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Are subscriptions the end of ownership?

Not so long ago it would have been unthinkable to subscribe to a car. Yet Frost & Sullivan claims by 2025 nearly 10% of new car sales in Europe and the US will be part of a subscription. Many dub this “the Netflix” of cars. But this implies cars are just another form of entertainment. Is that really true?

No more ownership

Already today, two thirds of Australians have some kind of subscription service and the average is 2.5 subscriptions. This will increase if, as Gartner estimates, three quarters of companies currently selling products will offer product subscriptions by 2023.

Subscriptions could put an end to having to own anything. Proponents argue people today want the experience without the burden of ownership. They claim there is no longer any status in owning anything. It is simply set and forget – you subscribe to a service and don’t have to think about it anymore.

For example, a Digital Opal card will trial in NSW later in 2020. Users will pay a fee each week or month to use both public and private transport. Whether they are travelling on a bicycle, tram, train or rideshare car, the subscription in their digital wallet will cover it.

Meanwhile, the car industry has suffered a severe slump in the last 2 years. Not only that, the millennial generation doesn’t want to drive, let alone own cars. They grew up with Spotify, Stan and Netflix while Baby Boomers grew up with vinyl records, cassette tapes and a handful of free-to-air TV channels.

Why subscribe to a car?

Why would you want to subscribe to, rather than buy a car?

  • No long-term commitment to any particular car
  • Insurance, registration, maintenance and roadside assistance all included
  • You can swap the vehicle for another more suitable one at short notice.

Subscription creep and waste

Subscriptions are already well-established for newspapers, clubs or software. But the term “subscription creep” describes how they can start to multiply in someone’s life. A few examples are Netflix, Stan and Spotify, gym memberships, fitness apps, Hello Fresh and Marley Spoon.

One study found nearly two thirds of Australians are together wasting $3.9 billion on subscription services they do not use or have forgotten about. More than 10% pay more than $100 each month for subscriptions. Would these people subscribe to a car as well?

There are a few reasons why they might not:

  • Monthly subscriptions are higher than monthly payments on a comparable used vehicle
  • Choice of vehicles is lower than if you bought, leased or rented
  • Most plans set a mileage limit with steep fees when exceeded.

Car subscription services

In Australia, there are half a dozen car subscription services: Blinker, Carbar, Carly, FlexiGo, GoGet and HelloCars (Holden’s Maven recently went out of business). Each of these services has a slightly different way of operating.

None of them is as cheap as Netflix, however much this term is bandied around. A subscription costs from $100 to $400 a week, depending on the service and the vehicle. Even though this includes all on-road costs, that is still $5,200 to $20,800 for one year. If you paid that amount for your own car, at least you would still own it at the end of the year.

The price for flexibility and non-commitment is high, but car subscription might suit people with those overriding needs.

These people may also like subscribing for car insurance. Two companies at least have already started targeting young vehicle owners. IAG in Australia recently introduced a subscription to comprehensive car insurance, branded Poncho. In the UK, Cuvva offers fully flexible monthly comprehensive car insurance along the same lines.

For people who still value their car as personal space, a place for family, a means for doing chores and having adventures – and a status symbol – subscriptions will not work.

Corrina Baird

Writer and expert greenslips.com.au

Corrina used to lend her car to her kids and discovered first hand what Ls, Ps and demerits mean for greenslips. After 20 years of writing and research in financial services, she’s an expert in the NSW CTP scheme. Read more about Corrina

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