Vehicle subscription services are cropping up across the U.S. as an alternative to leasing or buying a car.
They work like Netflix.
Consumers pay a monthly fee to use a vehicle but can end the service at any time. Turn in the car – no penalty, just walk away. Both dealerships and auto manufacturers are offering the subscriptions, and new companies are springing up to support them. Many of the subscriptions come with insurance, 24/7 maintenance programs, cleaning and concierge services.
Some services even let customers change vehicles as often as they like. Planning a night on the town? You can flip your sensible sedan for a luxury car. Need to pick up some supplies for a DIY project? The subscriber can get a pickup truck for the weekend.
"The idea is, instead of signing a three-year lease or taking out a seven-year loan on a vehicle, you'd just pay a month-to-month subscription," said Cliff Banks, president of the Banks Report, an auto industry advisory firm.
Porsche, Ford, Volvo and Cadillac are among the manufacturers already offering some form of subscription service. Startup companies like Clutch Technologies, Flexdrive and Fair.com provide either the service, or the software that runs them. Subscription services are already available in Atlanta; Raleigh, North Carolina; Cleveland; Omaha, Nebraska; Miami; and Dallas, among other U.S. cities.
Prices range from $150 a month to $3,500 a month in a program offered by BMW. The price depends on the subscription and features.
Clutch Technologies, which provides the software that runs many subscription services, already has partnerships with 30 dealerships across the U.S. Porsche, Mercedes and BWM use the software in their subscription services, said Tripp Rackley, who founded Clutch in 2013.
For now, such services can be pricey. Clutch's lowest-tier subscription is $750 a month, for example. But that includes insurance, maintenance and a concierge service that picks up and drops off vehicles to your home. The average monthly car payment for Americans is about $575 a month, excluding insurance.
For individual drivers, factors that affect the final costs of subscribing include credit score, insurance policy type, maintenance plan and what dealership they use.
Rackley expects car subscription costs to fall as more people adopt the idea. "We want people to change vehicles multiple times a month and make it part of their life experience," he said. "This is really about putting the fun back into driving."
At Fair.com, which provides subscriptions only on used vehicles, prospective subscribers use an app to download their driver's license and other needed information. The app reviews customers' basic financial information and determines what monthly payment they should be able to afford, said Fair.com CEO Scott Painter.
After the maximum monthly payment amount is determined, the app offers the consumer a variety of vehicles available in their payment range. The consumer decides on the vehicle and then picks up the car. Payments start as low as $150 a month, he said.
"Everything from cell phones to data and video work through subscription now," Painter said. "Providing vehicles through subscription was a natural extension."
Fair.com's goal is to simplify the car ownership process, Painter said. Vehicle subscriptions can lower the overall cost of vehicles for consumers as they avoid the fees associated with financing, down payments, car titles, vehicle registration and plates, and some simple maintenance, he added.
"Subscriptions will become just another tool for vehicle ownership," Banks said. "It's going to become part of the landscape, like leasing has become over the past 30 years."
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