Subscription models are an alternative to leasing a vehicle that started appearing as an experiment last year. Volvo, Ford, Porsche and a couple of other manufacturers launched subscription models through their own networks and technology partners. The impact was questionable at the time because the new system changes not only how you pay for your vehicle, but also how you own it.
More on that in a moment.
But now, Lexus and BMW are in the process of launching their own subscription models and it’s highly likely, based on the uptake, that other manufacturers will jump on the bandwagon in the near future. But with car leasing being so popular as an alternative finance option, why do we need something like subscription models?
How Subscription Models Work
Subscription models are an agreement with the manufacturer or vendor, rather than a financial institution. You, as the customer, pay a monthly fee and in return, you gain access to the cars that are available through the subscription. As an example, you may drive a sedan during the week and then little sports car on the weekend – the choice is yours because there is no commitment to a specific vehicle. Drivers also don’t need to worry about things usually associated with ownership, such as vehicle registration and ongoing maintenance costs. In fact, drivers can select their vehicle online, and pick up the new vehicle without so much as an inspection from the manufacturer as all insurance costs are usually built into the monthly cost.
Subscription Models Have Been Going for a While
But only at the premium end of the market. Subscribers have been able to register for premium vehicles for quite some time, picking up a Rolls-Royce for the weekend, or taking a Ferrari or a midweek spin. This is just an extension of that highly popular model.
So Why the Hesitation?
After all, it looks like subscription models are far superior to lease arrangements, at least for the consumer. And this is one of the reasons that manufacturers and partner businesses have been hesitant to go, “all then,” on subscription models.
They cost more if you are the manufacturer, and are more complicated to maintain. But as with other industries over the last decade, customers have had the last word. As mentioned previously, the uptake in subscription models has been significant, overcoming the other potential issue of non-ownership. A number of analysts predicted the system would fail because car owners are just that – owners. It was hypothesised that they would be hesitant to give up that sense of owning a vehicle simply for flexibility. And to a certain extent, this was true. But the cost savings, including registration and maintenance, were more than enough to convert even some car enthusiasts. After all, if you can drive a two-door Porsche Carrera to and from work during the week and then have an SUV to cart the kids around on the weekend, everyone wins.