Car subscriptions - ownership redefined

Having your own car allows you the convenience of travelling anywhere you wish, at will. But owning a car comes with its own problems, such as the expense of services and insurance. The process of buying a car can also be quite daunting. But is there a better solution?

We spoke to Tinashe Ruzane, CEO and co-founder of FlexClub, to find out if car subscription could be a better alternative.

Tip: A personal loan can help you buy the car of your dreams. Fill in this form to apply.

What is car subscription?

“Car subscriptions are essentially a flexible monthly fee that you pay for the use of a car,” says Ruzane.

The single monthly fee is comparable, he explains, to the cost of vehicle financing, insurance, a maintenance plan, and vehicle tracking over the same period.

If you don’t intend to keep the car for more than six years, a car subscription could well be the best option for you.

How is it different from traditional financing?

The key differences with car subscriptions, according to Ruzane, are that there are no multi-year commitments, no large upfront deposits and no obligations to make balloon payments at the end.

“When purchasing a car via traditional finance, you need to go to a dealer, engage with a financier, decide on an appropriate maintenance or service plan, agree on who will insure the vehicle and what their recourse is if the vehicle is stolen,” explains Ruzane.

He says there is a common misconception that vehicle financing with a balloon payment equates to ownership, when in reality there is still an obligation for the consumer to purchase the car after the 72-month period.

“You don’t become the owner of that car until that point. You are effectively in a rental construct, with a lot more risks and obligations than would be the case if you’d had a traditional rental product,” he says.

READ MORE: What is a balloon payment?

Ruzane notes that with a car subscription, you have the freedom to return, swap, or buy the car.

“You order the car on the website, it’s delivered to your home and if you don’t want the car anymore, it disappears. If you want to change the car, it’s a simple click of a button,” he explains. 

Ruzane says there is no need to negotiate trade-in assistance, and you will avoid attracting negative equity as far as settlement versus value is concerned.

Furthermore, Ruzane notes, car subscriptions reduce the complexity of retail transactions.

“You don’t need to negotiate any additional insurance or figure out a maintenance plan,” he says.

Any disadvantages?

Ruzane says that if you intend to eventually own or purchase the car, you must do so before the purchase window closes. This period varies between providers, but most extend to up to one year into subscription, or 30,000km (whichever happens earliest).

“If you choose not to purchase the vehicle within that window, the vehicle is automatically swapped for a newer model,” says Ruzane.

Before you get into your new car and drive off, make sure it’s protected. Get a car insurance quote by visiting this page.