diff --git a/.vscode/settings.json b/.vscode/settings.json
index a4369f34..9e5c799b 100644
--- a/.vscode/settings.json
+++ b/.vscode/settings.json
@@ -10,7 +10,7 @@
       "source.fixAll": "explicit",
       "source.organizeImports": "explicit"
     },
-    "editor.defaultFormatter": "ms-python.black-formatter",
+    "editor.defaultFormatter": "charliermarsh.ruff",
     "editor.formatOnSave": true
   },
   "editor.formatOnSave": true,
@@ -40,5 +40,6 @@
   "yaml.completion": true,
   "yaml.customTags": ["!encrypted/pkcs1-oaep scalar", "!vault scalar"],
   "yaml.format.enable": false,
-  "yaml.validate": true
+  "yaml.validate": true,
+  "cSpell.words": ["delenv"]
 }
diff --git a/src/ansible_compat/prerun.py b/src/ansible_compat/prerun.py
index 9448269d..36869f37 100644
--- a/src/ansible_compat/prerun.py
+++ b/src/ansible_compat/prerun.py
@@ -1,22 +1,22 @@
 """Utilities for configuring ansible runtime environment."""
 
-import hashlib
 import os
 from pathlib import Path
 
 
-def get_cache_dir(project_dir: Path) -> Path:
-    """Compute cache directory to be used based on project path."""
-    # we only use the basename instead of the full path in order to ensure that
-    # we would use the same key regardless the location of the user home
-    # directory or where the project is clones (as long the project folder uses
-    # the same name).
-    basename = project_dir.resolve().name.encode(encoding="utf-8")
-    # 6 chars of entropy should be enough
-    cache_key = hashlib.sha256(basename).hexdigest()[:6]
-    cache_dir = (
-        Path(os.getenv("XDG_CACHE_HOME", "~/.cache")).expanduser()
-        / "ansible-compat"
-        / cache_key
-    )
+def get_cache_dir(project_dir: Path, *, isolated: bool = True) -> Path:
+    """Compute cache directory to be used based on project path.
+
+    Returns:
+        Cache directory path.
+    """
+    if "VIRTUAL_ENV" in os.environ:
+        cache_dir = Path(os.environ["VIRTUAL_ENV"]) / ".ansible"
+    elif isolated:
+        cache_dir = project_dir / ".ansible"
+    else:
+        cache_dir = (
+            Path(os.environ.get("ANSIBLE_HOME", "~/.ansible")).expanduser() / ".ansible"
+        )
+
     return cache_dir
diff --git a/src/ansible_compat/runtime.py b/src/ansible_compat/runtime.py
index ca35e021..f58e3d58 100644
--- a/src/ansible_compat/runtime.py
+++ b/src/ansible_compat/runtime.py
@@ -208,8 +208,8 @@ def __init__(
         if "PYTHONWARNINGS" not in self.environ:  # pragma: no cover
             self.environ["PYTHONWARNINGS"] = "ignore:Blowfish has been deprecated"
 
-        if isolated:
-            self.cache_dir = get_cache_dir(self.project_dir)
+        self.cache_dir = get_cache_dir(self.project_dir, isolated=self.isolated)
+
         self.config = AnsibleConfig(cache_dir=self.cache_dir)
 
         # Add the sys.path to the collection paths if not isolated
diff --git a/test/test_prerun.py b/test/test_prerun.py
index d8320884..2ec3a791 100644
--- a/test/test_prerun.py
+++ b/test/test_prerun.py
@@ -1,6 +1,12 @@
 """Tests for ansible_compat.prerun module."""
 
+from __future__ import annotations
+
 from pathlib import Path
+from typing import TYPE_CHECKING
+
+if TYPE_CHECKING:
+    from _pytest.monkeypatch import MonkeyPatch
 
 from ansible_compat.prerun import get_cache_dir
 
@@ -10,3 +16,9 @@ def test_get_cache_dir_relative() -> None:
     relative_path = Path()
     abs_path = relative_path.resolve()
     assert get_cache_dir(relative_path) == get_cache_dir(abs_path)
+
+
+def test_get_cache_dir_no_isolation_no_venv(monkeypatch: MonkeyPatch) -> None:
+    """Test behaviors of get_cache_dir."""
+    monkeypatch.delenv("VIRTUAL_ENV", raising=False)
+    assert get_cache_dir(Path(), isolated=False) == Path("~/.ansible").expanduser()
diff --git a/test/test_runtime.py b/test/test_runtime.py
index b665f3ed..19756dfa 100644
--- a/test/test_runtime.py
+++ b/test/test_runtime.py
@@ -652,10 +652,9 @@ def test_upgrade_collection(runtime_tmp: Runtime) -> None:
     runtime_tmp.require_collection("community.molecule", "0.1.0")
 
 
-def test_require_collection_no_cache_dir() -> None:
+def test_require_collection_not_isolated() -> None:
     """Check require_collection without a cache directory."""
-    runtime = Runtime()
-    assert not runtime.cache_dir
+    runtime = Runtime(isolated=False)
     runtime.require_collection("community.molecule", "0.1.0", install=True)
 
 
@@ -1022,6 +1021,11 @@ def test_runtime_has_playbook() -> None:
     """Tests has_playbook method."""
     runtime = Runtime(require_module=True)
 
+    runtime.prepare_environment(
+        required_collections={"community.molecule": "0.1.0"},
+        install_local=True,
+    )
+
     assert not runtime.has_playbook("this-does-not-exist.yml")
     # call twice to ensure cache is used:
     assert not runtime.has_playbook("this-does-not-exist.yml")