Deep Dive: Taking Vehicle Subscriptions For A Spin

Digital License Plates and the Connected Car Ecosystem

Customers who need long-term vehicles now have options other than just buying or leasing. Several automakers, mainly from the luxury market, are turning to subscriptions to give consumers more flexibility and access to their vehicle lineups. The following Deep Dive looks at the rise of vehicle subscriptions and how the model is changing access to automobiles.

Vehicles and homes are among the most expensive purchases consumers make. But unlike homes, vehicles typically depreciate in value as automakers continue building new and improved models with additional features. This means vehicle owners are making large investments in purchases that will ultimately lose value upon being resold.

To address this, several automakers are ready to shift into the subscription lane and give consumers more flexible access to vehicles.The following Deep Dive examines how subscriptions are changing the automotive landscape.

The Trouble With Vehicle Leasing

In some ways, the subscription model framework has long been a fixture in the automotive market.

Leasing became a popular alternative to vehicle ownership in the 1980s. Lessees pay a monthly rate for a vehicle and, at the end of the lease, can either pay for the remaining market value of the vehicle or return it to the dealership with no obligation.

Leasing offers customers an alternative to ownership, but the business model comes with restrictions like lengthy commitments. Most lease contracts range from 36 months to 72 months.

Leases also lack flexibility. Once a consumer leases a certain vehicle, that selection cannot be switched before the lease runs out. This means unexpected events, such as moves, could force lessees to break their contracts early and face hefty financial penalties.

Given the limitations associated with buying and leasing, subscriptions have emerged as alternative paths to vehicle access.

A Subscription Vehicle Surge

While the vehicle subscription model is relatively new, it shows signs of shifting into the fast lane. Recent projections indicate that the global automotive subscription market will grow at a CAGR of 71 percent between 2018 and 2022.

One of the key benefits of a vehicle subscription is easy access to a new model. When subscribers tire of their current rides, they can access new ones with fewer hassles. Subscribers are not faced with selling their current vehicles or breaking leases before they expire. What’s more, many subscription offerings also include maintenance, repairs and the cost of insurance.

Several automakers have already launched subscription ventures to lure more customers, with luxury merchants leading the charge.

Germany-based BMW, for example, offers subscription access to its vehicles through its Access by BMW program. The program costs between $1,099 and $2,699 per month. Depending on customers’ subscription tiers, they can access the 330i, X5 and 5 Series vehicles. The most expensive plan offers access to the M Series, BMW’s performance vehicles.

Fellow luxury automaker Audi gives subscribers access to five vehicle options — the A4, S5 Coupe, A5 Cabriolet, Q5 and Q7— for $1,395 per month. Audi’s plan includes unlimited mileage and allows subscribers to swap vehicles twice per month.

One of the more expensive offerings is Porsche Passport. Subscribers pay between $2,000 to $3,000 per month for access to different vehicles in the brand’s lineup, including the Boxster, Cayman, Macan, Panamera and 911.

Beyond Luxury Vehicle Subscriptions

There are more affordable options for customers eager for vehicle subscriptions, however. Swedish automaker Volvo offers one option. The company’s Care by Volvo subscription gives consumers access to the luxury XC40 SUV or its S60 sedan. Pricing ranges from $650 per month to $850 per month, and allows drivers to travel up to 15,000 miles per year.

American automakers are also putting subscription vehicles to the test. Ford recently launched Canvas, which offers subscribers access to one of several Ford vehicles, including the Focus, Fusion, Escape and Edge. Subscribers can also select vehicles from the company’s luxury brand, Lincoln. Plans start at $329 per month.

Some third-party companies are also offering a more flexible model for consumers.Early players in the cars-as-a-service (CaaS) subscription market include Fair and Mobiliti. Both companies allow subscribers to select vehicles using an app and pay for access as needed.

Subscription plans give customers access to the vehicles they choose and free them from the complications of leasing and ownership — letting them walk away when they want. Subscribers can often cancel their plans when they want to, without being beholden to lengthy leases.

With new subscription models available, these older methods of accessing vehicles could lose favor with consumers and dealerships looking to move inventory. As subscriptions gain popularity, buying and leasing vehicles could wind up in the automotive market’s rearview mirror.