Hammer Time: Financial Hypnosis On A Per Mile Basis

The three year lease.

It entrances and traps the most spellbound car aficionados into a monthly payment that keeps them at the altar of the car payment.

Is that a bad thing? Well, depends on the way you want to look at it. What can’t be argued is that both sides get what they want, and after three years, that customer can choose to stay with the manufacturer or go somewhere else. To me at least, that seems like a fair bargain.

But what if the automaker could offer a better deal? For both parties?

Per mile cost of ownership models are still in their infancy. Yes, there are tacky penalties that are added to most lease agreements in the U.S. and elsewhere. Other countries have also developed unique pricing models, such as in Israel. Where car buyers (in the absolute loosest meaning of that phrase, since most cars are leased) get to own a car for a specific period of time, and then skip the last ‘ballon payment’ and give it back to the dealer who initially sold it.

What I’m thinking is a bit simpler than that.

You have a sliding scale. New cars would start off on the same type of leases that exist now, except they would be marketed on a per mile basis.

Lease a Corolla for only 25 cents a mile! Blow your financial brains out on a BMW for only 59 cents a mile! There would be minimal mileage requirement, say you have to pay for at least 10,000 miles a year, and all the other usual small print that comes with a typical lease.

Except it wouldn’t be a lease. You would be renting it and have an automatic draw done on your credit/debit card on a weekly basis. No hassle. No haggle. Just a flat rate for as long as you want to own drive the car.

Sounds a lot like the past standard rate plans we have with cell phones? Well, sure, but a driver can do a lot more damage to a car than a cell phone. The manufacturers want to protect their own assets, and auto insurance companies don’t make allowances for the lead foots and pigpens of the modern marketplace.

So with that in mind I want to immediately inform you that there will be a few (cough! cough!) restrictions and opportunities that would come with the contract.

Let’s start with the good news. Low cost and no obligation. Insurance, maintenance, taxes… everything except the source of propulsion would be paid for with your per mile rental price. If either you or the automaker are unsatisfied at any time, simply make the necessary arrangements and move onward with your lives. No debt. No worries.

If you don’t like the way the car drives, looks, steers, looks or smells, you can throw that smelly fish back in the sea of automotive inventory. Of course that luxury would come at a premium on your per mile price. But the actuarial scientists will figure out a way to make it all work for you.

They may also ask for a few healthy modifications to your driving style.

For starters, the speed limit IS your limit. There will be a little warning light that will post on the dashboard for excessive speeds.

During such times your car may be ‘throttled’ to limit the excessive acceleration. Sounds Draconian? Cell phone providers have been doing it to you for quite a while now.

You could press the emergency button to override this feature, which would immediately notify the nearest law enforcement officers that you need to proceed to the nearest medical center. As a public service you will be escorted. and of course, a false alarm associated with abuse of the manufacturers property will result in immediate loss of use of said property, speeding fines, public endangerment fines, a bill for unwarranted use of public services, remedial driving classes, community service, and an uncomfortable visit with the dour men who wear black robes.

Then again, what’s there to worry about? You, Mr. Customer, aren’t a lawbreaker. So obviously you won’t have to worry about any of this. As a courtesy, let me inform you of a few other things you won’t have to worry about.

Certain irrational driving behaviors that can damage the vehicle, such as shifting from reverse to drive, will first be met with a warning. Then a fine. Then the disabling of the vehicle with nearby officers en route while a driver training video blares forth on the dashboard.

It may be this one for distracted driving.

This one for excessive speed. (Note: NSFW)

Or even this one in the case of an odd vehicular malfunction.

Long story short, there will be no hooning with these rented rides. No texting. Hell, you better be wearing gloves tighter than OJ’s to make sure it stays in clean condition as well. The low cost of the rental is entirely dependent on a high resale value, which means you must walk that line you agreed to when you signed on the dotted line.

What else? Seat belt? Emergency brake? Mirrors? Turn that phone off!

And a 5 cent per mile credit for good behavior… at least for now…

Here’s the brutal truth folks. I know that there are a few (cough!) exaggerations with this model. And yet, if the marketplace eventually moves forward with driverless vehicles, virtually everything I mentioned above may become a reality for millions of people who see cars as little more than transportation modules.

In otherwords, the majority of today’s automotive market.

Most consumers don’t want to own their cars. They don’t want the debt of a consumer loan. They don’t want to pay lump sums in taxes, insurance and a long line of licensing fees. And they certainly don’t want to be caretakers of a piece of property that they don’t even know how to maintain.

Some of these consumers want low cost while others want excitement. Not so much ‘driving’ excitement, but ‘fashion’ excitement. They want to be seen and be seen in the hottest fashion accessory, while the other folks just go about their business in a comfortable minimal cost module.

Enthusiasts, like you and me, are a declining market. I don’t believe that this is the case because enthusiasts aren’t willing to pay a direct premium for the joy of their ride. Miatas, Vettes, Mustangs, Camaros and the FR-S all call out to our joy of driving. The manufacturers aren’t the ones letting us down here.

What’s killing the enthusiast is the cost of that fun in the form of revenuing schemes by local and state governments, higher taxes and fees, substantial higher insurance costs, and that hidden tax that comes with getting nailed on the open road. This is especially true for the young adult enthusiast. One bout of responsible driving at a high rate of speed for them can result in a four figure blow to their bottom line. Most young people can’t afford that, and once they get stung with that venom, many will opt for the low cost lemming model.

I think in the future a lot of manufacturers and third parties will embrace a permanent rental model. The car ‘note’ will be sold to a third party in much the same way as collateralized debt obligations and your own car note are already sold to third parties. They will be able to handicap you based on your past driving behaviors, and a trade will be made.

Your freedom, for less money.

I know most of you wouldn’t make that trade. It’s the ones who have other priorities in their life that I’m not too sure about.

Would it be a bad thing?