21 Feb 18

Rise of the subscription model

Want a car, but not the bother of ownership, nor the longevity of a lease? Increasingly, you have the option to subscribe. Subscription models are popular in the U.S. but rising in Europe as well. 

Why would you choose to subscribe to a car? Because it's so flexible. And so familiar. Consumers are looking for a hassle-free, fixed-rated experience, similar to the subscriptions they have on Netflix or their iPhone. 

Streamlined process
These are very simple and streamlined processes. In return, they make one monthly payment for a cocktail of services and know they can change or end their contract from one month to the next. 

Like those contracts, car subscriptions are short-term commitments, while offering ample opportunities to upgrade or otherwise change the products and/or services delivered. Typically, the one monthly payment covers a variety of variable costs, often including maintenance, service and insurance. 

Innovative relationship
Making it easy to switch to other and/or newer models will offer consumers an easy way to sample and keep up with the latest in car technology, and ensure they have the best of the best when it comes to safety, comfort and entertainment options. 

It's mainly premium brands in the U.S. that have started offering subscription-based services to consumers – though other players are getting into the market (see below).  But manufacturers (and others) will be going global with experiments of this innovative type of relationship between manufacturer and end-customer. In Europe, LeasePlan recently announced it would enter the subscription market with CarNext.com.

Convenience vs. risk
As self-drive cars will further reduce the bond between vehicle and consumer, will subscription go mainstream? The answer will depend on the uptake by the younger generations that are used to subscription-model services. 

While they are used to the convenience of fixed-price contracts, they are also keenly aware of the risks of all-inclusive pricing. If subscriptions end up more expensive than other usership options, they may not become the success formulas the manufacturers are hoping for. 

  • Volvo: Care

Unveiling its new XC40, Volvo in 2017 launched Care by Volvo, a subscription programme with monthly fee elements such as vehicle delivery, unlimited mileage, vehicle tax and registration, insurance and maintenance. The programme is currently only available on the XC40.

  • BMW: Flexible Mobility

Owners of the plug-in hybrid i8 or the electric i3 each year get 14 days' free access to combustion-engine BMWs, offering them a longer range (e.g. for holidays).

  • Hyundai: Unlimited+

Three flat monthly rates for each of the three trim levels of the full-electric version of the Ioniq: $275 (€223) for the Base model, $305 (€247) for the Limited one and $375 (€304) for the Limited Ultimate one. Deposit: $2,500 (€2,029), duration: 36 months, mileage: unlimited. Includes maintenance for three years and charging for up to 50,000 miles (80,467 km). Offer valid in California only. One disadvantage: subscribers are not eligible for the federal tax credit for electric vehicles. 

  • Cadillac: BOOK

With a monthly fee of $1,500 (€1,218), Cadillac's offer – currently piloted in New York City, Dallas and LA – Is on the pricy side. But it does include pickup and delivery service, unlimited mileage and the ability to switch between various models in the luxury brand's range.  

  • Porsche: Passport

A mobile app gives subscribers flexible access to various Porsche car and SUV models. The formula, which offers the chance to change vehicles frequently and provides unrestricted mileage, includes taxes and registration, insurance and maintenance, as well as detailing. Membership requires an activation fee of $500, and passing a background and credit check. Pilot running in the Atlanta area only. 

  • Carma Car

A multibrand monthly vehicle subscription service, without a long-term commitment but with the advantages of ownership, Carma Car offers the chance to choose a new vehicle every month, and to cancel when no longer required. The company has no fleet of its own, instead using the supply of ex-lease or ex-rental vehicles from banks and rental companies. 
The monthly fee, which includes insurance and maintenance, is set at $399 (€324) for 500 miles (805 km), $449 (€364) for 1,000 miles (1,610 km) and $499 (€405) for 1,250 miles (2012 km) – not cheap, but still better value than renting a car for a month. The service is currently being piloted in the Chicago area, and will be rolled out to additional U.S. cities in the future. 

Authored by: Frank Jacobs