The Future of Driving is Flexible. Are Car Subscriptions the New Normal?

Car subscriptions turn buyers to fleet users, pushing makers and dealers to evolve sales tactics, emphasizing ongoing customer value and perks

George Skentzos

Head of Customer Experience

Published on 

March 4, 2024


Last updated on 

March 4, 2024

Key Takeaways

In recent years, vehicle subscription models have grown in popularity. Instead of purchasing or leasing a car long-term, consumers pay a monthly fee to have access to a vehicle from a fleet. The subscription company handles costs such as insurance, maintenance, and roadside assistance. According to Straits Research, the global vehicle subscription market size is expected to reach $33 billion by 2030, growing at a CAGR of 36.5%.

Many within the automotive industry initially feared subscriptions would cannibalize new vehicle sales. The assumption was that consumers would opt for subscription access over purchasing, leading to an overall decline in sales. However, this belief is misguided. Rather than reducing total sales volume, subscriptions actually shift purchases higher up the value chain.

For automakers and dealers to adapt, they must focus on fleet partnerships and lifetime customer value rather than one-time consumer sales.

How Car Subscriptions Impact New Car Sales

With a vehicle subscription model, consumers no longer purchase vehicles but rather subscribe them for a recurring fee that includes other on-road costs such as insurance, registration and maintenance, without any long-term commitment. The experience for the customer otherwise remains analogous to more traditional car ownership.

Instead, the purchases of new cars are made by fleet operators like rental companies and dealerships who then supply the vehicles to end consumers on a subscription basis. Unlike other mobility options, like car sharing and ride sharing where customers use a vehicle on a temporary basis, under a subscription model there is no net loss in the number of vehicles required to serve a given market.

In this way, total vehicle sales volume does not decrease under subscriptions, but rather the profile of purchasers changes.

Fleet management companies and auto dealerships take on the role of purchasing vehicles in bulk to supply their subscription fleets. The overall sales volumes remain steady for automakers, but the customer profile shifts from individual consumers to institutional fleet buyers.

This means that rather than trying to sell one car at a time to individual households, automakers can now focus on larger, higher volume institutional purchases while still maintaining stable sales totals.

Impacts on Automakers

The growth of vehicle subscription models requires automakers to increase their focus to institutional buyers as well as consumers. Rather than marketing and selling directly to individual car buyers, automakers must develop programs and incentives in parallel aimed at leasing companies, rental car fleets, dealer groups, and other high-volume purchasers.

This is certainly not unchartered territory for automakers who regularly negotiate volume orders for fleet buyers. The difference, however, lies in the types of vehicles these institutional buyers need, the extent and speed of delivery, and the customization they may require. In the traditional model, fleet buyers often purchase a specific set of vehicle models, with limited customization.

While traditional fleet sales typically involve limited customization, vehicle subscription models could require a much higher level of customization to meet end-user preferences. This might range from specific vehicle features, trim packages, technological add-ons, and even personalized branding for corporate subscribers. Automakers need to figure out a way to offer such personalization at scale without disrupting their mass manufacturing model.

Lastly, in a vehicle subscription model, after-sales service plays a major role because it is a part of the package that end-users subscribe to. This implies extra responsibilities for automakers to maintain and service vehicles on an ongoing basis. This demands not only a robust after-sales service infrastructure but also a broader shift in automaker's business models towards service-centric rather than product-centric models.

Impacts on Dealerships

With vehicle subscriptions, in addition to selling directly to consumers, the role of dealerships extends to supplying vehicles for subscription fleets. Individual dealers and dealer groups purchase vehicles in bulk to provide inventory for subscriptions.

This means dealers must focus more on high-volume fleet sales and actively managing their inventory. According to research, dealers may need to carry up to 30% more inventory to support subscriptions while still maintaining adequate new car availability for regular buyers.

Dealerships also require expertise in remarketing and understanding residual values. When a subscribed vehicle comes off lease, the dealer must determine the best strategy for remarketing - either placing it into another subscription fleet, selling at auction, or retailing.

In addition, dealers must manage fluctuating demand. As subscriber numbers increase or decrease month to month, inventory levels must align. This requires close coordination with fleet buyers.

Importance of Lifetime Value

In a subscription-based model, one-time vehicle sales become less important than building ongoing relationships and maximizing the lifetime value of each subscriber. Rather than focusing solely on individual sales transactions, automakers and dealers need to retain customers and generate recurring revenue through subscriptions.

Therefore, customer loyalty programs, incentives, and perks become critical for maintaining a loyal subscriber base. These types of programs encourage subscribers to continue their memberships month after month rather than churning. They help maximize the total lifetime revenue from each subscriber.

Key performance indicators and sales metrics need to shift as well. Sales volume and profit per unit sold are less relevant. More important metrics are monthly recurring revenue, subscriber acquisition cost, customer lifetime value, and subscriber retention rate. Automakers and dealerships must track their success based on the long-term relationships they build rather than one-time sales.

By focusing on subscriber loyalty and lifetime value, automakers and dealers can thrive in a subscription-based market. Recurring subscriptions provide more predictable and stable revenue than individual sales. This allows businesses to better forecast, plan, and invest for the future.

Fleet Sales Incentives

Automakers offer a variety of incentives and discounts to encourage fleet purchases from rental car companies, leasing firms, and other commercial buyers. These incentives help automakers maintain consistent sales volumes even as consumer purchases decrease. Some common fleet sales incentives include:

Volume discounts and rebates

Bulk buyers can earn significant per-vehicle discounts, cash rebates, and bonus programs based on purchase volume.

Fleet-specific packages

Models can be configured with standard equipment and options optimized for commercial use, like durable cloth seats.

Dedicated sales process

Automakers have specialized fleet sales teams focused on high-volume institutional buyers. The sales process is tailored for multi-vehicle orders, with expedited quotes, factory ordering, and tracking.

These incentives encourage major purchases from fleet operators, sustaining sales volumes for automakers as consumer transactions decline due to subscriptions. Automakers have significant expertise in managing high-volume fleet sales.

Remarketing Best Practices

Optimizing the remarketing process is critical as dealers increasingly rely on used vehicle sales. Key areas for dealers to focus on include:

Residual value forecasting

Accurately predicting used car values at various timeframes allows dealers to optimize inventory management. This involves leveraging data and analytics to estimate future used car prices based on factors like make/model, mileage, condition, demand, and macroeconomic trends.

Optimal cycling periods

Determining the ideal length of time to keep vehicles before remarketing can maximize ROI. Shorter cycling times allow for more units sold but less appreciation, while longer cycles mean fewer sales at higher values per unit. Dealers must find the optimal period based on their inventory costs, market demand, and expected depreciation curves.

Reconditioning processes

Investing in reconditioning cars to "like new" condition results in higher sales prices and faster turnover. This involves thorough inspections, repairs, detailing, and replacement of wear items. Streamlining reconditioning workflows and standards is key.

Maximizing used car value

Employing optimal pricing, flexible financing options, reconditioning investments, online marketing, and sales process training helps dealers realize the full potential value for used vehicle inventory.

By focusing on these areas of the remarketing operation, dealers can maximize the value derived from used vehicles and better support emerging subscription models.

Importance of Customer Lifetime Value

With vehicle subscriptions, the importance shifts from one-time sales to retaining and maximizing the value of subscribers over their lifetime. This makes implementing customer loyalty and incentive programs critical.

Some ways for automakers and dealerships to boost loyalty and lifetime value of subscribers include:

Subscription loyalty incentives

Special rewards, discounts or package upgrades for long-term subscribers.

Retaining high-value subscribers

Identify and provide personalized perks to prevent cancellation by big spenders.

Personalization and custom offers

Use data analytics to send targeted, customized deals to individual subscribers.

Tiered subscription packages

Offer varying levels of packages and benefits to appeal to diverse needs.

The key focus must be providing ongoing value and incentives to subscribers, as their lifetime value becomes more important than one-time vehicle sales in a subscription model.


In summary, vehicle subscriptions do not reduce overall automotive sales volumes, but rather change the profile of vehicle purchasers. While consumers no longer buy cars directly in a subscription model, purchases are still made in aggregate by leasing firms, rental car companies, and dealers to supply their subscription fleets. Total vehicle sales remain constant even as the purchasing entities shift further up the automotive value chain.

This evolution requires automakers and dealers to adapt their sales processes to serve fleet operator and institutional buyers, rather than individual car shoppers. Capturing lifetime customer value through ongoing subscription revenue becomes more important than one-time vehicle sales. This opens up opportunities for automotive companies to develop new business models centered on building loyalty, maximizing subscriber retention, and crafting incentives for their evolving customer base.

Rather than reducing sales, vehicle subscriptions create the impetus for automakers and dealers to rethink how they capture value. Those who successfully transition to serving fleet partners and maximize subscriber lifetime value will thrive in the emerging subscription-based automotive economy.

About the author
George is the Head of Marketing and Customer Experience at Loopit. Having originally started his career as a motoring journalist and founding team member for one of Australia's top automotive startups, George has a strong passion for automotive, business and growth marketing.
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