Unsubscribed: The Problem With Car Subscription Services
Automakers are trying everything under the sun to turn a larger profit these days. Building and selling cars is no longer enough. Manufacturers now offer data plans, rental services, lifestyle products, and much more. One of the newest additions to their collective portfolio is the subscription plan — which yields customers a vehicle, insurance, maintenance, and other perks for a monthly fee.
However, as the concept is preparing to enter the mainstream market, the value of such programs have been called into question. While subscription services look like one-stop shopping, often providing users with the ability to swap models throughout the year, their cost effectiveness comes into doubt when one examines the bottom line. We’ve been skeptical for a while but Edmunds recently crunched the numbers to find out for sure.
“At these price points that we’re seeing, [a subscription service] virtually makes no sense to anyone,” Edmunds senior analyst Ivan Drury told Automotive News during a presentation on industry trends.
Using BMW’s $3,700 per month subscription plan as an example, he showed exactly how much more the program can cost customers. Access by BMW gives access to high-end vehicles such as the X6 M but it comes to $133,200, or double what it would cost to lease the vehicle for three years. Keep in mind that swapping to a less expensive model during that time would effectively reduce the plan’s cost effectiveness even further.
“If you went the other route versus the subscription cost … you could essentially have two,” Drury elaborated. “You can make your own miniature fleet. You don’t even need to use their program. So, it’s not going to be worthwhile for a lot of people who are going to do the math. It’s just a rich person’s toy.”
BMW does offer a less expensive subscription program at $2,000 per month. But, based up leasing offers we found on the more expensive models in its U.S. rotation (the M2 Competition and X5 xDrive40e iPerformance), you’re still spending nearly double. Although, subscription plans from other manufacturers don’t seem quite so bad if you spend the majority of your time in the more expensive models.
The Mercedes-Benz Collection plan starts at $1,095 and still nets you the concierge service that has a Daimler employee dropping off your chosen vehicle at a predetermined location. It’s still more expensive than leasing but, if you’re really into car swapping and like the white-glove treatment, it’s a semi-affordable alternative to BMW.
However, a spokesperson from Mercedes said that the comparison between the subscription plans and leasing wasn’t exactly fair. “This is not competing with leases,” the company said. “It’s for different needs, different mindsets, different psychographics. They’re paying a premium for the ability to do what you can’t do out of any other type of automobile acquisition.”
Fair enough, but there are examples of it being done in a way that will make you think twice about leasing. Care by Volvo is a subscription plan that has come with some problems. Customers have seen their delivery dates pushed back repeatedly as they wait for a vehicle. However, the pricing is actually competitive when you account for the added costs associated with leasing (insurance, down payments, etc). But whole point of a subscription service is access to a premium experience and ease of use, regardless of if you’re trying to hop into a $105,000 BMW X6 M or $33,000 Volvo XC40. If that aspect of it fails, then it’s impossible to rationalize the added expense.
Other brands have seen troubles as well but it has often been due to a limited supply of vehicles to meet demand. That sounds like a major victory for the automakers but it has been unclear if the issue stems from an overwhelming response from consumers or simply a problem with logistics
Will these services eventually be rolled out into mainstream brands? Most likely. “[The] thing that I think would be far more appealing from a regular consumer standpoint is having a diverse lineup,” said Drury. “These luxury automakers — they don’t have a minivan, they don’t have a pickup, they don’t have these other things that on occasion you might actually want to borrow.”
Edmunds claims that the mass-market appeal of such services lies in the ability to draw from a diverse lineup. With luxury manufacturers you really only have sporting sedans/coupes and SUVs. But that stable would be exceptionally diverse from an automaker like Fiat Chrysler, presuming it gave you access to all of its brands. Of course, that hasn’t happened yet but FCA is launching its Jeep Wave membership program offering three-tiers of access sometime next year.
While it will offer many of the same perks as its upscale competitors, it will cater to a broader demographic. Up until now, most of the subscription plans have had names like “ Book by Cadillac” and “Porsche Passport.” However, pricing for the mainstream market remains an issue. Would customers on a tighter budget be comfortable paying a premium on Ford vehicles when they’re only going to want the F-150 a couple times per year?
We think car sharing services like Zip Car and General Motors’ Maven may have already nipped this in the bud. There are also traditional rental outfits that can take care of most other needs. If you only need a pickup truck or utility van for the day, you can rent one with relative ease. You might not get the cleanest vehicle in the best condition, and you’ll have to pay a daily or hourly rate for it, but you will also probably end up saving money in the long run against any subscription service.
Consumer advocate tracking industry trends, regulation, and the bitter-sweet nature of modern automotive tech. Research focused and gut driven.
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