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

Customer’s intent

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.

Service bundle

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.

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