Automobiles as a service: Who needs to own a car anymore?


  • Amazon
  • Wednesday, 12 Feb 2020

Imagine no possessions: Car subscription models are being touted as the alternative to investing in a car. — Sixt/dpa

Buying a car is so last century. Just as streaming upended the music and film industries and mobile phones upended traditional telephone plans, some companies are betting that subscription models will disrupt the automobile market.

"A big group of providers are competing on the German market alone," says Jonas Wagner of strategy consultant Berylls. "And more start-ups are constantly being added."

And manufacturers, including BMW, Porsche, Cadillac, Volvo, Lexus, Mercedes Benz and Audi, have all started offering subscription programmes.

No matter which one you use, the principle is that your monthly fee includes all costs for use – insurance maintenance, parts and service are charged on a monthly basis.

All you have to do is refuel the car, explains Ferdinand Dudenhoeffer, an automotive economist at the University of Duisburg-Essen. "It's like full-service leasing for private customers."

The Care by Volvo programme aims to bring the new XC40 to customers on a monthly subscription basis. — Volvo/dpaThe Care by Volvo programme aims to bring the new XC40 to customers on a monthly subscription basis. — Volvo/dpa

In many cases, you can even swap out the vehicle – a convertible in the summer, a station wagon for the holidays and an SUV in the winter. But Wagner warns against getting your hopes up: Often the fleets are still too small to offer real flexibility.

The cost of the subscription depends on the vehicle class and the duration of the contract. Terms are usually much shorter than with a classic lease and can be as short as a few months. In Europe, You can get a small car for €250 (RM1,128) a month, or you could get a luxury off-road vehicle for €1,700 (RM7,671) a month.

Wagner has observed that flexibility usually makes a subscription service a little more expensive than leasing. But unlike leasing, there are companies offering subscriptions for gently used cars, which are then available at a correspondingly lower price.

Subscriptions are particularly appealing for customers who want to be flexible in their choice of car, who can assess and plan their usage well, and for whom a purchase – for whatever reason – is out of the question. A subscription can also be a good option for drivers who want to test a car for a longer period of time before deciding on a long-term lease or purchase.

A subscription can also be an interim solution if your dream car is on back order. And it’s a simple choice for people who like things convenient, Dudenhoeffer says.

"It makes driving a car as easy as shopping at Amazon. Just a few clicks and you're sitting in your dream car and don't have to worry about the later sale of used cars or about unforeseen repairs," he says.

Something new from time to time: If you only want to drive a station wagon for a while, a car subscription can provide the variety. — Opel/finn.auto/dpaSomething new from time to time: If you only want to drive a station wagon for a while, a car subscription can provide the variety. — Opel/finn.auto/dpa

Hans-Georg Marmit of the KUeS association of experts warns that anyone considering a car subscription should study the contract carefully and not feel rushed by easy online ordering. Items to look out for in the small print include introductory fees, the number of included kilometres and the costs of transporting or collecting the car at the beginning and end of the contract.

"You also need to check the scope of insurance, and ask who is allowed to drive the car," Wagner adds. "Are young drivers also allowed to drive, or do you need driving experience? Are trips abroad permitted, or is supplementary insurance required?"

That sounds complicated, but experts like Dudenhoeffer are convinced that the future of the auto is subscription-based. Two-thirds of all new car purchases are still being financed today, but in a decade those will be mostly subscriptions, he predicts. – dpa

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