HomeLaunch

What is a car subscription model?

The automotive industry is the latest to undergo significant transformation as a result of the usership economy

George Skentzos
Head of Customer Experience
Last updated on 
September 21, 2022
Introduction

Introduction

Sourcing Vehicles

Sourcing Vehicles

Procurement

Procurement

Financing

Financing

Acquiring Customers

Acquiring Customers

Above The Line

Above The Line

Point of Sale

Point of Sale

Key Value Propositions

Key Value Propositions

Discounts & Promotions

Discounts & Promotions

Lead Management

Lead Management

Inbound Lead Generation

Inbound Lead Generation

Outbound Lead Generation

Outbound Lead Generation

Managing Customers

Managing Customers

Customer Onboarding

Customer Onboarding

Customer Service

Customer Service

Customer Experience

Customer Experience

Legal Agreements

Legal Agreements

Receivables & Arrears

Receivables & Arrears

Collection & Handover

Collection & Handover

Delivery

Delivery

Fines & Tolls

Fines & Tolls

Breaches & Reposession

Breaches & Reposession

Insurance & Claims

Insurance & Claims

Eligibility

Eligibility

Claims Management

Claims Management

Incident Management

Incident Management

Fair Wear & Tear

Fair Wear & Tear

Fraud Risk & Prevention

Fraud Risk & Prevention

Managing Vehicles

Managing Vehicles

Subscription Structure

Subscription Structure

Profitability & Performance

Profitability & Performance

The idea of usership over ownership is proliferating across many industries such as food, health, entertainment and more with the rise of brands such as HelloFresh, Netflix and Spotify, and the automotive industry is the latest to undergo a transformation away from traditional models to more flexible ownership alternatives.

What is a subscription model?

The general idea of a subscription model is that it allows you to compound your value by accessing goods or services through smaller recurring payments rather than wearing the upfront cost to purchase those equivalent goods or services outright.

In the simplest terms, compare the monthly cost of a Netflix subscription which offers unrestricted access to a catalog of thousands of film and TV titles, to the cost it would take to purchase these titles individually on more traditional (and now defunct) formats like DVD or digital rental.

What is car subscription?

The automotive industry is the latest to undergo significant transformation as a result of the usership economy, where consumers would prefer to pay for flexible access over direct ownership.

Often described as "Netflix for cars", car subscription provides consumers with exclusive access to a vehicle for a recurring payment without any long-term commitment through an all-inclusive package that incorporates registration, insurance, servicing, maintenance and more.

It means consumers can drive for as long as they need without the significant upfront costs typically associated with car ownership. They are also welcome to swap to a new vehicle or pause their car subscription altogether as their needs change.

The minimum committed cost and duration of car subscription is significantly less compared to traditional car ownership options like purchase, leasing or finance.

In the simplest terms, subscribers want to be able to drive a car they would otherwise own but with the flexibility of a rental.

Not to be confused with in-car subscription

An in-car subscription typically refers to providing consumers with access to various in-car features for a recurring payment. These features are typically software-based and have become more prevalent as vehicle technology becomes more sophisticated - and more expensive.

The most well-known example of in-car subscription is the Tesla Full Self-Driving Capability Subscription (also known as FSD or Autopilot) which allows Tesla owners to activate FSD on their vehicle from US$99 per month.

This represents a significant saving for consumers as the upfront cost of Autopilot, which enables features like changing lanes on highways and automatic car parking, is otherwise a US$10,000 option from factory.

Some simple math reveals that it would take 101 months - or just over eight years - before the upfront cost for Tesla's Autopilot becomes financially viable, which is realistically far longer than most Tesla owners would keep their vehicle.

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.
LinkedIn

Big Or Small, Loopit grows with your ambitions

Loopit is the technology between car subscription and your fleet potential.