Autos: Feel like driving something new this month?
“Is owning a car quaint and unnecessary?” asked Mike Monticello in Consumer Reports. “For a growing slice of American drivers, it may be.” More and more auto companies, dealers, and startups are offering monthly car “subscription” plans. “For car owners, these plans aim to make things simple by bundling the monthly fee, insurance, and maintenance into one lump sum each month, without a long-term commitment.” One big draw: You can usually switch between several car models, sometimes as often as you like. But amenities vary from subscription to subscription, “so shoppers need to closely examine the fine print.” Luxury-car shoppers could try out BMW’s subscription, which starts at $1,099 a month, with insurance and roadside assistance, and allows for unlimited car swaps. Prices go up at the highest end: a top-of-the-line Porsche program with a choice of 22 models costs $3,000 a month.
Subscription services look a lot like leases, said Richard Reina in WardsAuto.com, but there are key differences. Typically, “there is no multiyear ‘contract’ with a subscription plan. Instead, after the initial 30-day period, the driver can cancel the subscription at any time.” The new system is especially appealing to younger drivers who “don’t feel the same way about driving and car ownership as their parents and grandparents did.” In addition to auto manufacturers who have rolled out subscriptions, several startups are vying to become the “Netflix for cars,” said Annie Nova in CNBC.com. Flexdrive, with 9,000 current customers, offers price points as low as $400, for a Toyota Yaris. Another startup, Fair, has you scan in your license, and then, using an algorithm, factors in your credit, income, and other variables and offers up a list of cars available to you. The average user pays around $350 a month, but adding Fair’s insurance could tack on an additional $115. It also charges a “start payment” that’s usually three times your monthly fee. You can return a car with as little as five days’ notice. Fair’s chief executive says that he wants to banish auto debt. “We don’t think you should take out a loan for a depreciating asset.”
This may seem like the hot new trend, but when you add up all the fees, you come “to one inexorable conclusion” about the new subscription plans, said Jack Nerad in Forbes.com: “They are not cheap.” Letting drivers “flip” their cars makes the programs expensive to run and drives up the price. Automakers such as Hyundai and Audi are holding off on subscriptions because they are simply too expensive to work, and Cadillac is ending its pilot program. The bottom line is that these programs 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.”