It’s different to ownership, and it’s not for everyone. However, prices can be competitive and the added flexibility makes car subscription worth it for many.
Demand for flexible mobility is increasing and in response to changing consumer needs, car subscription services are gaining popularity. In 2021, Volkswagen Financial Services UK found that 61% of people aged 18 to 34 would prefer car access via subscription over traditional ownership.
Although it’s more and more common, subscribing to a vehicle isn’t a well-recognised concept. A survey conducted by YouGov found that 78% of British people didn’t know what a car subscription service was, nor that they existed.
In this article, we explain what it means to subscribe to a car and how it compares to traditional ownership and leasing.
What does subscribing to a car mean?
A vehicle subscription is an often all-inclusive service where a customer receives access to a fleet of vehicles in exchange for a monthly fee. Although not all car subscriptions are created equal, they largely differ from ownership and leasing due to their added perks and flexible, low-hassle nature.
Pivotal is the subscription service from Jaguar and Land Rover, providing members with access to a fleet of luxury vehicles under one all-inclusive monthly payment. A Pivotal subscription also includes insurance, maintenance, repairs, roadside assistance, vehicle delivery and collection, and access to a member services team who are always just a phone call away.
Is a car subscription cheaper than buying?
It’s difficult to compare the cost of subscription and buying a vehicle outright, as a subscription covers additional costs, such as insurance, tax, servicing and some wearables (such as tyres), that the price of ownership doesn’t account for.
Additionally, the value of a subscription comes from the personal significance of the benefits it brings: all-inclusive payments, freedom from depreciation, access to the latest models and technology, ability to pause and resume payments, and cost savings for businesses. Basically, subscription is an altogether new way of driving. When asking the question ‘Is car subscription worth it?’ it helps to break down the benefits.
A low-hassle, all-inclusive service
The cost of subscription consolidates all vehicle expenses into one convenient payment. With Pivotal, insurance for two drivers, road tax, servicing, roadside assistance, home delivery and collection of the car, and the option to update to a fresh vehicle (as often as every 6 months) is all included.
For those who are happy to manage multiple payments, and to keep the same vehicle long term, ownership is most likely better value. However, where flexibility and ease of management is a priority, subscription makes the most sense.
Freedom from depreciation
The usual rate of vehicle depreciation is 15-35% in the first year and up to 50% over three years. It’s likely that the Government’s 2030 and 2035 targets will affect car owners by increasing depreciation. New regulations will lead to a surplus in supply of used internal combustion engine (ICE) vehicles, further accelerating the rate of depreciation.
“With the likely introduction of widespread ultra-low emissions zones in the coming years, resale values of petrol and diesel cars are likely to drop due to reduced demand, not to mention the presumed increased affordability of EVs.” – Robins and Day
Similarly, as cities across the UK introduce restrictions on petrol and diesel cars, drivers could be in a situation where their car is banned from driving in certain areas or be forced to pay additional charges. Flexible subscriptions offer the ability to simply swap cars when regulations change.
Upgrade your vehicle: drive the latest models and technology
The subscription boom is fueled by the modern desire for easy access to multiple products and services. One of the main reasons ownership and long leases aren’t for everyone is because of their inflexibility and the inability to switch out your vehicle for one that better suits your needs.
Car subscriptions give you access to a range of new or approved-used vehicles to swap between at your leisure. For those who love driving premium cars, prefer a 4×4 for winter months, or perhaps want to try out driving electric without commitment, a subscription gives you the flexibility to do so. Looking at a 2-year period, Pivotal members can drive at least 4 different cars over that time. All kept in great condition and under 12 months old.
Ability to pause and resume payments
When priorities change, a subscription can simply be paused, and the vehicle is picked up with no extra charge. If motorists have regular access to cars on a ‘use-basis’, they’re only paying for the times they actually need and use a vehicle.
Recent years have shown us the significance of flexibility in resilience to unexpected circumstances. The pandemic brought the world to a standstill. With many people still working from home, commuter cars are rarely used, and are depreciating on driveways. If you’re somebody who doesn’t need a car year-round – perhaps you split your time between different countries – a car subscription could work for you.
The pause and resume model also brings the automotive industry closer to a circular economy. Read how this reduces vehicle over-production on the Pivotal blog: Car subscription sustainability: is usership better for the planet?
Cost savings for businesses
There are some great cost savings to be had for businesses considering a subscription in place of a standard company car scheme.
- Ability to free up assets
Businesses need to be resilient. And the ability to pause and resume vehicle subscriptions gives them freedom to quickly free up assets in response to risk and changing circumstances.
- Salary Sacrifice schemes
With salary sacrifice, employees give up part of their salary for a different non-cash benefit. Usually, tax is paid on the higher of the two between the amount of salary given up or the value of the benefit. Therefore, as an employer, you could save money as you don’t need to pay National Insurance on the money that’s no longer paid as salary.
- Easy to manage, all-inclusive expense
The convenience of vehicle subscription saves businesses time. Gone are the days of setting up, handling, and expensing multiple payments for each company vehicle.
What is the difference between subscription and leasing?
The basic principle of subscription is similar to a lease in the fact that you pay monthly to use a vehicle. However, leasing ties you into a longer term contract that’s less likely to include additional services and costs covered by a subscription payment. As we’ve mentioned, subscriptions also give you access to a fleet of different vehicles and can be paused and resumed when needed.
In terms of cost, there tends to be a marginal difference between personal leases and a subscription. For instance, subscription is usually similar in cost to a personal contract purchase (PCP). This is currently the most popular way to finance a car. Traditionally, it’s seen as a great way of buying a car over a given amount of time. However, most people don’t actually go on to buy the car in the end.
We compared the monthly cost of a Jaguar I-PACE on subscription with Pivotal, to various PCP structures for the same vehicle. Subscribing to the I-PACE actually offers a highly competitive monthly price, with all the added benefits of subscription thrown in. Calculations are for a 22 model year I-PACE with assumed monthly running costs of £120 excluding fuel.
Is Car Subscription Worth It?
In general, the world is embracing subscriptions – just look at Netflix and Spotify. However, subscription isn’t for everyone all of the time – some people still want to own their movies and music rather than pay to access the Netflix and Spotify libraries. The same goes for cars, and whether a car subscription is worth it depends on factors like your lifestyle, priorities, and short-term vehicle requirements.
For those who want flexibility, choice and convenience, subscription is invaluable. For example, businesses that love the ability to quickly release assets in times of uncertainty. A growing, working family whose needs can change in the blink of an eye. Or, somebody who loves the thrill of driving luxury cars and regularly switching vehicles. And in many cases, you may even find that the car you’re interested in is better value on subscription so it just makes financial sense.
Need help deciding if car subscription is worth it for you? Our Pivotal experts are always on hand to walk you through your options and help you decide whether subscription is right for you. Get in touch today.