In recent years, there has been growing interest in alternatives to the traditional model of car buying or leasing. Many consumers are now considering flexible car subscription services as an option. The car subscription market has seen rapid growth, fueled by consumer demand for more flexible and affordable car access models compared to traditional purchasing or leasing.
What is a Car Subscription?
A car subscription service allows drivers to access vehicles for a monthly fee, without the long-term commitment of buying or leasing. Car subscriptions are an alternative to traditional car ownership and are sometimes referred to as "long-term rentals", "micro leasing" and "car as a service", among other.
With a car subscription, drivers pay a recurring monthly fee that covers the vehicle cost, insurance, routine maintenance, roadside assistance, and other services. Subscribers can typically swap vehicles, pause subscriptions, or cancel anytime depending on the provider.
The car subscription service provider handles all vehicle acquisition, maintenance, repairs, insurance, and roadside assistance. Subscribers simply pick up and drive the vehicle. All costs besides fuel and extras like washes are covered by the monthly fee.
Car subscriptions provide access to vehicles without ownership. They offer flexibility and convenience for an all-inclusive monthly price.
How Car Subscriptions Work
Car subscription services provide members with access to vehicles for a recurring monthly fee, similar to a gym membership or Netflix subscription. Unlike traditional leasing or financing, subscribers are not locked into long-term contracts and have the flexibility to swap vehicles, pause service, or cancel anytime.
Most car subscription services allow you to select a vehicle from their fleet through a website or mobile app. The monthly fee covers costs like insurance, routine maintenance, roadside assistance, and vehicle depreciation. Subscribers can switch vehicles up to a certain number of times per year, according to their subscription plan.
Once a vehicle is selected, it can either be delivered to the subscriber's home or picked up at a service center. At the end of the subscription term, the vehicle is simply returned and another one can be selected if desired. There are usually no long-term obligations or financing involved.
Car subscription providers typically offer a variety of makes and models to choose from, often including luxury brands. Vehicle availability may vary by location. Mileage limits, ranging from 500 to 1500 miles per month, are common.
Car Subscriptions vs Leasing
When considering alternative car ownership models, two popular options are car subscriptions and traditional leasing. While both allow you to drive a car without buying it, there are some key differences in costs, commitment levels, insurance, and maintenance.
In a lease, you commit to a set contract length typically 2-3 years and negotiate a monthly payment based on the vehicle's value and projected depreciation. You're on the hook for this payment every month whether you drive the car or not. With a subscription, you pay a flat monthly fee but can often pause or cancel anytime with little notice. This flexibility allows more freedom to change your mind.
For insurance, leasing requires you to maintain continuous auto insurance that meets minimum liability requirements. Subscriptions tend to include standard insurance coverage in their monthly fee, reducing this additional cost. Maintenance also follows this pattern. With a lease, regular maintenance costs come out of your pocket. Subscriptions cover routine maintenance like oil changes, saving you these extra expenses.
In summary, while subscriptions cost more per month, they provide more flexibility, convenience, and perks through insurance and maintenance inclusion. Leases lock you into fixed terms but have lower monthly rates. Depending on your needs, one may be preferable to the other.
Car Subscriptions vs Buying
When comparing the costs of car subscriptions versus buying, there are some key differences to consider. With a traditional car purchase, you take out an auto loan and own the vehicle outright after making your payments over several years. However, with a subscription you simply pay a monthly fee for access and use of the vehicle and the monthly cost of a subscription can be up to 35% lower than an auto loan payment on a similar vehicle.
A major benefit of buying is that you retain an asset - the car itself - which you can later sell or trade-in. With subscriptions you never own the vehicle. However, subscribers don't have to worry about depreciation, long loan terms, or eventually selling the car. Once you are done with your subscription you simply return the vehicle.
When calculating total cost of ownership over several years, subscriptions often come out much cheaper, even when factoring in the lack of a saleable asset at the end.
Benefits of Car Subscriptions
Car subscriptions provide several compelling benefits compared to traditional leasing and buying. The major advantages relate to lower costs, increased flexibility, and less commitment.
With a subscription, you pay one monthly fee that covers the vehicle, insurance, routine maintenance, roadside assistance, and other services. This bundled pricing is often cheaper than leasing, which requires separate insurance, tax, title, registration, and maintenance costs on top of the lease payment. Subscriptions can save 30-50% per month compared to equivalent leased vehicles.
Subscriptions also provide more flexibility than leasing or buying. There is no long-term contract, so you can pause or cancel anytime. If you want to change vehicles, you can swap into a different one, often with just two weeks notice. This freedom allows subscribers to always drive newer cars and switch models to fit changing needs.
Finally, subscriptions require less commitment than other options. With leasing, you are locked into 12-36 month contracts and face hefty early termination fees. Buying requires taking on 5-6 year loan terms in most cases. Subscriptions have no set duration and can be canceled anytime with no penalty.
Cost Savings Analysis
One of the biggest benefits of car subscriptions is the potential for significant cost savings compared to traditional car buying or leasing. According to research, car subscriptions can save consumers 30-50% over the total cost of ownership (TCO) of a vehicle when analyzed over a 3-5 year period.
TCO takes into account all expenses associated with car ownership beyond just the purchase price or monthly lease cost. This includes factors like:
- Down payment
- Monthly payments
- Insurance
- Fuel
- Maintenance and repairs
- Depreciation
- Interest
- Taxes and registration fees
When all of these costs are combined into a TCO model and compared to a car subscription service, the savings become clear.
These savings come from the all-inclusive nature of most subscriptions, which wrap insurance, routine maintenance, roadside assistance and other fees into one predictable monthly payment. There's also no down payment, tax or interest charges that come with financing a purchase.
For consumers looking to optimize affordability and minimize surprises in car expenses, the TCO savings of subscriptions make it an attractive model.
Flexibility of Car Subscriptions
One of the key benefits of car subscriptions is the flexibility they offer compared to leasing or buying. With a subscription, you aren't locked into using the same vehicle for an extended period of time. This flexibility provides several advantages:
First, you can pause your subscription temporarily if you need to. For example, if you will be traveling for work for a few weeks or months, you can pause the subscription, return the vehicle and avoid paying for a vehicle you aren't using.
Second, you can typically switch vehicles on demand with most subscription providers. If you want to change to a different type of vehicle better suited for a specific need or life change, subscriptions allow you to switch without the hassle of buying or leasing again.
Finally, you avoid having to sell a used vehicle when you are ready for something new. With a subscription, you simply return the vehicle when you are done and pick a new one. This is much easier than navigating the used car market to sell a leased or owned vehicle.
The flexibility to pause, switch vehicles, and avoid selling when you are ready for something new are major advantages unique to car subscriptions over other ownership models.
Evaluating Providers
When considering a car subscription service, you'll want to evaluate and compare providers across several key factors:
Vehicle selection
Look at the variety and types of vehicles offered. Most services provide access to luxury or premium vehicles. Ensure the inventory matches your needs.
Mileage limits
Pay attention to monthly or annual mileage caps which can range from 500 to 1500 miles per month depending on the provider and plan. Make sure it aligns with your driving needs. Going over can incur overage fees.
Insurance and maintenance
Many subscriptions bundle insurance and routine maintenance but check if you need to pay anything additional out of pocket. See what is covered under warranty vs wear and tear.
Length of subscription
You'll likely have the option to go month-to-month or commit to longer 3, 6, or 12 month plans for bigger discounts. Consider your needs.
Cost
Compare the effective monthly costs across providers after factoring in fees, insurance, mileage overages etc. Cost structures can vary greatly.
Ease of swapping vehicles
See how easy it is to exchange into a different type of vehicle depending on your changing needs.
Availability
Make sure the service operates in your city and there is adequate vehicle availability. Some have waiting lists for high demand models.
