7 differences between Leasing and Abo
Leasing has long been considered a proven method of financing a car. While in the beginning it was more popular for company cars, nowadays more and more private individuals lease a car. However, for the past few years, car abo has emerged as an interesting alternative to leasing, offering some advantages especially in terms of durations. In this post, we'll explain 7 important differences between traditional car leasing and abo to help you understand which ownership model is the right one for you.
End purchase
In contrast to an abo, with leasing there is usually the option to buy the car at the end of the contract. As a rule, the car is returned to the leasing company at the end of the lease. At the end of the leasing contract, customers have the option of making an offer to buy the car. As a subscription is contractually a rental, this option cannot be offered.
Some leasing companies supposedly offer written confirmation during the contract that the car will be sold to the customer after the lease. From a purely legal point of view, however, this is not possible with leasing, as otherwise it would be a consumer loan. In fact, the right to purchase would not be a right, but an obligation or already a purchase contract for the car in the future. This is not permitted under Swiss consumer and credit law.
Packages
With an abo, everything you need for your car is usually included in the price. With a lease, on the other hand, you can decide for yourself what services you want to get from the leasing company. Packages like All-in-one from gowago.ch or Leasing PLUS from Amag let you choose between a simple lease, lease with insurance and services, or everything you need to get on the road with other services, such as car service, tire storage or even the vehicle tax!
At gowago.ch there are three different packages you can choose between. While All-in-one Light offers insurance and car service at more than 300 locations in Switzerland and All-in-one Essentials additionally offers tires including change, All-in-one Premium includes insurance, service, tires including change and storage, vehicle tax and even the highway toll sticker. Thanks to monthly fixed rates, you can plan your budget and avoid unpleasant surprises.
Important to know: when leasing a car, you must legally contract a full comprehensive insurance. If you decide not to take it via the leasing company, you need to choose a third-party insurance to be allowed to get on the road!
Options
Abo providers like Clyde or Carvolution will rely on the volume effect when proposing vehicles, just like a rental company. This means that cars will be ordered with reduced options in terms of engine, version and equipment. However, on the leasing market, almost every car new and young-used can be leased. However, you want your car to be configured, it can be leased. Many abo providers have limited inventory options, with between 30 and 50 cars to choose from. One outsider on the market is the abo-provider Carify, that just like gowago.ch partners with dealerships all over Switzerland and is able to provider many makes and models to their clients.
So, if you can’t find the car you want with an abo provider, try looking at the leasing alternative, because it’ll have it!
Down payment
With a lease, you can make a down payment, which varies depending on the car and personal preferences. The amount of the down payment is then deducted from your monthly lease payments, making them cheaper. In this article we explain in detail how the down payment and as well as other parameters related to leasing work.
The amount of the down payment can vary depending on the model and brand, but is usually from 0 to 30% of the car price. The amount will determine the monthly rate of your leasing.This one-time down payment lowers the lease rate afterward, making it easier for some people to budget safely and easily, and is a great way to use the trade-in of your current car to change for a newer car, better equipped or more ecologic!
For subscription, down payment is unfortunately not possible because it is legally not allowed to lower a rental rate with a down payment.
Attention point - Many abo providers have a “subscription fee” that is an administrative fee to register clients. This is not considered as a first-installment and influences in no case your monthly rate.
Flexibility
Leasing and subscriptions also differ in terms of duration. While leasing is usually only offered for a term of 24 to 60 months, some subscription providers are offering terms starting from only one month. This is of course very interesting for people who want a high degree of flexibility by changing their car often.
However, it should be noted that a shorter term always leads to higher monthly installments. Therefore, this option is recommended if you have not yet decided on a specific car. It can be helpful to try out several cars in a short period of time and then definitely decide on one of them.
Another important flexibility that Abo offers is the ability to change your km package in your terms. Whilst it will influence your monthly installment (increased rate if you increase km pack, and vice-versa), it is especially a great feature for people that have flexible lifestyles and for whom the opportunity to change the usage of their car can be beneficial. Leasing providers cannot provide such a feature for the reason of difference #1- the return. As the car is bound to a residual value, changing the km would influence this contractual value and therefore is not allowed.
Attention: not every abo provider offers this, so be sure to ask your subscription providers if it does!
Get out of a Leasing or car subscription early
An unexpected life event can make you want to change your mind about your car. As both car leasing and subscription are working with duration terms, it could be that you want to give back your car prior the term duration. This is even one of the most frequently asked questions by future car owners, and deserves particular attention.
Let’s be very clear. There are no penalties if you want to get out of a lease early. However, the term of the lease will be adjusted in the event of early termination, resulting in higher costs that you will have to pay in arrears. If you have leased a car for 48 months, but want to terminate the lease after 24 months, you will have to pay the difference in monthly costs (which will be higher for a shorter term).
This is regulated by Swiss law, and is 100% transparent as the leasing contract contains a table showing what the lessee has to pay in addition to the already paid leasing installments in case of early termination of the leasing contract, and what the residual value of the leased object is at that exact time.
Unlike leasing, no law protects the customer with transparency in terms of early termination fees for an abo. It is at the discretion of the abo provider to specify the penalties in the rental contract. Therefore, be very careful to read the small lines before signing.
In principle, leasing in Switzerland is still more heavily regulated by law than abo. As a result, lessees are also better protected. The precise regulations prohibit leasing providers from hiding termination fees and demand full transparency. As a lessee, you therefore know exactly where you stand.
Interest rate
When it comes to financing products, everything (almost) comes at a price, the one of the interest rate. This interest rate usually serves to cover the risk of non-payers. Leasing is no exception, and once again the Swiss law requires leasing to always show transparently the interest rate in an offer. Usually, interest rates can range from 0% (very rare, only in case of promotions but attention, it’s often an advertising trick!) to 5.9% or even more. The interest rates for leasing are also usually lower for new cars than for used cars.
On the other hand, the interest rate is not explicitly shown in a subscription offer. The abo provider does not list an interest rate because the customer pays it within the monthly rental rate. Therefore, the customer has no transparency about how much he contributes to the financing of the car, because this is mixed with all other expenses.
Conclusion
Before you make the choice between a lease and an abo, you should be aware of the points you value. Whilst leasing and abo offer similarities by providing you a mobility for a monthly price, it is important to note the differences to find out which solution is more adapted to your very own situation. gowago.ch and its leasing by Migros Bank offers the most personalized solution on the market, with a wide range of cars and the possibility to choose services to get on the road. If you have any further questions about the differences between leasing and abo, or simply to discover if gowago.ch is made for you, don’t hesitate to get in touch with one of our advisors at +41 44 461 13 44 or email info@gowago.ch and we will answer all your questions directly.
