The word “subscription” is commonly associated with newspapers and magazines. But that was the old days. Today, the subscription business model has been used in different economic sectors: food, entertainment, fashion, cosmetics, even the auto industry.
But will this work? Are subscription services right for your business as an auto industry player?
Subscription Model in the Automotive Industry
Families and car enthusiasts can now get the car that they want through the car subscription model. The model works like car leasing but is different in the sense that subscription has no personal ownership. Unlike leasing, a car subscription lets you swap vehicles for shorter periods.
This setup is convenient for those who do prefer shorter-term commitments and more flexible terms with the perks of insurance and maintenance costs. Just like a smartphone subscription, you can drive your dream car without long-term commitments. For example, you can drive an SUV the whole week and swap it with a sedan the week after.
In essence, you pay a fixed monthly fee to the manufacturer to use several car models within the program. As long as the “subscriber” continues to pay the monthly subscription fee, they can continue to access all the cars in the lineup and the services that come with the chosen program.
Depending on your wants, the monthly subscription fees vary. A reliable used vehicle can go for as low as $150 to $200 a month. If you want to experience what it feels like to drive the best cars, the monthly subscription fee starts at around $1,500.
For a monthly premium, you will “own” your dream car, sometimes as part of a bundle that may include entertainment, emergency call capabilities, alarm notifications, and more depending on the program.
Currently, the auto industry is using two subscription service models: in-car and car ownership. The in-car service gives subscribers access to an array of services like remote engine start, remote diagnostics, vehicle locator, and remote door lock/unlock.
Many automakers have already launched their auto subscription services. Some of these brands include BMW, Mercedes-Benz, Volvo, Porsche, Lexus, and Audi. Some third-party leasing companies also offer car subscription services.
How Subscription Payment Model Benefits Auto Industry
Automakers will establish a stream of regular income. The more subscribers you have, the more the company is guaranteed monthly revenue. Having a steady cash flow will help manufacturers expand their business and easily manage the company’s financial health.
Providing better programs and services to subscribers is a great opportunity to convert them into loyal customers. Families, students, workers, and entrepreneurs have different car needs and an auto subscription is a sensible answer. A hefty down payment is a major barrier to owning a car.
Middle-income workers or families may not be able to afford to pay the costly price at once or the long-term commitment is not favorable when their needs may change soon.
With all these obvious advantages, car manufacturers will benefit from the subscription business model.
Exploring subscription services for your auto business can yield many positive results. If you want to consider subscription services for your business, reputable and experienced high-risk merchant account providers can help you.