Cars as a Service: Why your next set of wheels might come with a subscription

You’re looking for a new car — or a new car to you — and you’re trying to decide between financing it to own or leasing it.

And, as you’re thinking about that, you have several cars you are considering but can’t quite narrow the decision to just one. You aren’t sure if you want a truck, a car, sport utility vehicle or a crossover.

Why not try each of them over time and switch them out whenever you want by simply using your smartphone? Entrepreneurs, as well as automakers, have been rolling out such an option through “subscription car services.”

What is a car subscription service?

This isn’t like buying a subscription to a magazine or a newspaper and a year later you have to renew. Generally, this type of service allows you to pay an all-inclusive price for the vehicle, usually on a monthly basis. All-inclusive means, “The fee typically covers insurance, roadside assistance and maintenance,” according to Edmunds.

This trend has been emerging as part of the on-demand economy, which now is valued at $60-billion. The on-demand economy is about getting what we want, when we want it, how we want it. Think Uber, Lyft, and Airbnb in terms of the companies that taking advantage of the on-demand economy.

Millennials have been driving much of the on-demand economy. They are more accustomed to car and ride sharing. They also conduct much of their life’s business through their smartphones and are inclined toward “try before you buy”experiences.

That generation also doesn’t much care for the dealership experience with price and payment haggling or being upsold on other products.

Combine that with the fact that new car prices continue to rise and loan terms get longer so buyers can afford monthly payments. Then there are insurance premiums rising rise along with repair costs. All of this turns out to be a good recipe for subscription car services to attract customers.

We’re still at the beginning of the story of vehicle subscriptions

These services haven’t blanketed the country just yet. For now, they are in a handful of big cities around the country. But the idea is starting to take hold.

Like many companies in the demand economy, these car subscriptions got their start at the high end. Luxury car makers have been dominating the new subscription car services for new cars. But there are strong indicators that these services are moving in the direction of more affordability. Paying $2,000 a month and up for a Porsche may not be in your budget, but the numbers for a mid-range Audi might just work.

Automakers offering the service tend to stick with a specific model. Other subscription car services deal in used vehicles, startup companies Clutch, Flexdrive, and Fair, for example. Ford has Canvas, a service that has two-year-old Ford models. Canvas expanded to L.A.late last year from San Francisco.

Several of the options available now let you swap cars out whenever you want, depending on the level of subscription. Others have limits, or they reward you with lower pricing after a certain period if you don’t swap out.

Take a close look at the cost of a car subscription

There are a few factors beyond the monthly price to consider if you decide to look into this option and live in a city where subscription cars services exist.

• All have some sort of upfront fee – $99 and up.
• Unlimited mileage may mean a higher monthly fee.
• With some plans, if you have set mileage and don’t use them, they roll to the next month like mobile phone plans.
• Pet lovers may have limitations with using the vehicle for transporting them.
• You may be tracked in order to meter the mileage.

Whether or not there is a cost advantage to the service over owning or leasing, depends on you and your preferences. If you like to haggle over price and payments, then a subscription car service probably isn’t your choice.

But if you hate the car buying or leasing experience, the ease and flexibility of the subscription car service, with its all-inclusive price, may override cost as a deciding factor.