The difference between leasing, subscribing and buying an electric car.
When you're looking for a new car, especially an electric one, the terminology can be overwhelming. Switching from petrol or diesel to electric adds another layer of complexity. There are three main ways to get your hands on a vehicle: leasing, subscribing, or buying. While most people are familiar with the last option, let's break down the basics.
This image is sourced from Driving Electric
Leasing a car: Leasing means you have the car for a set time and mileage. Instead of paying for the entire vehicle, you're essentially renting it, covering your use during the agreed period.
Vehicle subscription: With a subscription, you pay a monthly fee to use a car for a specific duration, bypassing the need to buy it outright or commit to a lease.
Buying a car: When you buy a car, you either pay the full amount upfront or in monthly instalments, eventually owning the vehicle outright.
We'll dive deeper into the advantages and disadvantages of these three options, so you can be better equipped to make a well-informed decision the next time you're in the market for a new car!
How does leasing a car work?
Car leasing is becoming increasingly popular due to its lower initial costs and the opportunity to enjoy the latest models without the commitment of ownership. The specifics of your lease, including its duration and monthly payments, are outlined in your lease agreement. Typically, car leases last between 24 to 36 months. When the lease ends, you'll be presented with the option to either purchase the car or return it to the dealership.
The positives and negatives of leasing an electric car
| Positives | Negatives | |
|---|---|---|
| Opportunity to drive a brand new car at an affordable price | If you lease one car after another, your monthly payments go on for several years | |
| Because it is a new car, it is usually covered by the manufacturer's warranty | You have to do a specific number of miles each year - this can be extended but can be a limitation | |
| Don’t have to worry about depreciation or selling the car in the future | If you don’t maintain the vehicle in good condition, you will have to pay excess wear-and-tear charges when you turn it in | |
| You can get a new car every couple of years |
What are the requirements for leasing an electric car?
The requirements for leasing a car will depend on the leasing company, but typically you will need to have a good credit score, proof of consistent income and a valid drivers licence.
How does leasing work at The Electric Car Scheme?
The Electric Car Scheme is an employee benefit for companies - it is the obvious choice to support people through their transition to net zero. We make it easy, affordable and simple for employees and employers to make the switch to electric cars.
Employees choose a car with The Electric Car Scheme. The employer signs up, orders, and pays the leasing company for the car. The employer agrees to provide the car in exchange for the employee looking after the car and sacrificing gross salary to pay for it.
At The Electric Car Scheme we recently launched Complete Risk Protection, introduced in November 2023. Addressing a common concern associated with electric cars as employee benefits, this protection is tailored to protect employers from potential financial risks arising from vehicle damage or employee departures while the leasing period is still in effect.
Everything you need to know about subscription cars
Subscription-based electric cars have become a revolutionary alternative for those seeking flexibility and hassle-free maintenance. Subscribers can enjoy the luxury of driving a top-tier electric vehicle without a long-term commitment. Unlike leasing, subscriptions can be more flexible with shorter commitment periods. They are often suitable for those who need a vehicle for a limited time and prefer simple payment plans.
What is the difference between leasing and subscriptions?
Leasing requires a long-term commitment whereas a car subscription allows you to access a vehicle without the same level of commitment. With a subscription, you also pay a monthly fee that covers various aspects of ownership like maintenance and sometimes insurance. Subscription periods are usually 1-12 months.
The positives and negatives of subscriptions
As mentioned, the benefits of subscription models include the flexibility to switch between different models, access to cutting-edge technology, and the assurance of regular maintenance. However, potential downsides include a higher overall cost compared to ownership and limitations on annual mileage.
| Positives | Negatives | |
|---|---|---|
| Opportunity to drive a brand new car at an affordable price | The cost per month may be higher than leasing because you don’t have to pay a large deposit upfront, and the subscription provider is responsible for most car costs | |
| Flexibility of getting a new car or ending the subscription | You have to do a specific number of miles each year - this can be extended but can be a limitation | |
| Don’t have to worry about depreciation or selling the car in the future | If you don’t maintain the vehicle in good condition, you will have to pay excess wear-and-tear charges when you turn it in | |
| You can get a new car frequently | ||
| Pay a flat fee each month with everything included |
How subscription-based salary sacrifice works at The Electric Car Scheme
At The Electric Car Scheme, we offer rolling monthly leases for a minimum of 12 months (but can be shorter if you are bridging to a lease or if your employment terminates) on a flat monthly payment profile. Our offering includes maintenance, insurance and a charge card.
A guide to buying a car
The traditional approach to purchasing a car involves outright ownership. This method provides a sense of permanence, allowing owners to personalise and modify their vehicles.
The advantages of buying include long-term cost savings, potential government incentives, and the satisfaction of owning an appreciating asset. On the flip side, buyers face significant upfront costs, and in the case of electric cars, the rapid evolution of EV technology may lead to quicker depreciation compared to traditional cars.
| Positives | Negatives | |
|---|---|---|
| When you buy a car, you own it outright which provides a sense of permanence | Depreciation of a car is typically between 15-35% in the first year and up to 50% or more over three years. | |
| No mileage restrictions | Higher upfront costs | |
| Long-term cost savings | Tied to one car for a long period of time | |
| With the rapid advancements in automotive technology, a car you purchase today may become outdated in terms of features and safety compared to newer models in a few years. | ||
| You are responsible for all maintenance costs |
What is the difference between leasing, buying and subscribing?
We have compiled a price comparison for a new Tesla Model 3, looking at leasing, buying and subscribing. It is important to note, lease and subscription prices are taken from The Electric Car Scheme’s quote tool - these prices incorporate employee national insurance savings and employee income tax savings.
| undefined | Upfront payment cost | Overall cost | Mileage term per annum | Lease term |
|---|---|---|---|---|
| Lease | £459 per month | £16,524 | 10,000 | 36 months |
| Subscription | £729 per month | £8,748 | 12,000 | 12 months |
| Buying | £39,990 | £39,990 | Unlimited | Unlimited |
If you are interested in leasing an EV or subscription-based salary sacrifice, you can experiment with our quote tool, by selecting different cars and inputting your salary.
Our lease pricing is based on data collected from The Electric Car Scheme quote tool. All final pricing is inclusive of VAT. All prices above are based on the following lease terms; 10,000 miles pa, 36 months, and are inclusive of Maintenance and Breakdown Cover. The Electric Car Scheme’s terms and conditions apply. All deals are subject to credit approval and availability. All deals are subject to excess mileage and damage charges. Prices are calculated based on the following tax saving assumptions; England & Wales, 40% tax rate. The above prices were calculated using a flat payment profile. The Electric Car Scheme Limited provides services for the administration of your salary sacrifice employee benefits. The Electric Car Scheme Holdings Limited is a member of the BVRLA (10608), is authorised and regulated by the FCA under FRN 968270, is an Appointed Representative of Marshall Management Services Ltd under FRN 667174, and is a credit broker and not a lender or insurance provider.
Images on this site are sourced from third party websites as listed below each image and are the property of their respective owners. If you believe any content infringes your copyright, please contact us at marketing@electriccarscheme.com.
