If you are having trouble getting vehicle finance or don’t want to be tied down to a long contract, a car subscription may be a good option. A Planet42 subscription enables you to get behind the wheel of a new car quickly, plus you can improve your credit score with on-time monthly payments.

PARTNERED CONTENT. Pictured above: Lebo, one of Planet42’s many happy customers!

Owning a car is more than a symbol of freedom; it is a life-changing asset that unlocks better career, educational and recreational opportunities and brings people closer together. However, for most of us, buying a car outright with cash is out of the question, and that is where banks are supposed to help people with financing. But what do you do if the banks reject your application for car financing, as they do for the overwhelming majority of people that apply for a loan in South Africa?

Rent-to-buy car subscription is an emerging model that gained popularity only recently, but has already proven to be extremely successful in countries like Germany, the UK and the US. South Africa is playing catch-up, and there is still a lot of confusion about what exactly a car subscription entails.

Understanding the differences between traditional car finance, renting, and subscribing to a car will help you decide which method is best for your needs.

Rent-to-buy car subscription – How does it work?

The history of car subscriptions

Car subscriptions started in 2010, when a car dealership in Hawaii started offering a service that allowed customers to pay a monthly fee in exchange for a high degree of flexibility and support in driving a personal vehicle. Customers could, through this subscription service, drive a sports car for a few months and then switch to a minivan for travel with the family for another few months.

As car-sharing services and app-based ride-hailing services began to put pressure on big brand dealerships, many of them scrambled to offer new incentives that would make it easy to stick with one brand. A flat-fee, monthly payment could cover everything from insurance to maintenance to warranty with the added bonus of being able to swap the car with relative ease.

With the onset of the Covid-19 pandemic, consumer habits have gravitated towards flexibility and convenience, which is why the subscription model has become widely adopted by car manufacturers and tech startups. Up until this point, most car subscriptions have focused on offering upper-tier vehicles to people with very high credit scores, and they charge a premium for the added flexibility and luxury features such as being able to swap cars on a regular basis.

What a car subscription is not

A car subscription may sound similar to bank finance, but there are important differences. Bank finance agreements have much less flexibility, locking in the customer for as long as 72 months and typically also have a high “balloon” payment at the end of the contract term, which most customers cannot afford.

Car subscriptions are more flexible. For instance, Planet42 asks for a minimum commitment of 6 months, after which time the customer can return the car at any time for a nominal fee. This means that the customer is not liable to pay the shortfall in the car’s realisation value, which the bank would charge to the customer when the bank sells off a car that has been returned to them.

In addition, bank finance comes with many hidden fees that make the contract more expensive than the headline interest rate implies. Aside from hefty contract origination charges, these hidden fees also include comprehensive insurance, which the customer cannot opt out of. In contrast, car subscriptions usually have insurance included in the monthly subscription payment.

Renting a car may also seem similar to a car subscription, but again, there are significant differences between the two. For starters, getting a rental car usually comes with a very high deposit requirement. Not everyone will be able to put down more than R10 000 on a credit card to get access to a rental car. The deposit for a car subscription is usually much more affordable.

A more fundamental issue is that if you do any significant mileage, then the renting model becomes much more expensive than a car subscription. This is because nearly all rental agreements have a very limited daily kilometre allowance, after which the driver begins racking up fees.

Car subscription models have various allowances when it comes to vehicle usage, with some subscriptions –such as Planet42 – even granting unlimited usage in their terms. Renting is a great choice for the short term if you need a car for a couple of days or weeks. Anything longer than that and a car subscription is likely to be the better choice.

Apply for Planet42 car subscription here

Questions to ask when thinking about a car subscription

Because there are so many different car subscription models and each one has its own terms and conditions, there are a number of questions that you should ask yourself before deciding which one works best for you:

Can I become the owner of the car and if so, on what terms?What are the activation fees or deposits involved?Is insurance and maintenance included in the subscription?Is there a limit to the amount that I can drive?Is it possible to switch or swap out cars if I want?Which cars am I able to choose from?What is the process of getting a car?

In summary, if you are having trouble getting bank approval to finance a vehicle purchase or don’t want to be tied down to a multi-year financing contract, a car subscription might be a good option to consider.

Planet42 says that 93% of their customers had previously been rejected by a bank or simply would not have had any chance at approval. Best of all, a car subscription allows you to get behind the wheel of your own car quickly and begin building good credit immediately by paying your monthly subscription payments on timeDepending on how you want to use the service, Planet42 could be both of those things. But it would be more accurate to describe Planet42 as a new form of car subscription that has the mission of democratizing mobility at its core.

The Planet42 team is passionate about democratizing mobility in South Africa.

Planet42’s approval algorithms provide a fair, quick, and simple picture of the financial situations of people that have been unfairly passed over by banks. Customers are free to choose from thousands of cars at partner dealerships, or, alternatively, they can get pre-approved through the Planet42 website and then shop anywhere for a car within their budget. The approval process takes less than one minute, and the selection of vehicles is unparalleled.

If you have been turned down for vehicle finance and are looking to improve your mobility by getting your own car, you can apply on the Planet42 website right now.

Planet42 has bought cars for more than 3000 South Africans so far. If you’re looking to get behind the wheel quickly, check them out today!

Apply for Planet42 car subscription here