Edmunds: Whatever happened to car subscription services?

Business
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In this Nov. 15, 2020 photo, a long row of unsold 2020 GLB250 sports-utiity vehicles sits at a Mercedes Benz dealership in Littleton, Colo. The brand is the among many that have shut down their subscription services. (AP Photo/David Zalubowski)

Just a few years ago, car subscriptions looked like the next sure thing. Picking up on consumers’ comfort with paying monthly for the likes of streaming services or phones, many automakers introduced programs that allowed people to get a new car and a variety of perks for a monthly fee. As an alternative to buying or leasing, these programs seemed intriguing. But as of 2021, BMW, Genesis, Mercedes-Benz, Nissan and, most recently, Audi have all shuttered their nascent subscription offerings.

So why haven’t subscriptions caught on, and which services are still out there?

WHY AREN’T SUBSCRIPTIONS MORE POPULAR?

Depending on your driving needs, a subscription could save you money compared to leasing. Plus there are the perks of ongoing access to the latest models, the ability to switch cars frequently, and the convenience of app-based shopping. So why aren’t more people using them?

Lack of awareness is one issue. These services require more outreach and need to overcome the conventional wisdom that you’re better off purchasing a car outright. There’s not currently much investment in educating consumers either ― these subscription services aren’t widely advertised on dealership or manufacturer websites. Each service also has extensive rules around mileage, the time you can keep cars, and even driving internationally. Users will have to be educated on all of these restrictions compared to traditional lease rules.

The bigger obstacle is limited access. Porsche’s service is only offered in Atlanta, Las Vegas and Los Angeles. Volvo’s is more widely available but excludes three of America’s four most populous states: California, New York and Florida.

This limited availability is in part due to logistics and cost and in part to dealer franchise laws designed to stop automakers from dealing directly with consumers. The Care by Volvo program, for example, faced legal challenges from the California New Car Dealers Association and was subsequently withdrawn from the state. Until challenges from dealers have been addressed, nationwide rollouts of these services will stay off the table.

WHAT NEW CAR SUBSCRIPTIONS ARE STILL AVAILABLE?

Care by Volvo and Porsche Drive currently have the most attractive, and active, subscription offerings. Care works a lot like a traditional lease, but with insurance and most maintenance covered, and it adds the ability to cancel your subscription on short notice or resubscribe to a different model.

Costs range from $600 to $750 per month (excluding tax) depending on the model. While it’s true that the monthly payment for an equivalently equipped lease is significantly less, that doesn’t tell the whole story: Getting a low lease payment requires a larger down payment, and you’ll have to provide your own insurance and cover maintenance costs.

Amortize the down payment over the life of the lease, add insurance and maintenance, and you may pay about the same or even slightly less for Volvo’s subscription than a lease.

Porsche’s offering is much pricier. It ranges from $1,500 to $2,600 per month for a single vehicle and from $2,100 to $3,100 per month for the multi-vehicle subscription plan, which allows you to swap vehicles at will.

The idea of swapping from a convertible sports car to a family SUV depending on your needs in a given week is appealing, but you pay for that flexibility. Multi-car subscriptions are more expensive than a typical lease, even with insurance and down payments factored in, and you aren’t able to buy a car you’ve been driving at a preset price.

But considered as an alternative to leasing two vehicles, these programs start to make sense. Leasing both a Porsche 911 and a Cayenne, for example, and providing your own insurance will cost you more than even Porsche’s pricey plan.

CAN SUBSCRIPTIONS STAGE A COMEBACK?

Cadillac and BMW both say they’re reevaluating and retooling their programs. The new iterations of both will almost certainly operate in closer conjunction with dealerships in order to ease national rollouts.

But a major appeal of subscription services is ease of use, which includes avoiding the dealership outright. Being able to manage your subscription entirely through an app is key to the success of subscriptions with a younger audience, and dealerships have been inconsistent in engaging and doing business with consumers online. How subscription services will operate within the confines of dealer networks is an open question, but as things stand these services can’t operate without dealers.

Ultimately, the convenience of these programs will be as important as outright cost.

EDMUNDS SAYS: Buying a car within your budget and keeping it for the long haul still make the most financial sense. But as an alternative to leasing, a subscription might lower your overall cost and give you an easy exit should you change your mind. Unfortunately, legal and logistical challenges mean the future of car subscriptions is uncertain.

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This story was provided to The Associated Press by the automotive website Edmunds.

Will Kaufman is a content strategist at Edmunds. Instagram: @didntreadthestyleguide.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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