Car subscription vs PCP
Car subscription vs PCP
The use of PCP (personal contract purchase) to purchase a new car has grown exponentially in the UK, with 74% of new cars purchased that way according to the Finance & Leasing Association. With comparatively low upfront payments compared to other ways to purchase and the ability to spread the cost over 2-4 years, it is no wonder it is an attractive option.
However, with the introduction of car subscriptions, consumers have a new option to access a vehicle for even lower upfront costs and lower overall commitment.
In this guide we’ll cover the main differences between car subscription and PCP, allowing you to make an informed choice and giving you the freedom to move forward with car ownership.
What is a car subscription?
Car subscription is the modern alternative to PCP and other car leasing and financing options; bringing the familiar usership model of services such as Netflix to the car market. Using a car subscription you’re able to get a new car with a low upfront cost and all-inclusive monthly payment, on a rolling monthly agreement.
The all-inclusive monthly payment includes everything from tax and fully comprehensive insurance to maintenance, servicing, new tyres and even breakdown cover. All you do is add fuel.
And the rolling monthly agreement gives you the freedom to change your car as your circumstances change or even if you just fancy something new.
What’s included in a car subscription?
Most car owners dramatically underestimate the average monthly and annual running costs of their vehicles, with 19% of people having taken on debt to pay for servicing costs. One of the main benefits of a car subscription is everything is included but the fuel.
What’s included in a car subscription can vary and we’d encourage you to check, but typically they should include (and ours do include):
- Your chosen vehicle
- Road tax
- Fully comprehensive insurance
- Maintenance
- All servicing & MOTs
- Breakdown cover
- Consumables, such as new tyres and brakes
This means that once you’ve chosen the car, you’ll know exactly what your monthly payments will be until you return the car; giving you the freedom to live your life without worrying about unexpected costs.
What is PCP?
Often mistakenly referred to as leasing, PCP is a complex option for financing a new car over 2-4 years. With PCP a proportion of the value of the car plus interest is split between an initial payment, typically the equivalent of 6 months, and a series of monthly payments. At the end of the agreement, you can either make a final “balloon” payment to buy the car outright, hand back the keys and walk away or enter into another PCP agreement.
The balloon payment is set at the start of the agreement based on the expected value of the car at the end. This means that while the payment is fixed, you could end up under or overpaying the value of the car based on changes in the car market.
Another key feature of PCP is that they have a fixed mileage allowance which you choose at the start of the agreement. As the expected mileage impacts the final value of the car, it directly affects the amount of the monthly payment, and can result in excess mileage charges at the end of the agreement should you go over your limit.
Key differences between PCP and car subscriptions
Both PCP and car subscriptions enable you to drive new cars without the need to pay the full price upfront - but there are important differences.
Deposit/upfront payments
A PCP plan comes with two lump sum payments - one at the beginning of the contract, and one at the end. The end payment is only due if you decide you want to own the car upon contract completion.
A standard deposit value for PCP is around 10% of the car’s value or 6 months of the monthly payments.
With a car subscription, you typically only pay one month upfront - as little as £349. And as opposed to PCP, this payment is refundable at the end of the contract.
Lease or subscription period
Taking out a PCP contract typically locks you in for between 2 and 4 years, with penalty fees to return the car early. Choosing a car subscription affords you more freedom and allows for significantly shorter terms.
With a car subscription model, your monthly rolling agreement gives you the freedom to change or return your car each month. The only potential cost is any pickup/delivery fees.
Tax, insurance and maintenance
With a PCP agreement, you’re the one responsible for the maintenance (tyres etc) and servicing of the car, MOTs (once required), road tax, breakdown cover, insurance, and all other car ownership costs.
Not only can this present unexpected costs, but they could be potentially significant. For example, to replace all four tyres you could be looking at paying between £200-£2,800 depending on the quality of the tyre.
With a car subscription, while the headline monthly payments may initially look higher, your car comes with fully comprehensive insurance, road tax, and breakdown cover, as well as the inclusion of all maintenance and servicing. This is all covered in one standard monthly fee; meaning there are no unexpected costs.
Availability
As PCP is ultimately an option to buy a car, you may have the option to define the exact spec of your car. However, this can come at a cost, both in terms of increased monthly fees and the lead times to get your car, which post Covid can typically be six+ months.
While a car subscription may limit you to picking from the in-stock cars, you can get your new car in as little as 7 days. Additionally, the cars usually come with high specifications. An added advantage is that as you have the freedom to change, you can always change your car/spec as new models become available.
Flexibility
One of the most important benefits of a car subscription is the freedom to change your car. A car subscription gives you the ability to change your car as your circumstances or needs change. It may be that you change jobs, suffer a hit to your finances, start a family, get a pet or just fancy a new car. Whatever the reason, you can get the car that suits your needs at that point.
However, PCP normally ties you into the car you chose for the full length of the agreement.
Cost
There are three main areas to look at when comparing car subscriptions vs PCP.
Firstly, as mentioned, the upfront costs are significantly different between the two options. PCP deposits typically run into several thousand pounds and are non-refundable, whereas car subscriptions normally require a single monthly payment upfront, which is returned when you hand the car back.
Secondly, PCP typically offers a lower headline monthly cost - this is because it only includes the car itself, and not the full cost of ownership/repairs/maintenance as we’ve mentioned earlier.
As 65% of people don’t know how much they’re paying to run their car, should you be considering a PCP deal, we recommend that you factor in both monthly costs and a set amount for unexpected costs over the lifetime of the agreement.
Lastly, the total contract commitment for PCP is considerably longer. In comparison to a rolling monthly subscription, you’re agreeing to a 2-4 year contract with a final balloon payment. If you want to end your PCP contract early, you can only do so once you’ve paid 50% of the total overall cost of the agreement, including interest. This means you’re committed to a significantly higher amount.
Car subscription or PCP - Which is right for you?
Getting a car is often the second largest purchase most people make. So deciding the most appropriate method to suit your lifestyle is crucial. If your priority is driving an exact spec model that’s not available on subscription, you’re happy to drive the same car for years, and you want the path to ultimate car ownership, PCP is probably for you.
However, if you want the freedom to change your car, a low overall financial commitment, and fixed monthly all-inclusive payments, a car subscription may suit you much better.
Start your flexible car subscription today
At Drive Fuze, we understand that modern life is always evolving so we provide freedom to focus on what matters to you. No complicated contracts, no long-term commitments - just cars in a range of prices to suit whatever you need right now, as well as in the future.
Check out our range and let us get you on the road quicker.
