A new car every month. A car subscription is exactly what some car manufacturers and leasing companies are offering in selected countries. This relatively new service is intended to complement increasingly popular operational leasing and could quite possibly shake up the car market. What will be the impact?
What is a car subscription?
A car subscription is a kind of intermediate stage between a rental company and a traditional operational lease. As with a car rental company, the customer does not need to worry about anything – service intervals, tire changes, insurance, road and environmental taxes, and in the case of electric or hydrogen cars, sometimes even charging is included in the service. The user only has to take care of refueling, windscreen washer fluid, tolls, and parking fees, nothing more – in short, a car as a service. Many subscription services even include delivery of the car to an agreed address.
The key here is the duration of the subscription – it ranges from a single month to a quarter, half year, nine months, or a year. Sometimes, for example with Porsche USA, it is possible to rent a car for a single day. Car subscriptions are offered in various markets either directly through car manufacturers, leasing companies, or rental car companies. It is a special market where all these players compete at the same level. After the end of the several-month contract, it is possible to continue with a new car or terminate the contract.
Subscription vs. leasing
At first glance, the differences between a subscription and leasing may not be obvious. The main difference is the duration of the contract. The second difference is that opposed to a regular lease, it is not possible to buy the car at the end of the contract, like a car rental service. A key difference compared to operational leasing is that car does not have to be new and that it is not possible to choose its configuration. Most offers include cars that are up to two years old and a pre-selection of models, engines, and equipment.
The truth is that current operational lease offers are sometimes very similar to subscriptions. There are leasing providers that offer only annual or even six-month contracts, and in addition to insurance and taxes (road and environmental), they include tire rotations and service in the lease. These offers are not available in all markets, and they are also not always welcomed with open arms. Car subscriptions can also be attractive from a marketing point of view. In the days of Spotify, Netflix, Adobe Creative Cloud, and Microsoft Office 365, more and more companies and consumers are getting used to everything in subscription form. In many markets there are even mobile phone or laptop subscriptions. So why not “sell” and especially promote cars in the same way?
Who will benefit from a subscription?
A subscription would be ideal for new drivers. Of course, most providers know this, and that’s what they’re trying to prevent. Many services require a minimum age of 25 and several years of driving experience. So, for new drivers, the service is, so far mostly unavailable.
However, there are other usage scenarios for the retail segment. A family car for a few months is suitable for employees who have been recently fired and need to return their company car, or for those who take a so-called sabbatical for exactly six months or a year. In some countries, the possibility to cover the absence of a company car applies to a large group of customers who would welcome such an offer with open arms.
Car enthusiasts might enjoy another option with brands such as Porsche. Having a new, and especially different Porsche every month is a childhood dream of many boys. But few can afford it. At $3100 a month plus tax, which is the price of Porsche Drive in several major cities on the West Coast of the United States, such a dream becomes a reality, if only for a few months.
The ideal target group is also companies, especially those running a seasonal business. With limited contracts, they can rent company cars only for a few months, for example during a given season. However, it could also be advantageous for companies employing interns or employees from other branches. Another interesting target group could be contractors who are in a location for only a few months before they finish their contract.
And then we have an electric car subscription. For many companies they serve as a demonstration of the company’s commitment to the environment. And being able to show purely electric cars at summer company events for example, is something that many companies would be interested in. After all, Citroën chose to cooperate with selected companies to offer its utility vehicle, Ami, as a subscription. And other manufacturers such as Mercedes-Benz or Ford have also begun to offer a subscription service for their commercial vehicles.
Car subscriptions are gaining traction
But do car subscriptions have a chance to gain traction in the market? Definitely yes. It just may not be a widely available service. They can be expected to address only specific segments and parts of the market. However, as you will not find them everywhere in the US, the same is true for Europe. But how will car subscriptions change the market?
Some automakers want to go the way of direct sales or sales through their own financial institutions. Of course, this will not please dealers much, especially if the pricing policy will be more favorable then buying your own car. But carmakers will not be able to service the cars themselves. Dealers will be needed for this. For dealers, it pays to cooperate with car manufacturers. Those who are more proactive will have an advantage. This will especially apply to larger dealerships with multiple locations.
Those who have solid CRM data and know their clients will have a better bargaining position for car subscriptions, not only in cooperation with manufacturers. Dealers using advanced specialized CRM systems such as Automotive CRM, which offers a 360° customer view including social network interactions, will be able to generate quality leads for subscription services.
In addition, dealerships will be paid a handsome fee for providing quality leads, just as they do today with leases and loans. At the same time, winning a customer if only through a commission on the car subscription and service can be a source of new income. After all, it can be expected that car subscriptions will be purchased by different customers than those who typically come to buy a new car. And how are you prepared to take advantage of the opportunity that car subscriptions bring?