The Nissan Rogue is one of scores of popular vehicles whose lease rates and purchase costs make subscription services seem very expensive in comparison.Nissan
There’s a lot of claptrap being thrown around the auto industry disguised as a “trend,” but none is getting as much attention as the supposed wave of near-future consumers who will subscribe to cars rather than purchase or lease them. Those promoting the idea point to the fact that subscription services for things like razor blades, skin care products and the ingredients and instructions for making dinner are really hot right now. They then extrapolate that trend to justify a belief that subscriptions for cars will be the next big thing. But I’m here to tell you it won’t. And I’ll also tell you why.
But first, just so you don’t think I’m an old, stuck-in-his-ways Baby Boomer who just doesn’t get it, let me give you a little background. As one of those increasingly rare guys who shaves almost every day, I have subscribed to a couple of razor blade services. In fact, I think you might describe me as an early adopter of the blade subscription, because when I saw the price of razors at the drug store, getting a month’s worth of blades for five bucks appealed to the cheap bastard in me. That’s how I joined the ultra exclusive Dollar Shave Club.
To begin with I liked it, but then, when the company was acquired, it seemed like the quality of the blades went downhill overnight. At first I thought I just received a bad batch, but after another month, when the blade quality still seemed to hover somewhere between a trowel and a spatula, I decided to try out another subscription service.
The new service — Harry’s — says that its blades are manufactured by a factory it owns in Germany. I guess that’s cool despite the fact that by belonging to Harry’s I’m contributing to our trade deficit. My problem is I don’t think the blades are all that.
Hey, they’re not bad, but to tell you the truth, I think the best razors I purchased recently were a twelve pack of disposable twin-blade Schicks that I bought at the local CVS. Very light, easy to maneuver on my face and pretty cheap.
Which brings me back to the car subscription subject. And to the reason I think auto subscriptions — unless the model changes radically — are doomed to fail. I joined a razor blade subscription “club” because I perceived it to be cheaper than buying name-brand blades at the grocery or drug store, or even at a big box like Costco.
But after an exhaustive research project on the nation’s car subscription services, I have come to one inexorable conclusion: they are not cheap. Quite the contrary, they are much more expensive than buying or leasing a car even after you figure in the fact that they often include maintenance, repairs and insurance in the monthly fee. Here’s the thing: the car companies, the dealers and the finance industry have combined to make buying or leasing a new car almost amazingly inexpensive. Yes, cars cost a lot but buying and financing them (and leasing is just another form of financing) is very inexpensive.
Here’s a quick example — the very popular Nissan Rogue compact crossover. On Nissan’s consumer website it is being offered for $199 per month on a 36-month lease with $3,299 upfront payment. A noted national pricing website says the Rogue will cost about $1,200 each year to insure. So some quick and dirty math suggests that for something like $390 per month, including insurance but excluding repairs, some lucky consumer could be driving that Rogue for three years. ($199 monthly lease payment + $91 per month pro-rated $3,299 initial payment + $100 per month insurance.)
Compare this to new-car subscription rates that start much higher. One of the lowest I encountered was YourDrive out of Dallas. Its lowest priced subscription plan costs $660 per month after a $500 initiation fee, giving members the use of Toyota Corolla, Toyota Camry, Toyota Prius and Toyota CR-H.
That plan is a veritable bargain compared with the typical price levels of various subscription services. Most of them start at nearly $1,000 per month, and some extend as high as $3,000 per month. Offering use of multiple luxury vehicles, they are obviously targeted at those with significant levels of discretionary income.
At the recent J.D. Power Automotive Marketing Roundtable, Hyundai Motor America Chief Marketing Officer Dean Evans pronounced vehicle subscription services as “dead.” Reinhard Fischer, Audi of America VP, Chief Digital Officer, agreed, saying, “We are experimenting with subscriptions, but we believe it could be too expensive.”
When you take a peek behind the curtain, the high prices are inevitable based on the costs of administering a subscription plan that enables the use of multiple vehicles each month. Some of the plans offer unlimited “flips” per month — though they still have a cumulative mileage limit — and each “flip” costs the sponsor of the subscription plan money. In addition, to accommodate “flips” the subscription operators must keep some vehicles in reserve. This means that subscription service could be said to underutilize vehicles — just what New Age transport schemes are supposed to prevent.
So while I intend to keep my subscriptions to Dollar Shave Club and Harry’s, I don’t expect to subscribe to a car any time soon. And I bet a lot of people will join me in that.