Car Subscription vs. Lease vs. Purchase

Mr_Shiftright

Car subscriptions seem to be the "next new thing" in marketing for the automobile industry.

Here's a brief rundown of what they are and how they work:

What are Car Subscriptions?

Does this tempt you with any apparent advantages of how you buy/lease right now?

biancar

Zero interest in the car subscription idea.  I like my insurance company and don't want to switch to Liberty Mutual (company Volvo uses).  I'm not interested in being that locked into the dealer's idea of when I might need to switch cars.  For me, ownership only.  No subscription for sure, probably not ever a lease either.

Mr_Shiftright

I hadn't thought about being forced into another insurance company, so that's a consideration.

rkelly17

Also here in PA tax is on the monthly payment. So I assume in a subscription scenario you will pay tax on everything not just the car part of the payment.

PF_Flyer

I don't see what the consumer gains in this arrangement given how much these cost. Even factoring in what I pay for upkeep and insurance, how is this of benefit to me? As George Carlin said, "You can take and nail two sticks together like they've never been nailed together before and some fool will buy it"

The example in the article of a 2015 Nissan Sentra for $800/month. I have a 2014 Versa Note that cost me $288/month(highest car payment I've ever had). That leaves me roughly $500/month to spend on maintenance/insurance to break even. I think owning works in my special situation

stickguy

price aside, it is the convenience they are selling. and short term commitment. So basically, it is a long term rental, taking their insurance. Only way I can see it makes sense. Unless the desire to switch models often is worth the price premium.

I know at times our company had people come from overseas for extended periods that needed a car for maybe a year. This would work for that situation.

I know that I would never be interested in this.

Mr_Shiftright

stickguy said:

price aside, it is the convenience they are selling. and short term commitment. So basically, it is a long term rental, taking their insurance. Only way I can see it makes sense. Unless the desire to switch models often is worth the price premium.

I know at times our company had people come from overseas for extended periods that needed a car for maybe a year. This would work for that situation.

I know that I would never be interested in this.

Egg-xactly! It's all about convenience. To make a comparison, why would ANYONE trade in a car to a dealer when they could get thousands more selling it privately?

But they do, all the time.

PF_Flyer

I just cannot imagine, even if I hit the powerball, that I would ever be interested in this. We didn't even talk about restrictions on use mentioned in the article, and what kind of penalties would be involved if you messed up this month's vehicle.

I can't get the idea of Dippin' Dots out of my head. They found a way to put more air into ice cream AND change you more at the same time.

isellhondas

My prediction for what it's worth is this will quickly die on the vine.

qbrozen

I think it can work... for the right price.

To lease a $36k Volvo (that's the MSRP of the XC40 T5 Momentum in the $600 offer) for 2 yrs/24k, let's use the 1% rule plus tax plus DMV and inception fees due at signing, then add a fairly healthy $75/mo insurance (I pay a bit less than that here in NJ, so I'm assuming this should be enough for just about anywhere). Add in 3 oil changes and tire rotations. Oh, and lease disposal fee at the end. I come up with a back-of-the-napkin estimate of $535/mo.

$65 more per month for "convenience" seems a bit dear to me. At $550, I may think about it.

Mr_Shiftright

It's like trading in to the dealer vs. selling on your own, isn't it? You're paying for the "convenience" of it.

It's a clever marketing angle I will say that, because some potential leasees dread being locked in for 36.

kyfdx

If the price is right, it could work, but you can guarantee it will be more than doing it on your own.

But, I think it's imperative that it's your only vehicle. Might work best for someone that doesn't already own a car or house (that already gets multi-line insurance discounts).

Mr_Shiftright

Plus you are locked into the automaker's insurance carrier.

kyfdx

Mr_Shiftright said:

Plus you are locked into the automaker's insurance carrier.

Yes.. I think Volvo uses Liberty Mutual. That's a decent company, so if you didn't have insurance, it might be okay. I wouldn't want to switch, though.

stickguy

I could see it for someone in a situation where they will only need a car for 6-12 months. temporary job, something like that. Where buying does not make sense, leasing is too long, and renting too expensive.

Mr_Shiftright

Well stick, that's what we call a "niche" all right!

Michaell

kyfdx said:

If the price is right, it could work, but you can guarantee it will be more than doing it on your own.

But, I think it's imperative that it's your only vehicle. Might work best for someone that doesn't already own a car or house (that already gets multi-line insurance discounts).

Which raises an interesting point - if you are on the subscription program, and get into multiple accidents that are deemed to be your fault, can the insurance company raise the premium and/or cancel your policy, therefore nulling out the subscription?

Or, is the insurance company on the hook for a fixed insurance premium?

Could be an advantage if you have great credit and income, but are a lousy driver.

kyfdx

Until you turn it in, and find you are ineligible for insurance.

Mr_Shiftright

Insurance companies will always find a way to stick the knife in.

kyfdx

Car insurance is like health insurance. Companies want new customers to be able to show that they've been continuously covered. Gaps are a no-no.

turbo_v6

Thanks for the post and the info, car subscription can be so pricey at lease to me.

storm10

To me, someone has changed word "subscription" from the word "rent". It's a classic rent a car. When you purchase or lease - you are the first and only owner of the car. So you don't have to worry about bacteria from the previous, possibly sick people, holding the steering wheel, or who knows what else happened in this car. I wouldn't want my baby sitting in the car-seat after someone just smoked in it. Plus the performance of the car will be on a par with any typical rental car, when 20 previous people drove it differently and the axles are about to collapse. Plus you have to be insane to pay $4k per month for Mercedes... when you can easily lease it for $400. Am I missing something??

qbrozen

I doubt used ones are included.

And what example are you referring to when comparing $4k to $400? Pretty sure that doesn't exist.

Mr_Shiftright

I think Mercedes subscription service is just getting under way--I haven't seen any numbers yet.

leroy111

I rather just stay with a lease it isn't worth the bother to have to switch cars when they decide

qbrozen

? Not sure what you mean "when they decide." You sign for a specific term, just like with a lease.

clawsoncars

Subscription could work great depending on the market they are advertising to... Maybe companies might find the best use out of these subscriptions?

idrachman

What is an range of discounts (%) that you've heard of for a Macan base model? One dealer was offering only just about 5%. Thx.

qbrozen

Just for kicks, I downloaded the Care by Volvo app. When I click on the Xc40 T5 Momentum, it comes back with $650/mo. Did they already raise the price before even getting this off the ground?

Michaell

qbrozen said:

Just for kicks, I downloaded the Care by Volvo app. When I click on the Xc40 T5 Momentum, it comes back with $650/mo. Did they already raise the price before even getting this off the ground?

Apparently. Somebody mentioned it in the XC40 lease thread.

Mr_Shiftright

Almost $8K per year. I suppose there are lease payments that commonly equal that.

Michaell

Mr_Shiftright said:

Almost $8K per year. I suppose there are lease payments that commonly equal that.

Easily. But, those payments would be on a car with a substantially higher MSRP than the XC40.

If you use the 1% guideline, you're looking at cars in the $60-70K price bracket.

stickguy

Well, probably could get that to lease at $500/month sign and drive (I assume the subscription plan has no up front fees like you find on a lease?). So $150 for convenience of being able to get out in a shorter time frame, ability to switch cars, and the insurance? Depending on who you are and where you live, I suppose that could push $150?

So on the high side, but probably not too far from actual cost to lease. And if you don’t want it 3 years might make sense.

Just seems like a long term rental to me. Some people might need that arrangement. If it moves a few extra cars, good for Volvo. If not, they scrap it. Not that expensive of a plan really for them to take a flyer on it.

carolsutton_86

So, here comes in the car subscription. I think I will consider checking and know all the facts first before I will try this. Thank you for posting such useful information.

antoninb

Definitely not interested, for the same reason that I steer clear of leases. While the convenience may be appealing on the surface, I would not want to be in a forced relationship with a dealer or insurer where they will always clearly have the upper hand. I learned that the hard way with leasing.

Mr_Shiftright

It seems though that these subscription plans, at least in theory, are attempting to loosen the restrictions one normally has with leases.

GamesBx2

Mr_Shiftright said:

Almost $8K per year. I suppose there are lease payments that commonly equal that.

Yes, I think 8k usd!

bryanfox177

Actually depends on what kind of person you are. If you're the type of person that loses interest in their things in a short time then maybe leasing might be for you, but if you're the type that holds on to their possessions for a long time then why not buy it? But on a financial standpoint or perspective you might save more when leasing a car.

jdm11

Chicago area dealers, and/or probably their customers are on crack. Can someone please explain to me how "general joe public BMW driver" affords the car. I honestly dont believe the payments people pay to drive a mediocre car. Are you honestly paying those numbers? Idiots!

jasonkimberson

i think the idea of car subscriptions is actually very interesting. I like the idea of being able to change cars monthly if I wanted

qbrozen

Pretty sure they won't let you change that often without fees. They can't afford to be taking on "used" cars with thousands in depreciation in exchange for a few hundred bucks.

stickguy

It really ends up being the same as their car rental pool.

qbrozen

But are they giving the next subscriber in line a used vehicle? I don't believe so.

stickguy

Good point I thought of after. Maybe. Otherwise generating a lot of new service loaners.

PlasticBottle

Subscription isn't not a new idea. It was already implemented in the past in Israel. it creates a huge advantage for the dealerships, as they can resell the car as certified by default - all car support is granted during the lease period.

The concept is great. You get a lease and a management company(dealership) that supports your lease (in Israel they also pay for the gas) for a ~$50-$400(depends on the car) extra in a month and save the headache of insurance, gas billing(you don't pay at the gas station in Israel), maintenance, road support and etc.'

But the price right now in hear is way too high for cover the car management headache.

Right now, I'm going to stick with leasing.

Mr_Shiftright

Yes, subscription does seem more like buying a luxury handbag than getting best bang for the buck with leasing or purchase.

ksoman

My lease payments are less than my insurance payments. Sux to be a parent with a desire for nice cars.

I went from a buyer to a lessee. Largely because I found I was keeping cars for less than 5 years, and lately because technology creep is overwhelming life of cars themselves. Also, I use Lyft extensively as my work keeps me flying close to 200K a year. I often wonder if the extra car at home is worth the expense. So, in the future, I do see fewer cars in my garage and more reliance on somebody else's vehicle, whatever form of "service" it shows up as.

MorePowahhh2Me

wish there was a subscription service where you get a vehicle for 1-3months at a time

TheMarkusAllen

Subscriptions are roughly double the total cost of traditional leasing.

As far as leasing vs. financing, leasing wins almost every time (when we run the numbers through a spreadsheet)... I made a video about this here:

https://www.youtube.com/watch?v=gJZJlYLuV_k

Howard_wep

I guess oems are just trying to broaden their portfolio and especially want to target the millennials with these subscription models...
at the end of the day they just want to sell convenience.. some do so with entirely new cars and some also with used ones.. for me personally its not something I would ever do tho

Glockenspiel

I never liked the idea of subscription and lease.