The way consumers choose their next car might have more in common with Netflix than the traditional retail system that's defined the automotive industry for more than a century.
A plethora of vehicle subscription services being rolled out offer customers the ability to make all-in, month-to-month payments and the option to frequently switch vehicles as their needs change. Some let subscribers go from sports car to SUV to sedan in a matter of days; others limit swaps to a certain number of times per month or over the course of a year. A few operate more like short-term leases, allowing an upgrade after 12 months, for example, mimicking smartphone plans that let users snag the latest model each year.
But many questions have yet to be answered in the rush to capitalize on the subscription movement. Automakers and vendors are still grappling with how much to charge, how to handle inventory and distribution, and how — if at all — to involve dealers.
Volvo, Lincoln, Cadillac, Hyundai and Porsche, along with startups, auto lenders and dealership groups, have all been experimenting with some form of subscription service within the past year. BMW launched a pilot subscription plan in Nashville just last week (see story, Page 57), and Mercedes-Benz plans to launch pilots in two undisclosed cities in June.
Many of the offerings are focused on new vehicles, but some create another avenue to move lease returns and other used vehicles. Prices often look steep, even after calculating the benefit of free insurance and other included costs. Book by Cadillac's monthly fee is $1,800, and Porsche's Passport pilot in Atlanta charges up to $3,000. In addition, there's often an upfront fee just to get started.
While subscriptions are unlikely to entirely supplant traditional leasing or vehicle ownership, the companies introducing them as an alternative are seeing strong interest in certain demographics, particularly millennials who want commitment-free flexibility and might never have purchased a new vehicle the customary way.