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Could Car Subscriptions be the Future of Vehicle Ownership: Analysis

Edmunds, a respected auto industry resource in the USA, has been crunching the numbers associated with such schemes. However, the bad news is that at this point Edmunds has dismissed them as nothing more than a "rich person's toy."

AFP Relaxnews

Updated:July 17, 2018, 12:15 PM IST
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Could Car Subscriptions be the Future of Vehicle Ownership: Analysis
Will the car subscription model take off as companies hope? (Image: AFP Relaxnews)
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Polestar pretty much kicked things off last year when it announced its first vehicle, the Polestar 1, would only be available on a subscription basis. Since then, Mercedes, BMW and even Ford have been trialling these schemes where customers pay a single monthly fee to cover just about everything other than fuel. Like a lease, subscriptions are more of a long-term rental agreement, except the fee covers maintenance, insurance, taxes and in a number of cases allows the subscriber to swap between different models in the same price band. It seems in these times of increasingly squeezed profit margins for new vehicle sales, manufacturers have been hoping all-in-one subscriptions could be the next big thing. But the analysts at Edmunds say the current schemes out there at the moment cost far more than leasing a vehicle in the traditional sense and paying ancillary costs separately.

During a presentation of industry trends to Automotive News, Edmunds senior analyst Ivan Drury proclaimed: "At these price points that we're seeing, [a subscription service] virtually makes no sense to anyone." Drury's most damning observation was: "If you went the other route versus the subscription cost … you could essentially have two. 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."

An example used by Drury to illustrate his point was BMW's most expensive current subscription of $3,700 per month, which allows customers to run vehicles such as the X6 M. Over a three-year period it would cost $133,200, which is literally double what it would cost to lease one for the same period. It's the high-end of the pricing spectrum where value for money is almost non-existent though. At the more affordable end of the scale, Care by Volvo costs between $650 and $750 per month, which is then only around 7 percent above the cost of leasing.

A spokesperson for the Mercedes scheme says: "This is not competing with leases. 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." Perhaps the ability to swap vehicles regularly and easily will prove appealing in some sections of the market. But it remains to be seen whether the subscription model truly gains enough of a following among consumers to become a significant alternative.
| Edited by: Abhinav Jakhar
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