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How Vehicle Subscription Models Could Affect Your Shop

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How Vehicle Subscription Models Could Affect Your Shop
Vehicle subscription models could impact consumer maintenance habits.

Until recently, a customer’s only options with vehicle ownership were to purchase a car outright or to lease it from a dealership. But a new trend invades the automotive industry in a number of metropolitan areas: vehicle subscriptions.

One might look at the vehicle subscription model and envision the disruption that Netflix caused in entertainment, or how Spotify and other streaming services changed the way consumers listened to music. Subscription services can provide a “what you want, when you want it” benefit.

In the simplest terms, these subscription models offer a shortened, more flexible lease for the buyer. A subscription service allows customers the ability to drive a vehicle for a monthly fee, and to switch among available vehicles whenever they desire a new ride. Ford, Cadillac, Mercedes, BMW and Volvo are just a few of the brands testing these subscription programs.

Subscription models typically include insurance, roadside assistance, vehicle tax and registration into a single monthly payment. Membership is often month to month with no long term requirements.

The services include regular maintenance from a dealership, which could be a significant threat to independent automotive repair shops going forward. Parker Swift, founder of the telematics company Mechanic Advisor, says that he doesn’t think subscriptions are an immediate threat, but could be a threat of the future.

“It’s something that shops looking forward need to consider as they’re marketing and dealing with people thinking about getting new cars,” Swift says. “Dealerships are now more than ever focused on the servicing side of vehicles, and in the future will try and retain their customers longer through programs like this.”

 

How Subscriptions Work

For now, most subscriptions lean toward affluent customers who have good credit and can afford luxury vehicles.

Monthly fees are significantly more than an average lease or finance payment, especially for the luxury vehicle models. Cadillac, for example, charges a monthly flat fee of $1,800. Porsche offers similar subscriptions for $2,000 and $3,000 per month. For both of these brands, the luxury vehicles are delivered directly to customers.

Ford and its partner Canvas are working to provide a cheaper, less luxurious alternative that could pave the way for more accessible subscription services. First, a customer chooses a pre-owned vehicle less than three years old. Then, he or she chooses a monthly mileage package ranging from 500 miles to unlimited. Maintenance costs and insurance are included—all the customer pays for is the gas. If there are any issues with the vehicle, customers make an appointment with the nearest Ford dealership to have it fixed.

 

How Shops Can Combat It

As dealerships and vehicle ownership become more flexible, Swift says independent auto repair shops will need to adapt in a similar fashion.

Right now, he says, most repair shops work on cars that are 10 or more years old, but as customers look to get new vehicles, shops need to work on ways to stay connected to customers and retain their business.

Swift says that automotive shops can provide subscription packages as an added convenience, and as a way to sign on long-term customers.

“We do see shops that provide services on an annual basis,” Swift says. “Packages like for $XX, you can get two oil changes for the year, and a diagnostic check.”

Programs for financing can also be an appealing avenue going forward as well, especially for larger repairs. Telematics can also be a major influence, as Swift says it can give a shop levels of knowledge and service that a dealership is potentially providing with a new car.

“Telematics is a great way to keep customers engaged with the shop, and keep customers on the forefront of technology and experience,” Swift says.

 

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Here’s a look at four subscription services that are already on the market. As of this writing, BMW and Mercedes have not released details in their program.

Brand

Models

Subscription Period

Locations offered

Price per month

Book by Cadillac

Menu of 2017, 2018 models.

No long-term commitment, can change vehicles 18 times per year.

New York, Dallas, Los Angeles

$1,800

Care by Volvo

XC40 models, and more to be released later

Two-year lease, can change model after one year.

Will be nationwide

$600-$700

Ford Canvas

Pre-owned Ford cars, trucks and SUVs, less than three years old

Monthly commitment

San Francisco, Los Angeles

$429-$519

Porsche Passport (Tier One)

Up to 8 variants

Monthly commitment

Atlanta

$2,000

Porsche Passport (Tier Two

Up to 22 variants

Monthly commitment

Atlanta

$3,000

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