Car subscriptions, a sort of low-commitment way to get behind the wheel of new or late-model cars, are being touted as a no-hassle alternatives for people who just aren’t into long-term relationships.
They’re also soon to be available in Canada. While several auto manufacturers are already testing the concept with pilot projects in Europe and the United States, a third-party supplier is about to bring the first such program to Canada, with a targeted launch date of mid-June.
Subscriptions to late-model cars will be offered by AutoOne, a car leasing company with outlets in Toronto, Vancouver and Halifax.
Carma Car Inc., a Detroit-based tech startup, is providing the necessary technology to AutoOne. Azarias Reda, CEO of Carma Car, says the program is ideal for drivers who don’t want to commit to leases, which are typically for 36 months or more, but want continual access to late-model cars.
“It’s a fairly compelling value proposition,” Reda said, adding that in the two markets where the program is active (Columbus, Ohio, and Chicago), “it’s really resonating with customers.”
Rozmin Patel, senior vice-president with AutoOne, says she became interested in subscriptions when she learned about the concept this winter. “I was excited to be first out of the gate” in Canada, she said. AutoOne has about 2,700 late-model cars from an array of auto makers in its lease fleet at the three cities.
The subscription is to car leasing what Uber is to hailing a cab – a disruptive new way to access a vehicle. A consumer who wants to “subscribe” to a car will typically install an app on a smartphone and then order a car at fixed prices.
Subscriptions offer a no-haggle, all-inclusive price that includes pickup, delivery and concierge services. Insurance is prearranged, service is scheduled at the driver’s convenience (often with pickup at the driver’s location), and normal repairs are covered in the monthly fee. Most programs require one-time enrolment fees in the range of $400-$500.
Patel calls the subscription a “hybrid model” that spans the gap between daily rentals and long-term leases. “It’s not by the hour, not by the day,” she said. “It’s for someone looking to have a car for two or three months.”
She cited the example of a 2013 Mini Cooper. On a three-year lease, the company would charge $433 a month (plus insurance), while on a daily rental basis it would cost $1,350 a month. Such a car would be available on subscription for $749, including insurance.
Auto makers are also embracing the subscription concept, although none have announced such programs in Canada. Volvo, the Swedish auto maker owned by Geely of China, quickly sold out a year’s inventory of subscription vehicles to its Care by Volvo program in the United States, said Jim Nichols, product and technology communications manager with Volvo Car USA. Remarkably, 92 per cent of the subscribers are new to the brand, Nichols added.
“This appeals to a group that does not want to deal with the stresses of car ownership,” he said. “You have people who want a shorter-term commitment.” Volvo’s program comes with a two-year contract, but consumers can trade models after 12 months.
Nichols said Volvo saw customers were getting overwhelmed with option choices and other obligations – such as arranging insurance – when buying a new car. Volvo limited its subscription offering to two cars, the XC40 SUV and V60 wagon, and equipped them with the most popular options.
Reda said car subscriptions are available in two tiers: high-end programs such as the Book by Cadillac and Porsche Passport, which are attractive to people with high disposable income who want to sample a variety of models. Typically, these programs require a one- to two-year commitment.
Alternatively, Carma and other third-party providers put the emphasis on flexibility and lower cost by offering programs as short as one month and cars that aren’t brand new.
“Subscription is a really, really great way to deploy off-lease vehicles,” Reda said. “You’re going to get a nice late-model car … and you can save a lot of bucks.”
Attitudes toward car ownership model are rapidly changing, Reda said. Technology quickly falls out of date. Warranties expire. Insurance can be a hassle. Depreciation takes its toll.
“The notion of owning a car and taking pride in it exists, but it’s decreasing,” Reda said. “People like the no-hassle experience of ride-sharing and car-sharing.” But sometimes they need to secure a car they can drive daily.
Although they are slightly more expensive than typical leases, subscriptions could be an attractive option for people who don’t want the second-biggest investment of their lives growing old in their driveway.
“There’s some premium to flexibility, but it’s not a big premium,” Reda said. Beyond the subscription rate, “the only thing you spend for is gas.”
Other auto makers are testing their own subscription models. Ford and Lincoln, for example, are piloting a concept called Canvas in San Francisco and Los Angeles, and have not yet announced when, or whether, it will come to Canada. Volvo started its U.S. pilot in November, 2017. And Porsche is testing Passport in Atlanta, offering customers a choice of up to 22 models.
Other manufacturers with their toes in the water are BMW, Mercedes, Lexus (December 2018 in the United States) and Cadillac.
One of the most exciting programs is Book by Cadillac, launched in the United States in January, 2017. It’s pricey – US$1,800 including taxes, maintenance and insurance – but it includes such models as the CT6, Escalade, XT5, ATS-V and CTS-V. Melody Lee, global director of Book by Cadillac, says the price is comparable to a lease on a monthly basis, when all costs of leasing are factored in. Cadillac delivers the cars to your house by concierge, and – the best part – participants in the month-to-month program can swap out their cars up to 18 times in one year.
But those who have tried it cite the simplicity of the subscription process. Sometimes, people just want to get into the car and drive.
Book by Cadillac is available in New York, Dallas and Los Angeles, cities where business travellers are often looking for access to a car, Lee said.
Porsche's Atlanta program is multitiered. The entry level “launch” costs US$2,000 a month and gives drivers a choice of eight models. The US$3,000 “accelerate” level offers 22 models. There is a one-time US$500 membership fee. As with other programs, this one includes insurance, maintenance, pickup and delivery.
Drivers on a budget may prefer Ford’s Canvas. Its fleet is made up of recent-model Fords and Lincolns, and prices start at less than US$400 a month, including insurance, maintenance, roadside assistance, delivery and pickup. Terms vary from one to 12 months, but a car can be swapped at any time for US$99.
Flexdrive, a sort-of rental/subscription hybrid in the United States, contracts with dealers to provide late-model cars on a weekly or monthly rental. Prices are as low as US$199 a week.
Lee says Book by Cadillac is “complementary” to other forms of vehicle access – not for everyone, but as potentially transformative as the leasing model was in the 1970s. Noting the average age of Cadillac subscribers is 41, she challenges the commonly held assumption that subscriptions are just for millennials.
“This is more a lifestyle and mindset than a demographic,” Lee said.
AutoOne’s Patel says subscriptions make a lot of sense for younger drivers, especially those who want vehicles for just two or three months and don’t want to absorb the depreciation of owning cars. She sees this as a growing trend.
“It’s where [the market] is going,” she said. “I think we have to, as well.”
THE GOOD AND BAD OF SUBSCRIPTIONS
PROS
- Users can switch up cars – if you’re bored, or if you need a different type of vehicle, such as an SUV for camping.
- No worry over maintenance and insurance.
- Subscribers can access any type of vehicle offered by the subscription service at any time via the service’s app, and have it delivered by a concierge.
- App users can cancel and reinstate their subscription without added fees.
- Roadside assistance is often included.
- The monthly fee is all-inclusive, including insurance and regular servicing costs.
CONS
- Cost – slightly more expensive than leasing, although luxury cars can be very expensive.
- Drivers cannot use the app just for a weekend, or a quick day trip.
- Unlike Car2Go, parking is not included.
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