Traditionally, individuals have gained access to an automobile through ownership or a lease agreement.  Both entail a substantial financial commitment and marry the individual to the vehicle for a potentially long period of time.  However, the shift from ownership to usership [1], which has permeated almost every other good and service that we consume, may also be infiltrating the automobile industry.

What potential benefits do car subscriptions offer?  How large might car subscriptions become?

Essentials of a Car Subscription

Car subscriptions are somewhat similar to leases.  Individuals gain access to the vehicle for a fixed amount of time for a specified price.  While leases are generally for periods of two to four years, subscriptions offer more flexibility in their duration, even for periods as short as months.

Generally, in a lease agreement, expenses such as maintenance, repairs, and insurance are borne by the lessee.  In a subscription arrangement, the individual does not bear these expenses.

Potential Benefits of the Subscription Model

The automobile subscription model may offer the following potential benefits:

• Minimal commitment relative to ownership or leasing
• Eliminates the financial commitment of long-term ownership of a rapidly depreciating asset
• Eliminates the paperwork associated with purchasing a car, as the subscription usually covers registration, insurance, etc.
• More flexible, as the duration and terms of the subscription may be customized for the consumer
• The subscription agreement includes most of the costs associated with car ownership
• Low risk means of trying new car brands and models

Potential Size of the Automobile Subscription Market

A recent report published by the Boston Consulting Group (BCG) [2] estimates that the market for car subscriptions could grow to $30 to $40 billion by 2030 and could make up 15% of all new car sales by that time.  BCG also notes that others estimate that subscriptions could grow to represent 20% to 40% of all new car sales by 2030.

Mirroring Larger Economic Trends

As we have previously noted, the luster of ownership is fading.  Consumers are opting for the flexibility, convenience, and customization that may be offered by the subscription model.  This shift has the potential to change how individuals consume products and services.

1 See our blog: The Shift from Ownership to Usership May Help Bolster the Subscription Economy

2 Will Car Subscriptions Revolutionize Auto Sales?, Boston Consulting Group, July 2021