Car customers look for convenience without commitment in subscription services

Global Business

Car customers look for convenience without commitment in subscription services

A beacon for the car industry, dealerships have changed little over the years with packed parking lots, a range of models, and potential deals. Many customers drive away having signed a loan agreement or a long-term lease.

But that business model could be about to change. There’s a third option.

CGTN’s Dan Williams explains from the Motor City, Detroit.

A subscription service allows drivers the chance to switch cars at will or even opt out completely at short notice.

“It does seem to be trending now. I think they took their cues from some third parties that were experimenting with it. And I think what you are seeing now is the automakers making sure they don’t miss out on a piece of the business,” said Amy Wilson, Automotive News.

The convenience can come at a price.

Book by Cadillac, a luxury vehicle subscription service, allows customers the chance to swap cars 18 times a year, with the cars delivered by a white-gloved concierge. The cost is $1800 a month.

Carma is a Detroit-based startup offering subscription services in Chicago and Columbus, Ohio. For less than $400 a month, customers can drive 1600 kilometers in a mid-range car.

“When you buy or lease a car, you are committed to this thing for 36 months. So if you are thinking about moving or transitioning or if you are a millennial and you don’t know where your next job is going to be, getting this long-term commitment is maybe not something you want to do,” said Azarias Reda, Carma Car Founder.

Many of the subscription packages promote the convenience of one payment, bundling insurance, a maintenance plan and roadside assistance with the car. Most plans also allow customers to swap models to fit their requirements.

For most people, the traditional car model remains the preferred option. But the potential of subscription models is clear, especially as the technology within the car improves more rapidly.

Chance Richie is the founder of Mobiliti, a subscription model that taps into the inventory of a regular car dealership. He believes technology will drive the business.

“It used to be that a vehicle didn’t really change that much for maybe a seven or an eight year period. Now you are seeing vehicles, particularly the electronics, the safety features change so frequently in the vehicle that subscription programs are going to give folks a chance to participate in all of those different iterations that are coming more quickly,” said Richie, Mobiliti CEO.

Longer term, there is the potential of linking subscription services to the autonomous car market. If that happens, subscriptions could become the model for a new era in the automotive industry.

Dean Crutchfield discusses the growth of the subscription service economy

CGTN’s Rachelle Akuffo spoke with Dean Crutchfield, CEO of The Dean Crutchfield Company about the growing popularity of subscription services.