How Does the Car Subscription Business Model Work?

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The cost of car ownership is rising year after year. Unfortunately, this means that most of us are finding it harder to afford a brand-new car. Coupled by the high gas prices and expensive maintenance costs, it is not financially feasible for many people to invest in a car. 

Luckily, there are other alternatives if you want a car without the high upfront costs and soaring maintenance expenses. This is in the form of a car subscription. With services like LMP subscriptions you can drive a car without spending too much. Keep on reading and let’s talk more about how car subscriptions work. By the time you are finished reading, you can easily decide if this business model suits your needs. 

How It Works? 

Basically, a car subscription service works like any other subscription. You will pay a fixed fee, and in turn, you will be using the car that is provided. However, the specific terms will vary from one company to another, such as the ability to swap models and the inclusions in the price that you will be paying. 

In a car subscription, you do not need to shoulder the upfront costs of owning a car. No need to have a loan and other common financing options. Instead, you will be paying a monthly fee, which can range from $500 to $1,500 depending on the company and the terms.

In most instances, the monthly fee that you will be paying is all-inclusive. It commonly includes insurance, roadside assistance, maintenance, and even the delivery of the car. In the past, you will need to go to the dealership to get the car. These days, however, you can sign-up online or through the phone and the car will be delivered straight to the address that you provide. 

There are no hidden costs and fees when you have a car subscription. The company is often upfront about how much you will be paying. You don’t have to worry about going above your budget because the incidental costs are already included in the monthly payment. 

While a car subscription will allow you to swap models, take note that it comes with limitations. The specifics will differ from one company to another. Some may not allow it at all. On the other hand, when it is allowed, you are often limited to one change every month or quarter. It’s not as if you can request for a different model every time that you wake up feeling the desire to drive a different car. 

Weighing the Pros and Cons 

It is not enough that you know how car subscription services work. To help you come up with a well-informed decision, it is crucial that you also weigh the pros and cons. The more informed you are, the lesser is the chance that you will regret the decision that you will be making. 

The Good 

The best thing about a car subscription is that you do not need to shoulder long-term costs. This is unlike buying a brand-new car when you need a lot to start with. Instead, you will shoulder a fixed and usually affordable monthly fee. 

What makes it even cheaper is the inclusion of different services that are typically not included in a brand-new car or even in a leased unit. Depending on the company, the fixed monthly fee often includes payment for roadside assistance, vehicle maintenance, and insurance, among other things. If you are looking for value for every dollar, it is worth getting a car subscription. 

Flexibility is another reason why you might want to consider getting a car subscription. Depending on the chosen plan, you can be driving a different model every month. Many will offer the benefit of vehicle swapping. This means that you can experience the thrill of a different car make. 

Another good reason to consider a car subscription is the lack of long-term commitment. When buying or leasing a car, you need to make monthly payments, often lasting years. On the other hand, with a car subscription, you can often cut the contract anytime you want. In most cases, the cancellation does not come with a penalty. 

The Bad 

Despite all the good things about car subscriptions, it is undeniable that there are also problems. For instance, some might not like the fact that the choices are limited. The number of providers is nowhere near those that provide leasing. In recent months, some services have also closed because of lack of demand and unprofitable business model. Especially if you do not live in a major city, chances are, you will have a hard time looking for a car subscription. 

More so, while the service is generally easy on the wallet, some companies will require a participation or activation fee. This is a one-time payment that ranges from $500 to $1,000, depending on the chosen provider. This is different from the monthly payment.

Also, with a vehicle under a subscription plan, you cannot make modifications. If you want to change the seat or add a decal, among other customization options, you will most likely not be allowed to do so. 

Lastly, and perhaps most importantly, you cannot claim ownership of the car. It won’t be listed as your asset. You are basically renting from a company, so it isn’t yours. In the end, you will be paying for something that cannot be yours once the contract has ended. This is unlike in buying a brand-new car wherein you are the owner of the vehicle you are paying for. 

Conclusion 

In sum, a car subscription is a business model wherein the company charges a fixed monthly fee to its customers. Often, there is also a participation or activation fee. In exchange of the monthly payment, you will receive a car that you can drive. In some subscriptions, there is an option to change or swap the car, so you can drive a different model every month. It is also inclusive of different services, including insurance, maintenance, and roadside assistance.

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