Innovation in the Automotive Industry: Vehicles as a Service
The subscription economy is ubiquitous in our everyday lives. Streaming services like Netflix and HBO have made the subscription model common in the entertainment industry. The Dollar Shave Club brought the subscription model to the personal hygiene industry, and companies like Blue Apron have transformed the food and grocery industries with their subscription-based business models.
It was only a matter of time before the automotive industry started implementing its own subscription-based business models. Today, one of the ways the automotive industry has been using this model is by offering “vehicles as a service.” That’s right, it’s the typical “Software as a Service” model with flat fee subscription packages. However, in this case, the “software” is a physical car.
Customers pay a flat monthly fee, and they are able to use a temporary car per the terms of their subscription agreement. The vehicle as a service company typically deals with all the usual hassles of car ownership such as registration, insurance, and maintenance. All the subscriber has to do is pay their monthly fee and drive their temporary vehicle. Pricing for these vehicle subscriptions of course varies depending on the particular subscription package. However, to get an idea of the price range, companies like Canvas provide a Ford Fiesta for $329 a month, and more luxury subscriptions such as Porsche's "Passport" subscription program cost $2,000 per month.
There are a variety of other features associated with vehicle as a service companies. In this article, we detail some of the important features and benefits that are typically found with these vehicle subscription services.
Benefits of Vehicle as a Service Companies
An all-in-one, hassle free solution
Purchasing a vehicle contains quite a few steps in addition to the actual payment and handover of the vehicle. Just to mention a few items, car owners need to worry about vehicle registration, insurance, and maintenance. Particularly with vehicle maintenance, these additional costs associated with your vehicle can really add up to a hefty amount. Additionally, these costs can come unexpectedly and make it difficult for someone on a budget to manage their finances. Vehicle subscription companies take care of all these ancillary details and expenses for their users, and they wrap up these costs into a flat monthly fee. When a user books a vehicle, their vehicle is already registered and covered by insurance. Additionally, these subscription-sourced cars are regularly serviced, and, if a vehicle does go out of service, the car subscription company will typically provide a functioning vehicle for you to use while the original vehicle is being serviced.
A more flexible option for car ownership
More standard solutions for owning a car, such as outright buying or leasing, are quite rigid in that they lock in the customer to using the same vehicle for several years. With a vehicle subscription service, drivers do not have to worry about this rigidity. They are no longer locked into long term contracts, and, instead, they can swap out vehicles on a month by month basis. Drivers can swap these vehicles according to changing needs or preferences, such as swapping out a work-week sedan for a larger SUV to use for a road trip vacation with the family.
An opportunity for longer test drives
Vehicle subscription services also provide drivers with the ability for a longer test drive experience. Drivers can test the vehicle over an entire month or longer, rather than test driving a car for a brief thirty minutes or less. This is great for drivers who are looking to make the leap to fully owning a vehicle, as it gives buyers a chance to review the vehicle’s performance and utility in a wide variety of real-life situations. The car subscription company loves this too, as this longer test drive can motivate a prospective buyer to purchase the vehicle. This sales channel can provide an important, secondary source of revenue for the car subscription company.
The ability to only pay for what you need
There are often a variety of subscription plans and packages offered by car subscription companies. These plans usually vary be the number of days per month that you need access to a vehicle. This choice allows drivers to only pay for what they need on a day-by-day basis, and this contrasts with the practice of buying a car outright where the vehicle will likely sit unused for a number of days each month. In this way, car subscription services can save drivers money, as drivers do not have to be "paying" for an owned vehicle on days when they don’t even use it.
Increased convenience and a delightful vehicle experience
Car subscription companies all aim to make the experience of requesting and using a vehicle extremely convenient and delightful. This is particularly achieved via mobile, as drivers can request and exchange vehicles all through each company’s mobile app. Account setup, license verifications, and credit checks are all done in-app too. Additionally, most car subscription companies deliver the requested car to the driver’s home each month, so the driver never has to travel to a physical location in order to use the service.
As described, vehicle as a service companies provide a variety of useful benefits to drivers. If a driver is uneasy about entering into a long term lease or auto loan or putting up the money to buy a vehicle outright, joining a car subscription service may be for them. Additionally, if a driver simply likes to try a different vehicle each month or just wants to save money by not actually owning a car, a car subscription service may be for this driver too. While, at the moment, car subscription companies are a relatively new entrant in the automotive market, these companies acutely address the needs of a unique customer segment, and these companies are likely here to stay. To read more on this space, take a look at our related blog posts on innovation and technology in the automotive industry.
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