Car Finance

Leasing Cars: What Are Car Subscriptions?

By Mike Richards Updated: 01/09/2019 Posted: 10/26/2018

Over the years you have probably subscribed to a service, a newspaper or a magazine or a TV service. All this has become quite normal nowadays. But what if you wanted to subscribe to a car? Traditionally, when looking to acquire a new set of wheels, whether new or used, you had the option of buying with cash, or arranging some sort of financing, a lease being one of the options. Let’s take a look at car subscriptions.

For those who are not familiar with how a lease works, there are two types: open-end and the closed-end lease. In essence, you are renting a car for a period of two or three years. Once the initial “rent” period is up, you either have to purchase the car if it’s an open-end lease or return it to the dealer. When purchasing the car, you have to pay the residual value of the vehicle.

So why would one consider a car subscription, what does it bring to the table and what are the upsides and the downsides compared to the lease?

What Does a Car Subscription Bring?

Well, depending on the dealer or the manufacturer you decide to go for, you might get a monthly payment, as with the lease. However, this would also cover the insurance, the maintenance and the wear-and-tear coverage. Compared to a lease, the monthly payment might be a bit higher, but the lease does not cover the maintenance and the other factors mentioned above. Plus, you might also be able to get the car on a subscription with more miles per year than you could get it through the lease. You do have to be aware that not all subscription options are the same.

Some dealerships will allow you to subscribe to their car for a minimum period of a year. Other might give you the option to shorten the term. It is enticing when you consider that you could potentially subscribe to a brand new car every other month, should you wish to do so. If you look at it that way, it is certainly an upside over a lease that ties you to a car for a two or three-year period, and potentially longer if you have to buy the car once the lease expires.

But not everything is rosy when it comes to car subscriptions. In some aspects the traditional lease does have advantages.

Downsides of the Car Subscription Programs

There aren’t plenty of subscription programs available nationwide. Mostly these are offered to specific markets and manufacturers are still running pilot programs. Volvo has launched a nationwide subscription program called Care by Volvo. According to the company’s website, everything is included in one monthly payment. You pick your car and the concierge will deliver it to you. They will even pick it up once it has to be taken to service, which is covered by the subscription. Other items covered are the insurance, servicing and maintenance, repairs, taxes, wear and tear and tires. But where is the downside? So far, the subscription deal looks good, and some calculations bring it in at only slightly above the monthly lease payment.

As mentioned above, not all subscription programs are the same. Some are in their pilot phases and are capped to certain markets and customers. Many have significant sign-up fees. While some do offer monthly swaps (unlike Volvo, which requires at least a year’s subscription), this can come at a higher price. Frequent swapping could rack up the costs. In some instances, you might be paying more than 100 percent more that it would cost you to lease an equivalent car.

Are There Many to Choose From?

Companies that have started their car subscriptions pilot programs include Mercedes-Benz, Porsche and BMW. There is already variety of options. Not only that, there is a variety of subscription packages available. However, there are only select few metropolitan areas that you can subscribe to a car in. These are New York, LA, Atlanta, Nashville, Dallas and Philadelphia.

Every brand has set out to test the waters differently. Some only offer the current year models for subscription. Others will allow you to go back further two model years.

Further Reading

Early Doors

It looks like Volvo has made a major step towards offering a new service to its customers. Other brands are merely testing the waters with limited availability in terms of geographical coverage. Essentially, it is still too early to say whether car subscriptions will take off and be widely accepted. There are certainly differences to the traditional lease and advantages as well as downsides.

However, with the pilot programs returning results, we are bound to see tweaks in the offering in terms of subscription packages and cars as well as the area coverage. It eventually goes back to individual preference. Some might be ok subscribing to a car for a month or two and then let it go when they don’t need to hold on to a vehicle or don’t require it as much. Others might use the subscription option just to drive a different car every other month. Others again will stay loyal to the traditional ways of getting behind the wheel of a new car and stick to the lease.