Monday
May 28, 2018

Should You ‘Subscribe’ or Buy Your Next Car?

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Should You ‘Subscribe’ or Buy Your Next Car?

New programs allowing drivers to swap out vehicle models several times through the year may increase your options for doing business on the road.
drawing of different car styles

Many real estate professionals who dress for success consider the car they drive to be part of their image. But the set of wheels you use for work isn’t always the sort of ride you want to cruise in during your off time. Some automakers have come up with an interesting solution for such a quandary. Taking a tip from the consumer electronics world, they’re coming up with programs that let you “subscribe to”—rather than lease or buy—a new vehicle.

“We really think we can change the industry,” says Anders Gustafsson, CEO of Volvo Cars North America, when asked about the new Care by Volvo program. “We wanted to make buying a Volvo as easy as getting a phone.” At a recent auto show, Gustafsson set out to prove his point by asking prospective buyer Heith Rogers to see if he could complete the process of signing up for a new XC40 sport-utility vehicle before the 20-minute news conference wrapped up. Rogers, a facilities manager with Google in Los Angeles, had several minutes left over by the time he was done. In that time, Rogers not only spec’ed out his car but locked down a deal that also covered insurance, title, and other fees, including repairs and maintenance.

For the moment, the industry is still experimenting with the subscription concept, and each manufacturer is taking a different approach. Volvo’s is arguably the most basic, for now covering only the new XC40 crossover. But other luxury brands are taking things to another level.

Subscription programs simplify the process of getting into a new car, industry research shows, foregoing the hassles of negotiating over price, removing hidden fees, and rolling insurance into the purchase package. The savings is as much about time as money, which any busy real estate pro should be able to appreciate. Audi, Cadillac, and Porsche have launched pilot subscription programs that not only cover all of a buyer’s potential expenses but allow a customer to swap in and out of a variety of different models over a set period of time. With Book by Cadillac, you can switch up to 18 times a year. But Porsche buyers could do it every day. Porsche Passport has two different tiers, starting at $2,000 a month—plus a $500 activation fee—for access to eight vehicles, such as the Boxster roadster and Macan SUV. The top tier increases the selection to 22 models, including the Cayenne ute and Panamera sedan, for $3,000 a month.

Mercedes-Benz is launching a subscription program that will have four different tiers tied to its familiar product range—A-, C-, E-, and S-Class—and subscribers will be able to swap in and out of any vehicle in that segment up to 12 times annually. They’ll also have just about everything but gas covered, with a maximum of 36,000 kilometers annually. The program is being tested in Germany, but “we plan to have something ready within this year” for the U.S., says Britta Seeger, Mercedes’ global sales chief.

For now, these programs are all operating at the pilot level, but they’re starting to spread out. Cadillac’s began in New York but has expanded to California. Meanwhile, don’t be surprised to see other manufacturers get into the subscription game. “It’s certainly something we’re looking at,” says Michael Moore, senior manager of product marketing for Lexus. And officials with a number of other brands are hinting they could follow.

Subscription programs make more sense for luxury brands that can cover their costs with a steep premium. But even mainstream brands are looking at options that provide a one-step shopping process that covers all of a buyer’s costs. Ford’s pilot Canvas program is experimenting with that approach in several parts of California. Prices start at $400 a month and include such items as insurance, maintenance, and a roadside warranty, so there are no hidden costs. Like a lease or conventional purchase plan, the customer has 24/7 access to the vehicle but can drop out of the program at any time with just a week’s notice.

Manufacturers aren’t eyeing only the potential for higher profits. They’re banking on improving customer satisfaction by offering programs that make life simpler while also offering more options. That can increase loyalty, which translates into repeat business. Even if subscription programs don’t become part of the automotive mainstream, expect to see carmakers come up with other creative approaches. Hyundai, for example, recently launched a three-day money-back guarantee. “We have to make sure we’re retailing on the customer’s terms,” says Adam Chamberlain, vice president of sales for Mercedes-Benz USA. “We have to make sure we give them the experience they want.”

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