Vehicle subscriptions - a new way forward?

Posted by Alex Knight on 11-Sep-2020 15:47:12
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With consumers already comfortable with subscription services in many areas of their lives, could their car be the next big thing?

Vehicle subscriptions - a new way forward

As workshops up and down the country focus on drumming up as much business as possible to offset losses incurred as a result of the coronavirus pandemic, aftersales is set to become an even more intense battleground.

In the UK, the independent sector makes up 64% of the aftersales market and that’s expected to increase to 70% by 2022. With higher overheads demanded by investment in the brand and as EVs with their fewer moving parts become more widespread together with the impending impact post lockdown, the franchised sector needs to implement initiatives that deliver beyond customer expectations to ensure people keep coming back.

Taking the service plan beyond

Whilst service plans are a tried and tested means of both enabling customers to spread the cost of servicing across the year and encouraging repeat business at dealerships, dealers could look at the opportunity of taking this to the next level and offering a monthly subscription at the point of sale.

The subscription plan could cover all the car’s expenses other than fuel and are already on offer from some manufacturers. Dealers could also partner subscription providers as a supplier providing service, maintenance and repair. In a post-covid world, these simpler services which reduce dealership interaction might appeal even more to customers looking to limit the time they spend in enclosed environments outside their own homes.

How do they work?

Car subscription services work in a similar way to phone contracts and even streaming services whereby the customer pays a monthly fee, the car is delivered to the door with road tax, breakdown cover, insurance and routine servicing in place.

As well as manufacturers already experimenting with subscription services, disrupters are already making leeway in the market. American company Drover set up shop in the UK in 2015 to provide vehicles for Uber drivers, and has provided a public service since 2018... notching up 2,000 subscriptions for private motorists by 2019. Meanwhile, Wagonex has been offering similar services since 2016.

The downsides

It's generally more expensive than traditional ways of funding vehicles, which might prove to be off-putting to car drivers. The flexibility, though, could prove attractive in an uncertain world where we have yet to experience the true economic impact of the pandemic. Funding options such as PCP, personal contract hire and leasing, in general, demand an upfront payment and a contract of some three or four years. Subscription services typically provide contracts of six to 12-months although month by month are also available, albeit at a higher rate.

The question is whether dealers, particularly larger groups, can develop their own schemes, independently or in conjunction with manufacturer partners, which both deliver the flexibility and competitive cost consumers want to see. Cracking this nut could prove a winner, particularly in the current climate.

Topics: customer experience, technology, loyalty, dealerships, customer satisfaction, interaction, communication, online, digital, car purchase, Aftersales, automotive, buyer Journey, consumers, personalisation, sales, customer relationships, dealer, car sales, convenience, service, digitisation, retail, new car, workshop, vehicle subscription

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