Car subscription vs PCH
Car subscription vs PCH
If you’re looking to get a new car but don’t want the hassle and upfront cost of buying outright or financing, you may previously just considered PCH, but with the addition of car subscription, you now have multiple options
In this guide we will show the key differences between personal contract hire (PCH) and the freedoms offered by car subscriptions, outlining the options available to you to get the vehicle you want at a price that fits your budget, on terms that suit you.
What is a car subscription?
A car subscription provides you with a new car with the freedom of a rolling monthly contract, without the lengthy commitments or large upfront deposits. Car subscriptions include maintenance, servicing, tax, insurance, and even roadside assistance, all in one simple monthly cost, giving you the freedom to live your life. All you have to do is add fuel.
A great feature of car subscription services is the flat monthly fee - you know what you’re paying each month. You also still get your choice of petrol, diesel, or electric vehicles in various classes. One of the key benefits of the subscription model is, if, after a while, you need something larger or smaller, then you have the freedom to change your car easily. And, if you no longer require the car any more, you can simply hand it back, hassle-free. A car subscription is really that flexible.
What’s included in a car subscription?
The short answer is everything but the fuel. Once you have made your selection from our wide range of vehicles, you benefit from a generous, flexible mileage allowance, and all your maintenance and repair costs (even tyres) are included, as are tax, insurance, roadside assistance, and breakdown recovery.
This gives you the freedom to focus on other things, knowing your car is taken care of.
What is PCH?
An alternative to buying or hire-purchase, Personal Contract Hire allows you to choose a new vehicle to suit your budget but you are often responsible for additional maintenance or repair costs. Any damage to the vehicle, outside of reasonable wear and tear, will also be charged for. It is also important to know, you don’t own this vehicle and are not offered the option to purchase at the end of the contract. Once the lease period is over, you hand the keys back and walk away or renew the contract with a different, new vehicle, which may require an additional deposit payment.
Key differences between PCH and car subscription
PCH and Car Subscriptions may look similar in what they offer you, so let’s go through the key differences.
Deposit
With PCH, you are typically expected to pay 6 month’s worth of your fees upfront - that can be thousands of pounds. While this can decrease monthly payments; with a car subscription, deposits are usually 1 month upfront - potentially under £500 - and this is refundable at the end of the contract, not something offered with PCH.
Mileage
When you sign your PCH agreement, there is a mileage allowance included. Should you exceed this allowance, you are liable to potentially high charges at the end of the contract. While car subscriptions also have mileage limits, they are able to offer higher mileage allowances, and more flexibility. Due to the shorter length of agreement, they can be amended without it being expensive and time consuming. You also have the freedom to end the agreement and/or change the car easier to offset any excess mileage charges, something not possible on PCH.
Lease or subscription period
Taking out a PCH agreement typically ties you in for 2 to 5 years, with penalty fees (usually equal to the remaining payments) to return the car early. Car subscriptions offer much more freedom, allowing for significantly shorter terms. With a car subscription, you have a monthly rolling agreement, allowing you to return the car or swap it if your situation changes.
Tax, insurance and maintenance
One of the areas most people don’t appreciate is the actual cost of ownership of their car, even with a PCH agreement. With a PCH agreement, you are often expected to pay for annual services, as well as tyres, repairs, and maintenance if they fall outside the warranty. For example, to replace all four tyres you could be looking at paying between £200-£2,800 depending on the quality of the tyre.
You are also required to tax and insure the vehicle and typically provide your own breakdown cover. These costs can often significantly increase your monthly “car costs” beyond your basic cost of the agreement and 19% of people have taken on debt to pay for servicing costs.
Car subscriptions are all-inclusive, meaning you have a standard monthly payment. All you have to do is add fuel or charge the battery.
Availability
While PCH options may potentially give you the opportunity to choose the exact spec of your car, frequently the lead times for doing so can mean a wait of 6+ months for your car to be delivered. By contrast, car subscriptions usually offer the ability to get a car in as little as 7 days, while still offering high spec and a range of choice to suit your needs.
Flexibility
One of the key benefits of car subscription is the freedom to easily change your car. If you don’t like the car, your personal circumstances change or your needs evolve, you can return and swap your car for something completely different with short notice, and no hassle. With a PCH agreement, you’d likely be committed to the car you chose for the full length of the agreement.
Cost
There are three areas where cost differs between PCH and a car subscription. Firstly, PCH usually has a lower headline monthly cost as it only includes the car itself, not the full cost of ownership/repairs/maintenance as detailed above. A whopping 65% of people don’t know how much they’re paying to run their car. As the upfront cost is higher, it keeps the monthly cost lower.
Secondly, as opposed to PCH, car subscriptions have no additional costs outside of the monthly subscription amount, as long as you stick within your mileage, other than fuel costs. You should consider these additional costs for PCH when reviewing the overall budget you have.
Finally, the total contract commitment for a PCH is significantly higher as you are agreeing to a 2-4 year agreement as opposed to a rolling monthly subscription. Typically, if you want to stop a PCH early, you are still liable for the remaining payments on your contract.
Car subscription or PCH - which is right for you?
Apart from buying a house, purchasing a car is likely the biggest financial commitment you will make, and so deciding the right method is key. To figure this out, the key questions to ask yourself are:
- How much can I afford? And not just the car payments, but the additional potentially hidden costs
- What upfront cost am I happy with?
- How much flexibility do you want and need?
- How much time do I have to find a car?
- How long can I wait for a car?
Start your own flexible car subscription today
Here at Drive Fuze, we understand that modern life is always evolving so we provide freedom to change, live your life, move forward and focus on what matters. No complicated contracts, no long-term commitments - just cars in a range of prices to suit whatever you need right now, with the ability to change when you need to.
