The days of people buying a car based on the price written large on a car’s windscreen with a big white marker pen are long gone. From cheap leases to PCHs and PCPs, there are a number of ways cars are bought these days.
One of the trends to have gained traction during the past 12 months has been car subscriptions. They’ve been around in one form or another for a while, but with coronavirus forcing people to stay and work from home, the ease and flexibility of a subscription service has grown in popularity.
For proof just look at the big names that have arrived on the scene. From newly-launched firms like MyCarDirect to Cazoo buying up Drover (itself one of the largest and most established in the UK), car subscriptions is the hot topic of the moment in the motor trade.
Even car makers are getting in on the act with Volvo and Jaguar Land Rover launching their own services in the past 12 months.
Indeed, as Car Dealer recently discovered, car subscriptions could go hand-in-hand with agency sales models as manufacturers begin to change the way they sell cars to customers, and in the future buyers may even subscribe to certain piece of equipment and tech in their cars.
So what are car subscriptions, how do they work and is this new way of owning a car going to change things for ever?
- Volvo predicts 10% of its new car sales will be through subscription
- Jaguar Land Rover taps into car subscription services with Pivotal
What are car subscriptions?
They’re just like any other subscription essentially. From music streaming to TV catch-up, the average UK consumer is becoming a subscriber to many goods and services – and cars are no different. In fact, when Cazoo announced it was buying Drover, founder Alex Chesterman said he wanted to create the ‘Netflix of cars’.
While leasing and PCPs often lock customers in for the long-term, car subscriptions are far more flexible.
Customers can change their car every month if they wish, upgrade and downgrade their packages and can cancel at any time.
How do they work?
It won’t come as a surprise but car subscriptions are a product of the car industry’s new focus on online sales tools.
Most car subscription companies offer a simple online sign-up process and often take a fee, and they carry out certain checks with the DVLA and credit companies.
After the order has been placed for the car and the length of term selected, the car gets delivered to the customer in a matter of weeks – although some companies can deliver sooner.
As a general guide, packages for superminis tend to start at around £400 per month while large SUVs are around the £1,600 mark, but prices vary enormously from firm to firm.
What’s good about car subscriptions?
It’s the flexibility, really. Car subscriptions are perfect for those who just want to have a car and not be locked into a long-term agreement and have complete peace of mind.
Packages will include road fund licence, maintenance and breakdown cover while Jaguar Land Rover’s Pivotal service even includes insurance for two drivers – drivers just have to put fuel in, quite often.
Many providers are angling car subscriptions towards buyers who may be considering driving an electric car but are still a bit hesitant. The theory behind this being customers could drive an EV for a few months and then perhaps swap to a petrol, diesel or a hybrid at another time if an electric car is not right for them.
JLR’s Pivotal even gives customers a new car every six months so it’s ideal for people who want to chop and change.
…and the bad?
All sounds good doesn’t it, but just like that pint of milk that’s cheaper at Tesco than the corner shop, convenience comes at a cost.
For the level of flexibility on offer car subscriptions are pretty good value for money, but in comparison to leasing they can be expensive. For a lot of people, a traditional lease or PCP or PCH could be lighter on the wallet, and just like those any damage incurred or extra mileage accumulated during the subscription can be very expensive.
Is there a target customer?
According to MyCarDirect, there is no typical customer as the firm sees a wide assortment of people choosing the subscription life. It’s true though that car subscriptions are appealing to younger drivers who may want a car for a short period of time. Drover told Car Dealer last year the average user of its service was someone in their 30s, while Volvo is seeing a younger customer driving its cars thanks to car subscriptions.
Should dealers be worried?
No, most definitely not. In time, car subscriptions will be regarded as just another option for a new car buyer, and as purchases and the dealer experience becomes more digital it may even become the norm.
In fact, some are even predicting as the motor trade switches over to an agency sales model in the next decade, subscriptions will be part and parcel of the retail experience – especially as car makers are looking to make certain features and pieces of technology be available only if the customer pays a monthly fee for them.
Regardless of what happens, the dealer will still have a relationship with the customer as they will be supplying the car and looking after it. It may be different from what’s happened in the past, but it’s not game over for the dealer.