Lease? Buy? Subscribe?
Why drive just one vehicle when you could drive several? Well, you can’t drive them like you own them and there’s a lot of fine print...
In the beginning, people used cash to buy new cars.
For those who didn’t have the cash, car loans were revolutionary. For automakers, too, as sticker prices began to climb.
Buyers were distracted, instead focusing on low monthly payments. Leasing came along as an option to get people into even more expensive cars for similar monthly payments to car loans, or even less.
Today in the United States, leasing accounts for about 30 per cent of the new-vehicle transactions of cars and light-duty trucks. According to industry bible AutomotiveNews.com, it’s about 27 per cent in Canada.
An emerging third alternative are subscription services, which combine elements of leasing and renting. Here’s how it works: Subscribers pay a flat monthly rate, which generally includes insurance and maintenance, everything but the gas it takes to run the car.
The price is fixed, meaning there’s no haggling and in many cases the subscription process can be handled by smartphone, with a concierge delivering a new or late-model used car direct to the customer’s home. According to information company J.D. Power, the subscription model has its fans.
“Millennials are accustomed to comparison shopping online; paying subscriptions for allinclusive phone, data and service plans; completing financial transactions via smartphone apps; and exercising the freedom to switch when their requirements change,” wrote Christian Wardlaw for JDPower.com. “Given that this age group will comprise 40 per cent of the car-buying market by 2020, adapting to their buying preferences is critical.”
Although the age range of Millennials is not standardized, the term generally refers to individuals born between 1981 and 1996.
One of the more interesting bits about the subscription model is how broad a market base it spans. Porsche is offering customers in Atlanta, Ga., where the Germany-based automaker’s U.S. operations are based, an allinclusive package called Porsche Passport. For US $3,000 a month, drivers can have unlimited use of a Porsche 911 or Panamera; for US $2,000 a month they can choose from among four less-expensive models.
Cadillac is testing the waters with the new Book by Cadillac subscription service in New York City, Los Angeles, Calif., and Dallas, Tex. For US $1,800 a month, drivers can rack up 2,000 miles (3,200 kilometres) a month in any one of six high-end Cadillac models.
But there are plenty of lower-priced services, too. Ford’s Canvas service starts at US $400 a month, while Hyundai makes its Ionic Electric available for less than $300 per month in its Unlimited+ program.
There are more than a dozen subscription services sprinkled across the United States, with the new Care by Volvo service spreading to Canada as well.
Every subscription program has its pros and cons. Ford touts Canvas as “a simple alternative to car ownership,” but it’s rarely that simple. Every company program has different rules and restrictions on everything from kilometre limits to permissible usage guidelines. Some let you trade cars daily, some once a year, others not at all. There’s no universal set of rules, which can make it difficult to compare programs.
And since the driver doesn’t own the vehicle, companies can legally track where the car has been driven and how hard.
“Cadillac’s vehicles have OnStar, which collects and reports such information as GPS location, speed, airbag deployments, crash avoidance alerts, and braking, swerving and cornering events,” reports Edmunds.com.
“… Canvas also places a tracking device in each car to record location information and driver behavior that might violate the subscription agreement. … Understand that by signing up for a service, you’re agreeing to let the companies access and use the stored vehicle information.”
Then again, if you live someplace where you only need a car, say, five or six months a year, a subscription service might be just the ticket because you only pay for the car when you need it. Still, it’s clear these services are gaining traction and momentum and likely will continue to do so.
“These car-subscription services seem like an excellent way to simplify the car ownership experience. It’s basically an all-inclusive lease, but with less commitment — and that seems downright logical,” wrote Slate.com’s Christina Bonnington. “If you can get a subscription for everything from music to meals, why not your daily driver, too?”