Can Offering Car-Subscription Service Options Benefit Dealers?

Care by Volvo

In today’s marketplace, permanence is a thing of the past. Consumers can subscribe to an online marketplace that allows them to order items that they can choose to keep or send back for more options. Buyers no longer have to make long-term purchases. Historically, cars have fallen into the category of long-term buys, but some auto groups are changing the narrative.

A Shift from Car Buying to Offering Transportation Services?

On May 1, Park Place dealerships in North Texas will launch a subscription service that allows members to access three tiers of luxury vehicles. A one-time registration fee of $750 and a monthly subscription fee will cover unlimited vehicle flips, insurance, maintenance, and concierge services. If consumers in North Texas always had the dream of driving a Mercedes-Benz C Class, Jaguar XE, Porsche Macan, Maserati Ghibli, or a host of other luxury vehicles, the Park Place Select program opens a door for those who can afford this perk. The Vice President for Strategic Growth at Park Place dealerships had an interesting observation of what this service potentially turns this dealership group into.

“I believe that what you are seeing is a dealership organization transform into a full-fledged transportation service.” This development opens up a new segment of consumers for dealerships. Those who do not want to commit to one type of car or those who do not need a vehicle all the time are viable groups that programs like the one at Park Place can appeal to. With ride-hailing services like Uber and Lyft, and car-sharing options like Zipcar, Turo, and cars2go, recent generations have grown up in a society where car ownership is not the only option for having access to a vehicle.

Automakers are Seizing the Moment

Automakers understand this trend, and a few are jumping into the subscription service industry. Cadillac, Porsche, and Volvo all have subscription services targeted at high-end consumers. All three charge a monthly price that includes insurance, maintenance, and concierge services. So far, the car subscription space has only been filled by niche luxury automakers who exchange top dollar for convenience. However, Ford has been one of the first to enter into the more affordable mid-priced vehicle market. Their subscription service entitled Canvas starts their per month subscription prices at $50. Terms can range from one month to a year, and the service includes car swapping, insurance, and online shopping and delivery. For those who thought car subscription services were only being offered to wealthy customers by automakers, Ford is one of the first to bring a more affordable option to the masses.

An Unforeseen Benefit for Dealers

Most of these automakers do not seem to be going through dealerships to facilitate these car subscription services. So where does this leave the dealer? Should auto groups begin to pursue their own subscription services like Park Place? Is it even worth it? Park Place is targeting a similar group to Cadillac, Porsche, and Volvo, so high-end customers will likely be their primary clientele. Right now, most subscription services are only regional as Park Place is located in North Texas and Cadillac and Porsche only services in New York and Atlanta respectively. Considering the need to deliver cars and concierge services, dealers who targeted a specific regional area that is not being serviced by a major OEM could do well if they target the right market. However, it still begs the question if there is a benefit for dealers to jump into becoming a transportation service. An Enterprise Rent-A-Car statistic may have the answer. In 2013, a study was conducted on Enterprise Holding Brands. It was found that those who rented a vehicle were 55 percent more likely than the average customer to purchase a car within six months of the rental. The rental automobiles acted as a test drive for consumers. This data could be the key for dealers looking to drive sales.

Those who offer subscription-based services could include an incentive to purchase the vehicle after an agreed upon period. As a result, the subscription could eventually lead to a sale for dealers. Typically, rental fees are less than the average car note, so consumers have the opportunity to ride in a vehicle they otherwise would not have access to. Also, there might be buyers who need a temporary arrangement for a specified period of time, but their position could change. Consumers like options and the Enterprise rental study revealed that offering a more flexible opportunity could pay off in the way of more car purchases for dealers. It will be interesting to see if purchase numbers increase at Park Place dealerships due to their subscription programs, and the lessons created for those looking to jump in.