By understanding the nuances of these two models, existing leasing providers can make informed decisions about how to best serve their customers while also remaining competitive in a rapidly changing market.
Comparison of Car Subscription with Leasing
Car subscription and traditional car leasing each have their own unique advantages and disadvantages, making them suited for different types of customers and businesses. However, combining the two models can create a more flexible transportation solution that can address the limitations of each approach.
For example, car subscription can provide flexibility and convenience for customers who are looking for short-term access to a vehicle without the long-term commitment and financial burden of ownership. Car subscription services typically include maintenance and insurance, making it an attractive option for people who don't want to worry about the ongoing costs of owning a car.
On the other hand, traditional car leasing can be a cost-effective option for customers who need a vehicle for a longer period of time, but still want the flexibility to change vehicles or upgrade to a newer model every few years. Leasing typically involves lower monthly payments and a fixed term, making it an attractive option for businesses or customers who want to keep their expenses predictable and manageable.
Whether for better or worse, perhaps the primary difference between subscription and leasing is ownership.
With car leasing, at the end of the lease term the customer typically has the option to return the vehicle or purchase it outright with a balloon payment.
With car subscription, the customer does not own the vehicle at any point, but rather pays a monthly fee to use it for a period of time.
While the option to purchase a subscription vehicle may be available, typically this must be done for the current retail market value of the vehicle otherwise it may conflict with credit and leasing legislation.
Another key difference between car subscription and traditional car leasing is cost.
Car leasing typically involves lower monthly payments compared to car subscription, as the customer is essentially paying for the depreciation of the vehicle during the lease term which is offset either by a balloon payment or by disposal by the leasing provider.
In contrast, car subscription fees tend to be higher, but offer a lower overall commitment, greater flexibility and convenience.
Car subscription is generally considered to be a more flexible option than traditional car leasing.
With car subscription, the customer can typically switch to a different vehicle or terminate the subscription at any time without penalty.
In contrast, traditional car leasing often involves a fixed term of several years, mileage limits, and penalties for early termination.
Traditional car leasing usually comes with strict mileage limits. Going over the mileage limit can result in extra charges or penalties, so the customer needs to be aware of the terms and plan accordingly.
With car subscription, mileage limits are often more flexible, and some subscription services do not have any mileage limits at all.
Extending the Fleet Lifecycle with Subscription
For leasing incumbents, an opportunity exists not simply to offer car subscription in parallel with traditional leasing offers, but as a means to extend the lifecycle opportunity for each vehicle in the fleet prior to disposal.
Vehicle Age and Condition
In terms of a lease, this typically applies to brand new vehicles direct from a manufacturer or dealer.
The flexible nature of car subscription means that customers are inherently less sensitive to vehicle age and condition, providing the opportunity to utilise a vehicle on a subscription basis once a lease term has concluded to earn additional revenue from that asset.
One advantage of car subscription is the flexibility it provides to businesses when it comes to disposing of vehicles.
In traditional car leasing, the lessor typically owns the vehicle, and the lessee returns the vehicle at the end of the lease term. However, with car subscription, the service provider retains ownership of the vehicles and can choose to dispose of them at any time.
This can be advantageous for leasing businesses because it allows them to take advantage of favorable market conditions.
For example, if there is a sudden increase in demand for a particular make or model of vehicle, a business that offers car subscription can easily dispose of their inventory of that vehicle to take advantage of the market conditions.
They can either sell the vehicle outright or transfer it to another part of their business where it is in higher demand.
In addition, car subscription can also help businesses manage their fleet more efficiently by allowing them to dispose of vehicles that are no longer profitable.
If a particular vehicle model is not being used by customers or is costing more to maintain than it's worth, the business can easily remove it from their subscription offering and sell it or transfer it to another part of their business.
This can help businesses reduce costs and streamline their operations, resulting in increased profitability.
Moreover, as electric vehicles continue to gain popularity, businesses that offer car subscription can easily adapt to the changing market by disposing of traditional gas-powered vehicles and transitioning to electric vehicles.
As electric vehicles become more affordable and more widely available, businesses that offer car subscription can quickly update their fleet to reflect the changing market.