When we use a vehicle, it’s normally one that we’ve purchased new or second-hand, but this typical process is shifting. Car ownership may have traditionally been the dominant model, but car subscription services are now emerging as a compelling alternative, particularly for younger drivers.

Both come with their own unique pros and cons, so which one is the best for you? Here are the economic realities of both options so you can make an informed decision that aligns with your budget and driving needs.

Upfront Costs vs. Ongoing Fees

Traditional ownership requires a significant upfront investment – the purchase price of the vehicle. This initial cost can be a major barrier for many drivers, especially younger individuals or those with limited savings.

On the other hand, subscriptions typically involve a lower initial outlay. While this might seem more attractive, it’s important to remember that you’ll be locked into a monthly fee for the duration of the contract. Carefully think about the total cost over the contract period to ensure it aligns with your budget.

Depreciation vs. Predictable Costs

A car’s value depreciates over time, meaning your initial investment steadily loses value. This can be a significant concern, especially if you plan to sell after a few years. It may also become a problem in the case of an accident. Consider contract hire gap insurance to bridge the financial gap between the car’s depreciated value and its market value in case of a write-off.

Subscriptions eliminate this concern, as you’re not responsible for the vehicle’s depreciation. The predictable monthly fee offers peace of mind in terms of budgeting as you know exactly how much you’ll be spending on the car each month.

Maintenance and Repairs

In recent years, UK car owners have reported rising costs in vehicle repairs. Owning a car means shouldering the responsibility for maintenance, which can be unpredictable and expensive.

Subscriptions typically include routine maintenance in the monthly fee, and some even cover repairs. However, be sure to scrutinise the fine print of your agreement. Certain types of damage caused by the driver, such as those exceeding normal wear and tear, might require additional payment.

Insurance Considerations

Car insurance is mandatory for both ownership and subscriptions. As an owner, you’ll need insurance that covers damage to your own vehicle or comprehensive options including third-party coverage. Subscription services often include basic insurance in the monthly fee, but it might not be as comprehensive.