We live in an age where convenience reigns supreme.
Whether listening to ad-free music or scheduling a pet food delivery to arrive on our doorstep the day before Fido runs out of his favorite nuggets—we are constantly seeking ways to make our lives easier and more productive.
Over the past few years, a lesser-known (but growing) area of opportunity for subscription services has emerged within one of the world’s largest economic sectors: the auto industry.
If you want to learn about ways to modernize your driving habits and ditch the dealership once-and-for-all, read on and discover how the car subscription model is poised to change the landscape of the auto industry.
What is a car subscription service?
A car subscription service is an alternative to buying, leasing or renting a car. Subscriptions allow a customer to pay a flat fee in order to access a variety of vehicles without retaining ownership.
In most instances, members of a car subscription service pay one, transparent fee that may include the use of a vehicle coupled with a wide range of services such as insurance, maintenance and repairs, unlimited miles and roadside assistance. Some subscription services are offered directly by the automaker, which affords the subscriber access to one brand. Other third-party providers offer subscribers access to a wide-ranging fleet of vehicles, featuring a variety of brands.
Car subscriptions allow members the freedom to test-drive a variety of vehicles at their leisure. By offering members the opportunity to exchange their current vehicle for another model in the fleet at any point in time, the customer is afforded the unique opportunity to design a customized experience in a convenient, hassle-free and competitively priced manner. While service offerings range based on provider, some subscription companies even offer door-to-door concierge services that deliver the vehicle directly to the customer.
Finally, as with any subscription model, members can cancel or pause their membership at any point in time. While terms and conditions range, the subscription model’s value proposition remains: no long-term commitment and no hidden fees.
All-Inclusive Pricing Structure
Let’s dive into the pricing commitments and (non-hidden) fees.
To reiterate: when a customer joins a car subscription service, they don’t actually commit to owning a vehicle. What they do commit to is paying a month-to-month, all-inclusive fee that gives them access to a fleet of vehicles and a number of additional services such as insurance, roadside assistance, charging (for EVs and hybrids), maintenance and repairs—the list goes on. Approved drivers are typically covered by the car subscription company’s insurance policy, and members may be responsible for a deductible for any major accident. Members also avoid down payments and registration and titling fees but may have to pay a one-time activation charge, depending on the contract’s terms.
Most car subscription services available in today’s market have “tiered” membership levels or subscription packages, offering the customer access to varying levels of service. These options typically range from the basic, economy level experience that includes access to a certain fleet of vehicles with a limited number of vehicle swaps, to the premium-level experience featuring a fleet of luxury vehicles, unlimited swaps and a concierge-level of service. Cost structures will vary from tier-to-tier, and subscribers usually have the ability to modify their subscription plan at any point in time to suit their needs.
At first glance, a bundled fee may seem high to a car owner who is conditioned to paying vehicle-related fees on an itemized basis. Sometimes it is difficult to process the thought of an “all-in” cost when it comes to a vehicle. However, depending on the type of vehicles the member is interested in driving coupled with registration, titling, and ongoing insurance and monthly payments and more, a car subscription is competitively priced when compared to buying, leasing or renting a vehicle in today’s economy.
As with most renting and leasing contracts, members often have the option to add a secondary driver at no extra cost, as long as that driver meets the same criteria as the primary driver. Application processes are quicker and more direct, however, as subscribers are given the option to apply for the service conveniently from a mobile app or website, as opposed to visiting a dealership to complete paperwork in person.
For those looking to squeeze even more value out of their car subscription plan, many providers offer referral programs to existing members, which may feature plan discounts or monetary rewards when the lead is converted into a new member.
Avoid Outdated Trends and Technology
Did you know that the average American will retain his or her vehicle for 10-12 years?
When you consider the rapid advancements in automotive technology (think: improved safety features, longer-range batteries and self-driving capabilities to cite a few examples), committing to one car can become a serious disadvantage for the modern driver. Imagine if you had to hold on to your current smartphone for the next 10 years! It is almost unthinkable.
A car subscription gives drivers access to the latest auto trends and technology and eliminates the fear of buyer’s remorse. Subscription companies feature the newest models and the latest technology in an effort to maintain interest and build a strong and reliable customer base. In order to provide a top-tier experience for their customers, they must maintain a modern fleet of vehicles with a variety of options to fit the needs of the modern, tech-savvy consumer.
It also goes without saying, but no matter how much you research a car prior to buying it, nothing compares to the physical experience of driving it. The grooves of the steering wheel, the sleekness of the dashboard—it takes weeks, if not months, to truly understand what we love (or don’t love) about a vehicle. But preferences change over time, and what may be considered sleek and ‘on trend’ one minute can swiftly be replaced and leave many consumers feeling remorseful about their purchasing decision.
Car subscription plans allow members to learn the ins and outs of multiple vehicles and ensure that the vehicle that they are driving suits their lifestyle in real-time.
Goodbye, Depreciation (hello, appreciation!)
Car depreciation is the monetary toll that a number of factors (such as age and mileage) can take on a car’s value. In short, it’s the value of the vehicle that will be lost over time.
According to CarFax, the value of a new vehicle can drop by more than 20% in the first 12-months of ownership. Then, for the next four years, it is expected to depreciate 10% annually. In an effort to curb depreciation, car owners will follow a number of steps to keep their vehicles in tip-top shape, such as purchasing additional insurance and limiting mileage. Sadly, however, there are limits to the effectiveness of these practices.
Fortunately for car subscribers, factors like age and mileage are an issue of the past. In fact, members have the luxury of avoiding the stress of depreciation entirely.
Hassle-Free Sign-Up Process
According to a Harris Poll survey, 87% of Americans dislike something about car shopping at dealerships, and 61% feel they’re taken advantage of while there. Unsurprisingly, the experience is considered even worse from the perspective of Millennials, with 56% saying they’d rather clean their homes than negotiate with a car dealer.
No matter how you view the car buying process, it is safe to say that car subscription services tend to offer reduced stress from the perspective of the customer due to its easy, hassle-free sign-up process.
The primary benefit is that the customer has the ability to apply for membership from the comfort of their own home. There is no haggling, no time wasted at the dealership and no script to memorize before talking to a car sales representative. The prices are already negotiated, the fuel economy is already memorized and the car history is, well, less important since members are paying to drive the latest and greatest models.
Subscription providers are also aware that new drivers will want to be educated about what, exactly they are driving. The value proposition still needs to be conveyed even if the member doesn’t own the vehicle they are driving.
This is why many car subscription plans include access to a concierge service, which will provide educational materials and even personalized car drop-offs with pamphlets and information about the car before leaving it with the member. These concierge services range in style and scope based on the subscription service provider, but 24/7 access to a personalized resource to answer any and all questions is a definitive perk.
What else do I need to know?
By this point, you are well-versed in the basic benefits of a car subscription service. If you are ready to sell your vehicle or end your lease, there are a number of automakers and third-party providers in the market who are testing this business model within a number of markets within the United States.