Car ownership is on a shifting track, and car subscriptions are emerging as a potential challenger to traditional finance methods like PCP and HP. But are subscriptions a fad or the future? Let’s check out the current landscape and explore what experts predict.
Challenges on the Road: Considerations for Dealerships
The Road Ahead: Strategic Moves for Dealerships
A Quieter Rumble
The initial hype surrounding car subscriptions seems to have softened. While some manufacturers like Volvo and Hyundai offer subscriptions, it hasn’t become the dominant force some predicted. This could be due to factors like the fluctuating used car market or concerns from car dealerships and finance brokers.
Flexibility vs. Cost
There’s no denying the appeal of subscription plans. They offer flexibility – no long-term commitment compared to PCP or HP. This is attractive to those who desire a short-term solution or want to try different vehicles before committing. However, subscriptions can sometimes be more expensive than traditional options, especially for shorter terms.
Beyond the Monthly Fee
The true cost of a car goes beyond the monthly payment. Subscriptions often include extras like servicing, roadside assistance, and MOT, which can be appealing. However, comparing subscriptions requires factoring in these extras alongside deposits and advanced rentals associated with PCP or HP deals.
The Dealer Perspective
Car dealerships are also getting in on the act, with some offering their own subscription services. This requires adapting traditional finance and insurance (F&I) processes to accommodate subscriptions’ flexible nature. Companies like Hendy Group see subscriptions as a potential alternative revenue stream, offering more flexibility than daily rentals.
The Appeal of Subscriptions
- Flexibility for Customers, Flexibility for Dealerships: Subscriptions offer short-term commitments, appealing to a new customer segment. This can also be a valuable tool for dealerships to manage used car stock – testing the waters before selling or offering longer subscriptions for less desirable vehicles.
- Bundled Services, Higher Margins: Unlike HP and PCP, subscriptions often bundle maintenance, roadside assistance, and MOTs. This creates an opportunity for dealerships to generate recurring revenue from servicing contracts alongside subscription fees.
- Data-Driven Insights: Subscription models can provide valuable customer data on usage patterns and preferences. This allows dealerships to tailor offerings and target specific customer segments with the right vehicles and subscription packages.
Challenges on the Road: Considerations for Dealerships
- Adapting F&I Processes: Integrating subscriptions requires revamping traditional finance and insurance (F&I) processes. Dealerships need to invest in flexible financing options and user-friendly digital platforms to manage subscriptions efficiently.
- Residual Value Risk: Subscriptions potentially expose dealerships to greater residual value risk compared to selling vehicles outright. Careful management of subscription fleets and mileage limits is crucial.
- Competition and Collaboration: While subscriptions might cannibalise some traditional sales, they also present an opportunity to collaborate with OEMs offering subscriptions and carve out a niche in this growing market.
The Road Ahead: Strategic Moves for Dealerships
- Pilot Programmes and Partnerships: Starting small with pilot subscription programmes can provide valuable insights and mitigate risk. Partnering with established subscription providers can leverage their expertise and existing infrastructure.
- Investing in Digital Tools: User-friendly online platforms are essential for managing subscriptions, streamlining customer onboarding, and offering transparent pricing structures.
- Customer Education: Educating customers on the total cost of ownership (TCO) is key to effectively positioning subscriptions alongside traditional financing options. Highlighting the bundled services and flexibility can be a major selling point.
The Final Lap: Embracing the Future of Car Ownership
Car subscriptions are unlikely to replace traditional financing entirely, but they represent a significant shift in consumer preferences. By adapting their operations and embracing the potential of subscriptions, dealerships can ensure they remain at the forefront of the evolving automotive retail landscape.
Who’s Subscribing?
The current subscriber base is diverse. Some use them as a bridge while waiting for a new car order. Others, like businesses building teams, appreciate the flexibility compared to long-term leases. There’s also a growing trend of EV customers exploring different models through subscriptions.
A Look Ahead
The future of car subscriptions is yet to be written. Consumer education on Total Cost of Ownership (TCO) is crucial for subscriptions to gain wider traction.
A Comment from Marsh Finance
At Marsh Finance, we’re keeping a close eye on the evolving automotive landscape. Whether subscriptions become mainstream or remain a niche option, one thing remains clear: customer needs are evolving, and the car finance industry needs to adapt to provide the best possible solutions.
Partner with Marsh Finance and Stay Ahead of the Curve
At Marsh Finance, we understand the complexities dealerships face. That’s why we offer more than just competitive lending solutions. We’re your right-hand man in this ever-changing industry, providing:
- Expert Compliance and Sales Consultancy: Our free consultancy services ensure you’re equipped to handle the latest regulations and sales strategies.
- Flexible Financing Options: From traditional HP and PCP to innovative solutions, we have the tools you need to cater to a wider customer base.
- Unwavering Support: Our dedicated team is here to answer your questions and guide you through every step of the car finance process.
Click here to partner with Marsh and start your journey.