Do you plan to buy, lease or subscribe?
That could be a common question from lenders and dealerships as vehicle subscription services grow as an alternative to car ownership in coming years.
Vehicle subscriptions essentially package car ownership into a monthly fee that includes insurance and requires no long-term commitment. Some services charge thousands of dollars a month for luxury vehicles, while others offer mainstream vehicles for less. Most deliver a vehicle on demand and allow users to switch vehicles based on their needs.
"The industry is really exploring these business models as a means to attract some customers who maybe did not or could not own their own vehicle," said Jeremy Carlson, principal analyst at IHS Markit.
IHS forecasts that "mobility as a service" will grow to represent more than 10 million vehicles sold in 2040 compared with about 300,000 in 2017. A small part of that growth is expected to be subscriptions.
This year, Cadillac launched a pilot subscription service, Book by Cadillac, in New York. This month, Porsche rolled out its Porsche Passport pilot in Atlanta, and Cadillac expanded its service to Los Angeles and Dallas.
"Just like leasing was quite revolutionary in the 1970s but has remained a primary way of accessing luxury vehicles, we hope subscription also has that potential," said Melody Lee, global director of Book by Cadillac.
The Cadillac and Porsche services offer delivery and pickup, luxury touches that the brands hope set them apart and attract new customers. Lee said about 90 percent of Book by Cadillac's subscribers in New York had never owned a Cadillac. Porsche declined to discuss details of its service this early in its launch.
Startups, auto lenders and some dealers also are getting into subscriptions.
One pioneer is Drive Flow, owned by Flow Automotive Cos., a dealership group with 38 franchises in North Carolina and Virginia.
"For us, it was a very natural fit," said Eric Flow, president of management services for the Winston-Salem, N.C., group and Drive Flow. "It's not necessarily a replacement for our core business. It could be over time; it's an additional offering."