Major automakers are experimenting with a new type of car ownership — offering customers subscriptions instead of multi-year leases or outright sales.
Ford, Cadillac, Porsche and Volvo are the current entrants in this fledgling market. Each vehicle comes with a mileage limit that the customer selects and users pay a premium for going over the prescribed mileage, but unused miles also roll over to the next month or year. Additionally, subscriptions include maintenance, insurance, roadside assistance and registration. If a user tires of their vehicle or finds they need more space or better gas mileage, he or she simply selects a different vehicle online and arranges a delivery.
Automakers are appealing to tech-savvy Generation Y consumers who have become accustomed to flexibility and choice when buying essential services. Increasing focus on alternative transport for environmental reasons and the growing prevalence of ridesharing means consumers have more personal transportation options than ever before, so manufacturers are seeking new ways to maintain their respective marketshares by reaching an emerging demographic in innovative ways.
Services like this also take the hassle out of comparing insurance quotes, maintenance costs and department of motor vehicle paperwork. In a sense, car ownership becomes more like a cell phone plan. Users are subject to credit and background checks and may need to enter an annual or biennial agreement.
Right now, the programs are limited in scope and availability.
- Ford: Customers in Los Angeles and San Francisco browse certified used vehicles on the Ford Canvas website and set their subscription terms. Rates vary based on service terms and vehicle, but start at less than $400 per month.
- Cadillac: Book by Cadillac offers customers in New York City, Los Angeles and Dallas the ability to subscribe to vehicles for the rate of $1,800 per month, plus an initiation fee. All vehicle models are from 2017 or 2018 and of a premium trim. Mileage tops out at 2,000 miles per month and vehicles swaps are limited to 18 per year.
- Porsche: For between $2,000-$3,000 each billing period customers have access to one of 30 Porsche models available. There is also an activation fee. However, there are no limits on miles or vehicle changes. Porsche Passport is currently available in Atlanta.
- Volvo: Care by Volvo will launch in California in 2018 and offer customers the XC40 crossover at $600 or $700 per month, depending on trim. Drivers receive 15,000 miles per year and cannot exchange to a new XC40 until after one year.
Other manufacturers are taking note. Audi has launched Audi On Demand, although it is more akin to car sharing than a recurring subscription. Additionally, experts and analysts have predicted that car ownership in the age of autonomous automobiles will starkly contrast with what has been the traditional vehicle sales and leasing business models. It’s possible that subscription-based auto services are the first step to absolving drivers of personal vehicle ownership altogether.
There are also some obvious downsides to this concept. Consumer choice is limited by the vehicle models, colors and trims available, but also by what companies have paired with the subscription services. For example, Ford Canvas autos come with Liberty Mutual insurance, even if another coverage option might be cheaper. People are also limited by how personalized they can make their vehicles — Foxy Grampa bumper stickers (or any bumper stickers for that matter) won’t be acceptable on a vehicle the subscriber doesn’t own. Lastly, users are not building equity into a vehicle and will lack negotiation leverage when looking to purchase or lease in the future. Users should not expect the option to buy their vehicle at the end of a subscription, as they would with a lease.
Right now these subscription auto services are little more than pilot programs. It is entirely possible that consumers reject the subscription model or automakers find the programs ahead of the times.
Nonetheless, there is something very appealing about driving to work each day in a different Porsche.