases, choose upgrades for the car and select extra services like maintenance and servicing. These additional features cost extra.
What is a car subscription?
A new way to buy a car
Car subscription is a new form of vehicle payment, though it's growing rapidly. It comes at a time when the subscription economy is booming as we pay monthly for things like Netflix, Spotify, the gym, rent and more. In layman's terms, a car subscription works much like any other form of a subscription-based model. But how is it different from a lease?
With car subscription methods, the monthly payments tend to include the cost of the car, tax, insurance, maintenance and breakdown cover. On the other hand, a lease typically covers the cost of the car. Anything else is an added extra.
One simplified payment
Think of a car subscription as an all-in-one approach. You only need to think about one payment each month, rather than viewing all the costs associated with cars separately. Fuel is the only aspect not included, which you won't need to worry about if you're buying an electric vehicle. 🍃
Subscription models go under different names, including flexible, rental and sometimes even lease, which can be somewhat confusing. You can usually have the car as long as you like, from a few months to several years.
The same, but different
Essentially, leases and subscriptions offer you a way to get the keys to a new or used car without paying the full price upfront. Consequently, many drivers see them as smart options, especially as new vehicles depreciate in value as soon as you drive them away from the dealership.
With a lease, however, you don't get any of the extras like maintenance included. For some, this might make a car subscription more appealing, thanks to the all-inclusive nature of the model.
What about the mileage?
Regardless of whether you get a lease or subscription, you should factor in mileage costs. When choosing your method, you'll be asked how many miles you expect to drive each year.
The lower the mileage, the lower the monthly payments. Sounds great, right? Well, it is as long as you keep within your chosen range. The lease or subscription company may charge you for each extra mile if you go over the amount.
Extra mileage charges vary from finance provider to finance provider, but you can expect to pay anywhere between 3p and 30p for each mile. That's why it's important to have an idea about how many miles you'll drive your car over a 12-month period. It doesn't need to be an exact amount, but you should have an estimate.
What about the deposit?
Car leasing usually requires a deposit up front, with most lenders asking for between one and 12 monthly payments in one go. The higher the deposit, the lower the monthly payments. Essentially, you're looking at paying a couple of thousand pounds at least for a new car.
Car subscription deposits vary depending on the lender. However, most tend to be in the region of one month's payment. So if your monthly payments are £350, you can expect to pay the same amount for the deposit.
You also get it back at the end of the subscription as long as the vehicle is still in good shape – another factor that might make car subscriptions more appealing than leasing.
Lease or subscribe?
The option you choose – if any – is ultimately down to your car-buying needs. If you're thinking of leasing then it might be worth checking out a comparison site for car finance lease deals offered by companies, such as Auto Lease Compare. And if you want to compare the cost of leasing against a car purchase loan facility then you might want to look at some figures using a finance lease car calculator.
For some motorists, the appeal of paying a lower deposit and having other factors like insurance and tax covered within the monthly payment is appealing. Others, however, may prefer to lease a car outright. Whether you go for lease, subscription, loan or buy the car upfront, it's good to have options, and drivers around the UK can benefit from different ways to get the keys to their next set of wheels. 👍 🚘