Subscription vs. Rental vs. Lease: What’s the difference?
The difference between subscription and leasing can be best understood via two differentiating comapirsion points; customer’s intent and commitment to an asset.
The difference between subscription and rental can be best understood via two differentiating comapirsion points; the duration of the contract and service bundle.
Lease vs. Subscription
Lease: The customer’s intent in a lease contract is to have or get the asset. Lease is an “asset-oriented” transaction.
Subscription: The customer’s intent is to have the experience and benefits of the asset. Subscription is a “service-oriented” transaction.
Commitment to an asset
Lease: In a lease there is a particular asset involved that is identified at the beginning of the contract.
Subscription: In a subscription there is no such commitment to as asset as the fundamental idea of a subscription is choice and flexibility.
Rental vs. subscription
Duration of contract
Rental: Rental contracts are usually short lived. Standard contract length varies from a few hours to 3 months.
Subscription: Subscription contracts are usually long lived. Standard contract length varies from 3 to 24 monthsfor consumer durable products and a few years for industrial subscriptions.
Rental: Rental contracts only include the product and do not offer additional services like insurance, maintance, repair
Subscription: Subscription products are more service oriented and often are bundles together with additional services like insurance, maintance and repair.
Practice of combining business models
While there are significant differences between a lease and a subscription, the terms subscription and rental are often used interchangeably. At present a lot of companies that offer their products on a subscription basis, instead of selling them combine the elements from lease, rental and subscription. Some companies offer products as a service and call it a rental because they do not offer maintenance or repair services along with the product.
While some companies offer a product on a subscription basis and attach it with maintenance or repair.
Additional comparison factors
If you’re still deciding whether your product is more of a lease or a subscription and are looking to create a clear distinction between a lease and a subscription/rental, the following table highlights additional points for comparison.