Vehicle Subscription Services Emerge as New Car Ownership Model
During 2017, a new vehicle ownership model took root that blends aspects of leasing with aspects of renting, aiming to bring simplicity to your life. Instead of haggling over price, arranging a loan, obtaining your own insurance, and figuring out where to take a vehicle for service, you can instead subscribe to use a fleet of vehicles at a monthly payment that includes everything but fuel.
Book by Cadillac was among the first of these programs, announced as a pilot project in New York City that has grown to include Dallas and Los Angeles. Pitched as an exclusive membership program, you apply to join and if you are accepted you pay a flat monthly fee of $1,800 for access to five of Cadillac’s higher-priced vehicles. Everything is taken care of except for gas.
Since then, several car companies have announced vehicle subscription programs, and not all of them are expensive. For example, Hyundai rolled out Unlimited+ for its Ioniq Electric, which is sold in California. The monthly rate is as low as $275 per month.
At the other end of the cost spectrum, Porsche Passport offers two subscription rates. For $2,000 monthly, you can access the 718 Boxster and Cayman, the Cayenne, and the Macan. For another grand, Porsche adds the 911 and Panamera to the menu. That’s pricey, but there are no mileage restrictions and you can change vehicles daily if you wish. For now, the service is offered only in Atlanta, the location of Porsche’s North American headquarters.
Care by Volvo is another appealing program, launching with the debut of the company’s XC40 small crossover SUV. The monthly payment starts at $600. You choose between two levels of equipment, agree to a 24-month service term, and you can upgrade to a new vehicle after the first year. The program is restricted to the XC40, however, and there are mileage limits.
Lincoln takes a different approach, testing a program with a variable payment structure depending on which vehicle you want to drive. You can go the more affordable route by choosing the MKC SUV or MKZ sedan, or you can pay more and drive a Continental or Navigator. You drive each vehicle for a month, with the option to switch or stay in the car for a longer period of time.
Used cars are fair game, too. Ford is piloting a subscription service called Canvas (drivecanvas.com) in the Los Angeles and San Francisco regions, offering subscriptions to its certified pre-owned vehicles. They include insurance, warranty coverage, maintenance, registration, and roadside assistance. You drive each vehicle for a month with a pre-determined mileage limit, and you can switch from, say, a Ford F-150 to a Mustang convertible or a Lincoln Navigator if you want to.
TrueCar founder Scott Painter is also getting into the game with Fair, a new app that serves as a clearinghouse for dealers’ certified pre-owned vehicles. It, too, aims to simplify the selection and ownership experience. Everything is handled within a smartphone app, from application and approval to vehicle selection, and when all of the paperwork is in order the dealership delivers the car to your home or office. You do make a down payment, but you also have month-to-month flexibility in terms of remaining within the program or switching to a different vehicle.
The question is, then, how appealing are these programs?
Speaking from the point of view of a prospective Gen-X customer, I find them very appealing. In particular, Ford’s Canvas program is of special interest because it offers maximum month-to-month flexibility combined with a menu of vehicles ranging from sports cars to full-size pickup trucks to luxury SUVs.
Additionally, studies indicate that Millennials don’t want to haggle, or be upsold by dealership F&I departments, and that leasing is especially popular with younger car shoppers.
Building on the concept of leasing with non-negotiable payments that include everything is appealing to this age cohort. Millennials are accustomed to comparison shopping online; paying subscriptions for all-inclusive phone, data and service plans; completing financial transactions via smartphone apps; and exercising the freedom to switch when their requirements change. Given that this age group will comprise 40-percent of the car buying market by 2020, adapting to their buying preferences is critical.
However, vehicle subscription services are not for everyone. If, for example, you have lots of kids or you’re the designated carpool driver, your flexibility in terms of vehicle choice is limited. Similarly, these programs are best for people who take conscientious care of their vehicles, and who don’t wish to personalize them in any way. Regular transfer of pets might also incur unexpected costs when switching vehicles.
Furthermore, based on a cursory examination of the monthly payments listed by Canvas and Care by Volvo, in comparison to the vehicle my own family leased in August, the value associated with them is questionable.
For example, for what my family pays for a new 2017 Acura MDX with front-wheel drive and the Technology Package, and taking both our insurance and registration costs into account, using Ford’s Canvas program we could have selected a used 2015 Ford Explorer Sport with all-wheel drive instead. Volvo’s program would have put us into a new, but much smaller, XC40 T5 AWD R-Design, though the mileage limit for the Volvo is 50 percent higher than with our own lease.
In any case, subscribing to a vehicle is an appealing alternative to traditional buying and leasing models that involve price haggling and separate transactions for insurance, registration fees, and maintenance. This model might not be suitable for everyone, but as Lincoln president Kumar Galhotra understands, “the greatest luxury is time.” And that can apply as equally to a Hyundai Ioniq Electric driver as it might a Porsche 911 driver.
The only requirement on your part is understanding what you can afford to pay each month, and how far you’ll need to drive.