Car subscription gray area: car ‘leasing’ without BKR registration, how can it be done?
BKR registration and car subscription
Wait a minute … BKR registration? That needs some explanation. The Bureau Krediet Registratie (BKR) has insight into all loans strengthened in the Netherlands. In this system, lenders register loans above 250 euros that run longer than 1 month. BKR also registers business loans for which a person is personally liable. A car subscription is not formally a loan.
Private lease
A person who drives a car via private lease gets a BKR registration. Because the agreement is often for a minimum of 12 months, although a term of 48 or even 60 months is more common. With private lease, you pay a fixed monthly amount including insurance, tax and maintenance. You only have to refuel or charge yourself.
Hooks and eyes
That sounds pretty tempting, but private leasing also has snags. In fact, a private lease will greatly affect the amount of your mortgage application. With private leasing, you may well be able to borrow tens of thousands of dollars less. That’s because banks look to see if you already have financial obligations. Banks check the BKR register for this purpose. In addition, private leasing involves mileage limitations. You are only allowed a prearranged number of miles per year. If you go over that limit, you have to pay extra.
Popularity of private lease declines
Since the advent of the car subscription, the popularity of private leasing has been declining. How is that possible? Because, in a nutshell, a car subscription is nothing more than a disguised form of private lease, with the subscription provider taking a different level of risk. The principle is broadly the same in that the user pays a fixed monthly fee, including service and maintenance, wear and tear coverage, road tax (if applicable), comprehensive insurance and much more. As a user, you only pay the fuel or energy and any traffic fines yourself.
Car subscription
That’s suspiciously close to private lease, right? There is a big difference, though. With a car subscription, you don’t get a BKR registration. A car subscription is often terminable after just 1 month, but in practice people often drive a car for up to two years. So people in that case pay a fixed amount per month for 24 months. And that’s without BKR registration. Not surprisingly, private leasing is losing popularity and auto subscription is gaining popularity.
Why no BKR registration with auto subscription?
Car subscription is still fairly new and gray area for Dutch law. Because there is no private lease seal of approval, that BKR registration is not required. A car subscription is also not a lease structure on paper. Private leasing is almost always through a leasing company. A car subscription is often from the manufacturer itself, so without the involvement of a leasing company. The option to take over the car at the end of the contract – as is the case with private leasing – is never offered with a car subscription. With a subscription, the car is also registered in one’s own name only. Moreover, the terms and conditions are also just a little different. These rules may change in the near future, but for now, anyone who opts for a car subscription need not fear BKR registration.
Because the manufacturer retains ownership of the car – and you can’t become an owner at the end of the contract either – the car subscription is not considered a loan. The car subscription has another advantage: because the miles you are allowed to drive are much higher than with private leasing.
An example
At Volvo – one of the car subscription providers (Care by Volvo) – for example, it is possible to select a mileage package up to 65,000 per year. For additional kilometers driven, the user then pays 0.13 euro cents per kilometer. If the user incurs less mileage, an offset will follow. Moreover, the package can be adjusted up and down each month.
In addition to Volvo, more manufacturers already offer car subscriptions. Think Lynk&Co, Polestar and Skoda. New providers are added every month.