Economic Perspective: Auto Subscriptions

MARY WALDEN:

“Today’s program looks at car subscriptions. Mike, you and I are old enough to remember when there were only two ways to use a vehicle: purchase it, or borrow it from your parents. A couple decades ago leasing a vehicle emerged as an option. Now there’s something new I’m hearing about, auto subscriptions. What are they?”

MIKE WALDEN:

“Well this is at least very interesting to me as an economist to show how financing an automobile is evolving, and what happens with an auto subscription is that you as the driver, or the client, you pay a monthly fee to a dealer or some company to use that vehicle. That fee covers everything: insurance, maintenance, roadside assistance, et cetera.”

“Now you might say, ‘Well how is that different than a lease?’ Well the major difference is flexibility. If you want to use that vehicle for just a couple days, and then change to another vehicle that’s fine. Most of the arrangements have very short-term requirements in terms of how long you have to use a vehicle, and when you get bored with that vehicle and want another one you can do it.”

“In fact many of the arrangements will allow to simply call up the dealer or the company and say, ‘Hey, bring me that other vehicle.’ They’ll bring it to your home, and take the other one back. There are no down payments. There are no financing charges. Now there is no negotiations. These fees, these monthly fees, are set.”

“Again, these commitments that you’re making are very short-term. In fact some of these subscriptions can be as short as a month. But there are some catches. You’re often not guaranteed a new vehicle. There may be restrictions on mileage and how you use the vehicle. For example, some of the agreements prohibit you from transporting pets.”

“And also, and this may cause some people to back off of them, the company or dealer may say in the contract that they’re going to be allowed to track you so that they know where that vehicle is at all times. But this is a new kind of way of getting transportation. Something that maybe older people like you and me won’t want to do, but younger people, because they’re much more flexible, may want to look into.”