What if, when faced with the difficult choice of escaping the Matrix by red pill or suspending the illusion with a blue pill, our boy Keanu could have instead opted for a third, tasty green pill that gave him the time, resources, and knowledge to make an informed decision about these really stressful ultimatums Larry Fishburne was throwing at him?
While car shopping isn’t quite as nerve-racking as discovering you’re living in a computer simulation, for some it’s still pretty awful. And until now, potential new car owners faced two options: buy or lease. But thanks to those Netflix-loving, smartphone-hugging Millennials, there is now a third, tasty alternative for you to consider: car subscription services.
Uhh… What? Car Subscription Services?
That’s right friends, falling somewhere between leasing and renting lies car subscription services, a new option for commitment-phobic drivers who want to play the automotive field. Much like leasing, car subscribers don’t own the vehicle, but they also don’t commit to a two- or three-year contract, either. “Instead, you get the use of a car for an all-inclusive monthly fee,” explains car resource company Edmunds. “The fee typically covers insurance, roadside assistance, and maintenance.”
In a world of people who choose their evening playmates by an apathetic right-swipe, the ability to commit part-time to a vehicle without the usual hang-ups is pretty attractive to some. Originally introduced by upmarket automakers like BMW, Cadillac, Volvo, and Mercedes-Benz, car subscription services began as a kind of experiment to address lagging car sales. As vehicle prices continue to soar, loan terms are stretching six or seven years and many motorists are choosing to hold onto their vehicles longer. According to an IHS Markit study from 2016, the average age of light vehicles on the road now falls somewhere around 11.6 years.
Why Should that Stop Me?
But this is America! We practically invented “Fake it ‘til you make it,” and we won’t be dissuaded from our dream cars by a little thing like staggering personal debt. Prospective buyers still want new cars, if not for the prestige then for the ever-advancing safety features. And they’re not afraid to explore new avenues on their quest to ownership.
With car subscription services, consumers can not only get into a newer car—they can get into a different car as frequent as every few days. “For example,” continues Edmunds, “you could drive a sedan during the week and switch into a sports car or an SUV for a weekend trip.” (A kind of flexibility that could do wonders for a Millennial’s growing Instagram following.)
Who Would Spring for Car Subscription Services?
The line between ‘want’ and ‘need’ continues to blur, with piecemeal payments becoming an attractive solution for limited budgets. According to Forbes, “In developed markets like the UK and the US, subscription-based ownership models have already crossed 10% of monthly household incomes.” With monthly subscriptions for TV (Netflix), music (Spotify), beauty supplies (BirchBox), and even dinner (BlueApron), why not transportation?
The convenience, variety, and technology baked into car subscription services is undoubtedly what makes them so appealing to a niche group of shoppers. And with a wide spectrum of term options, they can reach a variety of audiences. Millennials who favor tech-savvy mobility solutions over high interest loans and binding leases, Gen X enthusiasts with an expendable income who like the idea of upgrading their ride on the weekends, immigrants and visa holders looking for affordable short-term transportation, and even traditional shoppers who are simply fed up with current purchasing processes.
Throw in no down payments, no negotiating terms, and the ability to handle everything from a smartphone, and many companies are asking “Who wouldn’t be interested in car subscription services?”
In fact, they’re betting on it.
“Carmakers are launching subscription services at a steady clip,” says Edmunds. Indeed, in addition to the few manufacturers mentioned above, Audi Select recently launched in the Dallas-Fort Worth area, Porsche Passport in Atlanta, Carpe by Jaguar Land Rover in the UK, and Ford’s used-car service, Canvas, in San Francisco and LA. Jeep plans to roll out a program by 2019 and Polestar, Volvo’s EV line, expects to offer something by 2020.
Tech startups refuse to miss out on the action, too. Companies like Flexdrive, Less, Borrow, Fair, and Mobiliti (Are we seeing a pattern here in this naming structure?) all currently offer a variety of car subscription services in select hip cities across the country. Insurance companies are also getting a piece of the pie, seeing the profits in shacking up with an automaker and bundling coverage into a monthly car service fee.
So How Much Do Car Subscription Services Actually Cost?
Championed as a hassle-free, short-term leasing option, car subscription services aren’t the be-all, end-all solution. Much like traditional avenues, they can land a customer in hot water if a package is selected without careful consideration. Edmunds points out that while specific instances can definitely produce savings, the macro view is a little more unsettling.
For example, when comparing a three-year, 12,000-mile lease for a BMW X6 M with average insurance costs to a three-year subscription through Access by BMW for the same vehicle, Edmunds found that the lessee was looking at an expense of roughly $68,974 while the subscriber would be paying a staggering $97,739. Granted, the latter would be receiving double the yearly mile allowance and an unlimited opportunity to “flip” cars, i.e. swap models, but that’s still an enormous difference.
However, those parties opting for high-end car subscription services aren’t really concerned with saving money. They also wouldn’t be driving the same BMW for three years. The point of the service is variety on a whim; a libertine approach to car buying. And automakers are all too happy to deliver. A low-investment way to milk more profits from off-lease vehicles as well as secure consistent cash flow from subscribers? Hard yes coming from the top dogs.
But those shoppers who are looking to save money should choose wisely. Currently, third-party car subscription services offer the cheapest terms. A subscription through Fair (owned by Uber) could start as low as $200 a month, supplemented by your own insurance. With routine maintenance included and the ability to walk away at any time, that’s a viable option for people who can’t—or don’t want to—commit to a long-term contract. “Think of it like any other subscription,” says CNET. “Sign up for what you want, cancel it when you’re done.”
What Could This Mean for the Aftermarket?
Future car subscription services could easily come with options for navigation equipment, fuel stipends, and even personal drivers. And while this presents a more digestible alternative to self-driving robot cars, it still spells trouble for the aftermarket. As if leasing weren’t a big enough hurdle to jump, retailers and restylers are now faced with another growing segment of drivers who can’t modify their vehicles for fear of pecuniary loss.
Clearly, America’s relationship with car buying has changed over the years. And whether or not the urban Millennials targeted by this new sales model latch on, make no mistake: It is their concept of the future that is pushing this technology forward.
It’s true, this is still a new phenomenon. Cox Automotive reports that only about 25% of consumers are even aware of car subscription services, and even less would consider using one. But as major industry players invest more time and money into this and other alternative revenue streams, the aftermarket should be prepared. Because while car subscription services represent a veritable cash cow for automakers and dealerships, they could definitely hurt traditional auto shops.
However, time has proven that the OEMs will never be able to cover all bases. Aftermarket professionals should continue doing what they’ve always done: listen to consumer complaints with a friendly ear—and a convenient solution in their back pocket.