Subscription Plans (Leasing) vs Conventional Hire Purchase

Leasing or car subscription plan as most like to call it is a new way to own a car over traditional methods, but is it any good?

Generally, there used to be only three ways you could own a car in Malaysia. You could either buy one through hire-purchase, own one through a cash buy or be given one from friends or family. These days however, there is a fourth way to own a car, and that way is through a car subscription programme.

A car subscription programme is essentially a leasing programme. However, most of them just prefer to call it a subscription as it may deviate from the traditional car leasing methodology.

More often than not, these subscription programmes will require you to pay a deposit/security deposit at the very beginning, which will be returned at the end of the agreed tenure. During this tenure, you will be required to pay a monthly subscription fee, and that's about it. 

Pesky things such as road tax, insurance and regular servicing are included with the subscription. However, be warned, wear and tear items such as tyres, brake pads, and wiper blades are not covered - but some do offer these as part of the subscription for an extra fee. 

Another small detail that most do not realise is that they will also cap the monthly mileage, but it can be changed and expanded for an extra fee, just like the wear and tear items.

Before the pandemic hit us, Renaut Malaysia and Flux were one of the first to offer this type of vehicle subscription programme. Since then, many other companies have offered these types of vehicle ownership programmes (albeit in different designations), including OEMs such as Mercedes-Benz, Volvo, and BMW. The list of private companies providing the same services has also grown and includes the likes such as GoCar, SoCar, Avis and Orix.

We guess the burning question that everyone wants to know is whether these types of vehicle ownership programmes are better than the conventional hire-purchase? To find out, we thought we would simulate an example and compare the two.

Note: There are some variables unaccounted for, and the calculations are done in a straightforward manner discounting any promotions or SST waivers. We can only calculate up to three years for some subscription plans as that is the longest they offer, but for hire purchase, we have done a three, five and seven-year calculation.

Renault

For short term vehicle ownership, the Renault subscription programme is definitely the better option. But if you see from the calculations, the 84 months hire purchase loan makes more sense for those who are looking for longer vehicle ownership as well as those who plan to use the car more than 20,000km a year (20k cap per year under the subscription plan). 

Flux

Similar to Renault, the Flux subscription plan makes sense for a short period of vehicle ownership. The Flux starter fee may rise depending on your credit rating where they will require more from you if your credit score is low. Flux's mileage cap is also 15,000km a year but can be upgraded.

Volvo

Although Volvo's leasing programme requires you to pay a 10% deposit, it still makes sense for short term vehicle ownership. The main difference between Volvo's programme and the other two above is that you have to fork out a big sum in the beginning. 

More and more car manufacturers are starting to introduce car leasing programmes in Malaysia as ownership habits changes. People used to hold on to a particular car till the day they die, but these days, cars are like phones, where it is changed every few years.

This is where a subscription plan comes in handy. But if you're the old school type, then stick to the old school ways, cause conventional ownership methods are still best for those who stick to a particular car for a long time.