Understanding microleases: how they differ from car subscription services

Microleasing – more akin to short-term rental – is a more flexible product than car subscription or long-term leasing. Giles Chapman explains how leasing brokers can provide microleases as part of their product offering

THERE used to be a comforting certainty to car leasing that the typical carbuyer could easily adjust to – adjust to, that is, after they’d made the sound choice NOT to buy a new car outright. Once the preferred model was chosen from their preferred leasing broker, a familiar Ford or a very dependable Volkswagen Golf, the car would arrive and usually a contented three-year residency of the driver’s seat would begin.

There would be safety in the knowledge that, if the car had the slightest defect, the lease company would sort it out. With care, too, that desirable ‘new car smell’ could be preserved for 36 months, and then the whole no-brainer process could start all over again. Converts rarely switched back to the aggravating personal responsibilities of depreciation and expired warranties.

Old-school Mondeos and Golfs, though, belong firmly in the fossil fuel-burning recent past. The electric evolution is now in full swing. New petrol- and diesel-powered cars will be obsolete in 2035, and in advance of that, leading European markets are already seeing electrics account for nearly one third of new car sales, even though there’s much talk of a slow down in demand.

The big step into EVs

Most intelligent drivers know the big switch is coming soon. Making that change entails a certain leap of faith, however. And that’s where the new trend in microleases can step in as a conduit for change. Not only that, but their attractions can be harnessed by leasing brokers as a great way to drive new business potential.

The microlease concept is, at heart, dead simple, and makes a very attractive proposition for you to offer clients.

A traditional car lease locks a driver into, usually, a three-year period of sharing her or his life with a single specific vehicle. This is fine for someone who has a settled life plan, or perhaps isn’t very demanding about what they trundle around in.

A microlease has a drastically shorter length – generally a year, or perhaps as brief as six months – and depending on the inventory state of the manufacturer concerned (ie: a bit of a glut…) the monthly payments could be a good deal less than for a conventional, 36-month-lease period.

Behind the growth of the microlease lies the unease swirling around the automotive industry at present. Electric car manufacture is generally replacing internal-combustion engine-powered equivalents, impelled by legislation, but the products flowing off the production lines have to find homes. They need to go somewhere, and leasing is one very practical route.

From the consumer viewpoint, electric cars are a hot news topic, subject to constant speculation over, for example, emerging battery technologies and the size of the charging network. It tends to give a background hum of uncertainty that works against picking a new electric car, or even being saddled with one for a long lease period. The lithium-ion battery was THE thing, for example, and then suddenly everyone is speculating about solid-state powerpacks. Such talk breeds hesitancy…

Providing the microlease opportunity

So there is your opportunity; you have apprehensive clients with fingers hovering above the ‘go’ button, but the one-year commitment of a microlease – along with your guidance – could help them to make the zero-emission changeover in a way that feels comfortable and not too exposed to future developments as the car industry fully electrifies.

Is there a downside? Not really, apart from the fact that a microlease, despite its short currency, isn’t quite as flexible as an electric car subscription, where the driver can swap cars after merely weeks behind the wheel. A microlease, however, could be just the thing to please a nervous client, and enhance your reputation as a terrific provider of car solutions…