Would You Rent Your Next Car?

Remember the days when Netflix would deliver DVDs to your house, so you could send them back after watching rather than buy them for full price, only to accumulate movies in a box by the TV? Today, the subscription trend has evolved into receiving that monthly box of items ranging from makeup to dog supplies, to even upgrading your phone every few months. Subscriptions are more prevalent than ever in today’s tech-heavy society, but would you consider getting your next car this way?

It seems that for some, the answer is yes. Subscription-based car rental services are on the rise, and we’re seeing them pop up across the country. From automakers like Porsche and Volvo offering their vehicles on a month-to-month basis to apps and other forms, it seems like car subscriptions could become the new Birchbox.

What’s out there today?

Subscriptions are ideal if you want to try a new set of wheels every month. Automakers are offering ways to make it happen for buyers who want the latest and greatest without the conventional ties to a lease. But we have to wonder if they could become more than just a luxury in the future. For now, here are the automakers offering this type of model for their vehicles.

Porsche has launched its Passport subscription program, but that’s not to say you’re going to save money by skipping out on owning it. For $2,000 a month, you can swap out Porsche models as much as you’d like, but your choices are limited to certain models. For $3,000 per month, your options open up. Currently, Porsche’s program is only available in Atlanta but it could eventually expand. Porsche’s program will cost you a small salary, but it’s been increasingly catching the attention of younger drivers who want to do things differently.

Volvo also offers a subscription for its popular models, like the XC40 SUV and S60 sedan. And for the Scandinavian brand, theirs has been quite a success story. After announcing plans to expand into the subscription market in 2017, Volvo saw lots of interest in the program. After running the program for four months, they had gone through their anticipated inventory for the year. Perhaps the key to this success was a much lower price point – Volvo starts their Care by Volvo program at $600 per month with a two-year commitment. It is a little more commitment than some other subscriptions out there, as the Volvo plan only lets you trade up to a new vehicle after 12 months.

Cadillac also tried the subscription model, but eventually ended up calling it quits in December 2018. But we have to wonder if their $1,800 per month price tag might have had something to do with the lack of success. However, it sounds like they may have future plans to revive the program. In a statement to The Verge, a Cadillac spokesperson said “the brand will use these insights to make adjustments to the BOOK by Cadillac strategy moving forward.” So we’ll just have to wait and see if they manage to bring it back.

Mercedes-Benz will also launch a service for customers in Nashville and Philadelphia, offering their popular vehicles for $1,095 per month. BMW’s program is comparable in price to the Porsche and Mercedes option on the lower end. But swapping out the German brand’s iconic M Series performance sedans and SUVs will cost you a crisp $3,700 per month.

While we’re mostly seeing these from higher-end manufacturers, we have to wonder if this will start to expand into other parts of the market, too. After all, some of these seem a little pricy. But there’s far more potential to this model than these luxury brands might realize.

Given the high price tag for some of these services, it would be neat to have a chance to drive something the average person would generally have to settle for dreaming of. Many of these programs don’t even include the brands’ higher-end models. Rather, the models available are the popular entry-level models. Why pay $1,099 per month to simply rent a 3 Series? And for $3,700 a month, I’d best be driving a brand new BMW i8 to justify that cost. While the i8 isn’t available in the program, you could lease it for about half the price of the top-tier membership subscription. But then, you don’t have the luxury of trading to something more practical whenever you feel like it, of course. The bottom line here: you get what you pay for. And that’s a brand new car, whenever you feel like it.

But where this model has huge potential is on the lower end of the cost spectrum. Auto loans cost more for longer amounts of time, causing many to struggle with their monthly payments. Offering an alternative method to auto finance might be really helpful for consumers. The subscription method could be a very viable way to get a car without having to struggle with the long-term commitment to a loan or lease.

For now, manufacturer subscription-based programs are mostly benefitting those who don’t want to be caught in last year’s Mercedes or Volvos. But with lots of support from the younger generation and a model that helps get people their dream car (without the commitment of paying on that dream car for four to six years), it’s looking like the luxury market might just be onto something with these subscription programs.

 

SOURCES

https://www.theverge.com/2018/11/2/18050020/cadillacs-car-subscription-service-shutting-down

https://www.washingtonpost.com/business/2019/02/12/record-million-americans-are-months-behind-their-car-payments-red-flag-economy/?utm_term=.bb3dfb4cbd84

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