Why Are Car Companies Racing Toward the Subscription Model

Over the years, car companies have introduced subscription models for customers that allow for more flexibility than leases and loans. There is also another type of subscription model that gives customers access to specific services after purchasing a vehicle.

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But why are car companies moving towards the subscription model? And is it possible in the long run? Let’s dig deep to find out.

What is car membership?

A subscription model designed for customers to pay a monthly or annual fee to access a variety of vehicles offered by the same company. This means that if you have signed up for a car subscription service, you can change vehicles at your convenience based on your package agreement.

Other types of car subscriptions involve paying a recurring fee to unlock specific features or services provided by the car manufacturer after the vehicle is purchased. For example, as reported by Bloomberg, BMW introduced an $18 monthly subscription to unlock heated seats.

Similarly, if you want to unlock all the features in Tesla’s self-driving software, which brings your Tesla closer to driving automation level 3, you can pay a monthly subscription of $99 or $199, depending on your package. Are.

What is the difference between Car Subscription and Leasing?

Both car subscription and leasing agreement do not give you ownership of the vehicle, but they are structured differently. If you’ve signed a lease agreement, you commit to paying a fee to have access to a specific vehicle within a certain time frame – most car leases have a minimum term of 36 months.

After the leasing agreement ends, you return the vehicle to the dealership or get ready to buy it. If you want to exchange your car before the end of the lease, you may be penalized for early termination.

On the other hand, you pay an annual fee for a car membership, but it doesn’t commit you to one vehicle—you can change cars at short notice. It is also easier to exit a car subscription than a lease agreement as you are usually not given brand-new vehicles, but in most cases not older than three years.

Furthermore, most car subscription packages do not require additional payments to cover insurance and maintenance costs, as you would on a lease agreement. Most car subscription packages also offer roadside assistance, but you are expected to pay for fuel.

Despite the flexibility of the car subscription model, leasing is often a cheaper option. According to Top Speed, the membership fee to access most Porsche models is almost twice as expensive as the leasing cost – that’s when you don’t add insurance and maintenance costs.

With this in mind, car subscription packages are often more expensive as you have access to more car models from the same car brand and insurance and maintenance are included in the package fee – but you are limited to the leasing contract.

Alternatively, you can consider renting a car to save money. You can easily get one at your nearest rental company, or you can check out your options with some of the best car rental apps so that you have more options.

Why are car makers offering subscriptions?

Most of the car makers are moving towards subscription model as it generates more revenue. According to Business Insider, major automakers such as GM, Ford and Stellantis project annual revenue of more than $20 billion from monthly subscriptions by 2030. The potential is huge and could double the revenue of most automakers over the next decade.

However, most manufacturers target subscription through service options that improve the driving experience. More subtly, carmakers offer features such as driver assistance, cellular data connections, vehicle diagnostic tools, and satellite radio through micro-transactions. They may also charge you a fee to activate automated vehicle technologies that improve safety.

Another reason why automakers are offering subscriptions is that some of their software technologies, such as driver assistants, need to be maintained regularly – and manufacturers provide over-the-air updates. Also, the subscription model makes it more affordable for drivers to access the additional features instead of asking them to fork over extra cash to get the more expensive version.

On the other hand, some manufacturers have a subscription package for customers who want to drive different car models without buying them.

Car manufacturers that offer membership

However, most car subscription models offered by car manufacturers are available only in select locations. If the car subscription you want is not available in your location, you can consider third party companies such as AAA Car Subscription, Subscribe with Enterprise, Sixt+, Hertz My Car, Fair and Borrow that offer car subscriptions.

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