What is a car subscription UK?

The car subscription: it’s been taking the UK automotive industry by storm in recent years. 

From Amazon Prime to streaming services like Netflix, and even food shopping like Gousto, there seems to be a subscription for every service under the British sun. If only we could subscribe to sunny weather… 

Imagine the traditional responsibilities that come with a Personal Contract Purchase or Personal Contract Hire, but with less responsibility and much more flexibility and ease.  

What do we mean by this? 

Read on for everything you need to know about car subscriptions in the UK… 

What is a car subscription in the UK? 

Small red car model resting on the keyboard of a grey laptop - car subscription UK

So, what exactly is a car subscription in the UK?  

A car subscription in the UK is the new alternative to owning or leasing a new car. You are essentially borrowing a car of your choosing for a certain period of time, usually from a minimum of a month to up to 2 years.  

This is a fantastic option for those who are testing the waters before buying their dream car, or their driving needs change throughout the year. 

How a car subscription works  

Drivers pay a monthly fee and receive a car of their choosing (subject to availability). This fee can be increased to include even more flexibility and convenience including maintenance, insurance, breakdown cover and servicing.  

With the way the world is going after COVID, the war in Ukraine, and the rising cost of living, it’s no wonder more and more people are seeking cost-effective ways to drive vehicles.  

Car subscriptions have sky-rocketed in popularity due to being an affordable and non-committed way of driving a car without the hassle of a long-term lease or ownership. Discover how car subscriptions and short-term rentals compare.

So, how exactly does a car subscription work in the UK? 

  1. Choose a subscription service: consider your needs and budget, and what you need from a car subscription service provider. 
  1. Select a car: Here we recommend you establish what exactly you need from a car at this moment in time. Read our article on How to choose your next car for an in-depth guide on selecting your ideal car. 
  1. Sign up and pay: Once you’ve selected your car you can now sign up for a car subscription, here you can choose whether to opt into a ‘normal’ subscription or an all-inclusive car subscription to add insurance, maintenance and other care expenses to your monthly cost. 
  1. Receive the car: After you’ve signed up for a car subscription and selected your car, the vehicle will be delivered to you or you can pick it up from a designated location.  
  1. Use the car: How long you can use the car ranges usually from as short as one month to a minimum of 3 months dependent on the provider. Once you are done with the vehicle you will either return it and swap it for a new one or pause your subscription. This means you can subscribe to the same car for longer than the minimum number of months – subject to availability and the provider’s terms and conditions. 

What are the benefits of a car subscription? 

Female smiling sat in the driver's seat of a car holding car keys with a red ribbon attached to it out of the car window - car subscription UK

The main benefits of a car subscription in the UK are: 

  • Ease & flexibility: You aren’t tied down to the traditional long-term financial commitment. You can also pause a subscription, and swap over cars with short notice. Perfect if you don’t need a car for a month here or there. 
  • Try before you buy: Many people see car subscriptions as long-term test drives before they make the permanent decision of buying their dream car. 
  • No negotiations: as you are usually researching and signing up for the car subscription online, you avoid the pressure of the salesman in a traditional dealership.  
  • All-inclusive costs: There are options to have everything all in one fixed monthly payment including insurance, maintenance, breakdown cover, servicing and charging credit if you’re using an electric car. 
  • Change cars regularly: If you are a car fanatic and like to try the latest models on the road, then a car subscription is perfect for you.  
  • Experience electric: drivers looking to switch to an electric car are faced with big commitments such as buying and installing a home charger. Often it’s hard to imagine how an EV really suits your lifestyle without trying it. This is where an electric car subscription comes in to save the day. If it doesn’t work out, at least you’ve only paid for 1 or 2 months’ worth of fees. 

Is car subscription tax deductible?  

Looking to save some extra money on the side whilst also getting a car on subscription?  

Now, you can save tax on a car subscription – but this is dependent on the purpose of the car’s use. 

If the car is solely used for business purposes, the subscription fees can be tax deductible as a business expense. 

If your company has provided you with a car on subscription, you can claim back some or all of the VAT on the business car subscription.  

If you have got a car on subscription and it is being used for personal journeys, then this cannot be tax deducted. 

It is important to note that the tax deductibility of a car subscription in the UK is subject to the rules and regulations of HM Revenue & Customs (HMRC), and the specific terms and conditions of the subscription agreement.  

We recommend seeking advice from a qualified accountant or tax professional for guidance on the tax implications of a car subscription. 

Interested in saving money whilst getting a new electric car? Discover how car salary sacrifice compares with cars on subscription.

Does a car subscription show on credit reports? 

Are you concerned about signing up for a car subscription and it showing up on your credit report? Or have you got a poor credit score? 

There’s no need to worry about this. Although car subscription companies do assess your credit history, this is usually a ‘soft’ credit check which doesn’t affect your score or mark your credit report. 

Some providers may carry out a ‘hard’ credit check if you apply for an all-inclusive car subscription. This will leave a mark on your credit report and can affect your score. However, if you are concerned about this we would advise selecting a provider that doesn’t do hard checks, or reducing how many providers you apply for in a short space of time. 

What is an all-inclusive car subscription? 

All-inclusive usually means you get a car with insurance, tax, maintenance and other benefits all included in one fixed monthly price.  

What about the car subscription showing on my credit report? 

Once you have signed up to a car subscription, this will not show up on your credit history. This is how they differ from PCP or Hire Purchase finance agreements, which always show up on your credit report. Discover how the traditional car lease compares to car subscriptions.

Remember, as car subscriptions won’t show on your credit history, this means they won’t have any positive effect on your credit score. Looking to understand the whole picture? Read our article on the disadvantages of car subscriptions.

Should you consider a car subscription? 

So, should you consider a car subscription in the UK? This completely depends on your individual needs and requirements. 

In the UK, car subscriptions are a fantastic alternative to traditional car leasing and ownership. It’s a great advantage to those who need day-to-day convenience and flexibility without being tied down to concerns including depreciation, maintenance and insurance. 

Remember, car subscriptions can be more expensive than other contracts such as car leasing and buying outright in the UK – but this does vary between providers. Your mileage is likely to be constricted to a certain number of miles per month or for however long you keep the vehicle. 

To get the best experience possible when choosing your UK car subscription provider, we recommend establishing what exactly you need from a car and your monthly budget.  

It’s absolutely vital you understand your driving needs and requirements before you sign up for a car subscription. For specialist vehicle advice on finding the right car finance agreement, chat with a Vehicle Specialist today

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