From shorter minimum terms to payments for usage, subscription offerings have been pitched as being a flexible alternative to traditional car ownership options such as finance, leasing and outright purchase. Motorists are beginning to become more financially savvy in face of changing financial priorities, and are realising that purchasing a depreciating asset is no longer as attractive as it once was. When coupled with the increased infrastructure particularly in metropolitan areas and the looming onset of self-driving cars, consumers are now prioritising flexibility in their decision to acquire a vehicle. And while the majority of car subscription providers associate this flexibility with subscribers being able to have control over accessing a vehicle when they need it, Loopit explains the other factors driving the flexibility in car subscription offerings.
What flexibility actually looks like in car subscription
For motorists, flexibility is underpinned by being able to combine driving a vehicle and public commuting to suit the weekly needs of their work schedule and the rigours of their personal life. However, subscription takes this level of flexibility to a new level by providing subscribers with the opportunity to swap their normal vehicle for another vehicle with different functionalities and features to suit weekend needs. A common example would be swapping to a SUV that is fit for outdoors purpose for a family wanting to go on a road or camping trip.
Though many motorists show signs of strong interest in this value proposition, data from the Loopit network reveals that such flexibility in the form of vehicle swaps are actually not what motorists desire out of subscription. In fact, our stats show that:
- The average lifetime in a subscription vehicle based on the subscription segment based on our early 2021 subscriber cohorts is around 6-7 months and growing.
- There is an average of 2.31 vehicle swaps in the lifetime of a given subscription with 10% of all subscriptions having no vehicle swap at all
One can deduce that vehicle swaps, while an important offering and behavioural cue for subscribers, are actually not happening nearly as often as anticipated under this flexible ownership model. This can be attributed to the following factors:
- Most plans offered by subscription providers provide free swaps at the 30 or 45 day mark
- Subscribers upon committing to their vehicle on the agreed minimum term, end up familiarising themselves with their vehicle and do not feel the need to make a swap
What are other ways can subscription providers offer program flexibility?
Considering the above factors, it becomes eminent that it’s the other flexibility offered by subscription that is attractive to both motorists and businesses alike. These other flexible options include:
- Variable plan options - similar to how consumers opt in to a mobile phone plan, subscribers will get to choose how they will use that vehicle and how those options can be offered such in a way that aligns with the prescribed usage patterns. These can include the minimum term of the subscription, usage limits (i.e. distance that can be travelled) and flexibility around free swaps of the vehicle
- Subscription add ons - these include additional drivers, kilometre/mileage booster packs (akin to extra data on your mobile phone plan) and other accessories for the vehicle such as child seats. Depending on their personal driver history, subscribers can also have full autonomy in deciding whether they need liability coverage.
- Bundled in options - many subscription providers are now including insurance and roadside assistance as a standard offering, giving peace of mind to subscribers that they no longer require to annually budget and pay for these associated fees.
Identifying patterns in vehicle swaps
Just as we surfaced the numbers around how often vehicle swaps occur across the lifetime of a subscription, we can also take a look at how often some of these other occurrences happen. Data from the Loopit network show the following:
- 34% of active subscriptions have had a plan change
- 33% of customers include an add-on with their subscription
- 25% of subscriptions include penetration of insurance products
The figures are conclusive to the fact that when it comes to flexibility, subscribers value program flexibility more so than vehicle flexibility (ie. swapping vehicles). The concept of constant vehicle swaps and cost to the vehicle owner is revealing to be far from reality. Numbers show that subscribers keep their vehicles to the minimum term, which on average is 81 days and more. Rather, subscribers use the flexibility in subscription offerings to adjust to their changing lifestyle needs, whether that be upgrading or downgrading plans; or adjusting kilometre booster packs according to upcoming usage needs. With this in mind, there needs to be more of a focus for businesses around how to best educate and incentivise the uptake of subscription add ons:
- Additional drivers policy - showing the benefits of how this can help with any change in sharing the vehicle with other drivers in the family
- Distance/kilometre boosters - highlighting the ability to accommodate to new lifestyle and work demands such as holidays or having to commute further for work
Vehicle usage over ownership is quickly becoming the new norm for modern motorists. Along with this, motorists are now understanding that they are now able to treat the vehicle as their own - whether that be modifying or changing the subscription package that is fit for their purpose. New entrants into the car subscription space must recognise this and ensure that their offerings are suitable to the flexible demands of their respective customer segments. To ensure success, businesses must first understand the behaviours and usage patterns of their subscribers as well as how these change across the lifecycle of their subscription.
Our all-in-one car subscription solution makes this possible by centralising all the essential data and information about your vehicles and subscribers – all under the one platform. By unifying all processes and subscription data, configuration of your subscription plans and offerings to suit the flexible needs of your customers becomes a simple task. To learn more about how Loopit can help streamline your car subscription operations, speak to our team for demo: www.loopit.co/contact