Subscription services are popping up everywhere, but will they save you money?
In this day and age, people can subscribe to just about anything. Whether it be entertainment like Netflix and Hulu — or services that range from dog food delivery to meditation instruction, there’s something for just about everyone. The automotive industry has taken notice and is offering a wide variety car subscription services. If you’re considering this new alternative to the traditional buy, lease and rent models, it’s important to know what you’re getting yourself into. The main question to consider is: is car subscription a smart alternative to leasing or buying given your current circumstances? Before you sign up for any lease or car subscription service, it’s essential to do some basic homework:
- Establish a realistic budget for yourself
- Consider your income, outlay and savings
- Set a cost limit for your car subscription service
Once your budget is set, work through the various car subscription services to find one that suits all your needs, including financial situation and locale. Also, be sure to read the fine print in any contract you sign; car subscription services often come with many rules and restrictions on how the vehicles can be used. Want to learn more about the basics of car subscription services and how they can save you money? Read on.
- What are car subscription services?
- What do car subscription services cost?
- How do car subscription services work?
- Where are car subscription services available?
- Are car subscription services a cost-effective alternative to leasing or buying?
- The bottom line on car subscription services
What are car subscription services?
Car subscription services offer consumers a flexible form of car ownership without having to lease or buy a car. Customers pay a recurring monthly fee for access to a specific vehicle or a variety of vehicles. The services can be offered by automakers, car leasors and third-party vendors. Car subscription services have evolved as an alternative to buying or leasing a car and have been around in earnest since 2014, but in the last few years, they’ve sprung up everywhere. Car subscription service fees often include things like:
- Roadside assistance
What do car subscription services cost?
Costs for car subscription services can vary widely, depending on the level of service you desire and the cars you want to drive. As you would expect, car subscription services typically cost more as you gravitate toward more luxurious vehicles. Monthly fees are non-negotiable and set in stone. There’s no haggling. Some car subscription services have fees that vary, based on available vehicles. Others charge a flat fee and offer access to all vehicles. If you’re considering signing up with a car subscription service, be sure to do your homework before signing up. There’s usually an initiation or sign-up fee. And since you’re entering into a contract, there can be some penalty fees for ending the contract early. With car subscriptions, you don’t actually own the car — just like you don’t own the car if you leased it. However, with car subscription services, you aren’t bound to one specific vehicle for the life of the agreement. For example, you could drive a sedan all week and opt for an SUV for the weekend — although that extra level of choice and flexibility does carry additional costs in most cases. Prices for car subscription services vary widely depending on the make and model of the cars and whether or not they are new or used. In California, the state law requires drivers to carry liability insurance. So that is the responsibility of the driver. Most services bundle collision insurance as part of their monthly bill that covers damage to the car while the car is in your possession. Some of the most expensive car subscription services include Porsche’s Passport service, which can run as much as $3,100 per month.
How do car subscription services work?
Once you’ve chosen the service that’s right for you, just sign up online or via an app with that particular company, put in your personal information and the company will review your driving record and run a credit check. Once your credit and driving history are approved and you’ve paid your initial fees, you can start borrowing cars at your leisure using an app on your phone. Some companies will deliver the cars to your home or work place. The credit check is done to ensure that you’re able to pay for the service on a regular basis. Don’t worry about the credit check dinging your credit score. Most car subscription services (like Turn) use what is termed: “soft credit checks” that don’t affect credit scores. According to WalletHub, soft inquiries show:
- Your open lines of credit
- Your existing loans
- Payment history
- Outstanding balances or accounts that have been sent to collections
A creditor generally does a “soft pull” if they’re pre-screening you for an offer or performing regular account maintenance on an open line of credit. Soft inquiries will show up when you check your own credit report, but they don’t appear when you apply for a new line of credit or open a new account. Car Subscription companies will also run your driving record. They’ll request a copy of your driver’s license and run it through the state DMV to verify information for various reasons, including:
- License status and expiration date
- Verify that your identification matches your credit card information
- License classification and any endorsements
- Violations and convictions, such as information on traffic tickets
- Penalties like points, fines, suspensions and revocations
- Collision history
If you want to learn more about what shows up on your driving record, check out this story over at DMV.org. The car subscription service will also likely ask you to agree to allow them to regularly check your driving record and credit on an ongoing basis. They want to know that you are a safe and responsible driver and that you can continue to pay for the service before giving you a car. Before you sign up, be sure to read all the fine print in the agreement. Each car subscription service has different usage rules for the vehicles you borrow. For example, many car subscription services prohibit the following: Transporting pets without an approved pet carrier unless they are service animals: You’ll be responsible for any pet damage
- Smoking in vehicles: You’ll be responsible for cleaning fees if you or a passenger smokes in your car
- Leave smells behind: If you spill something stinky in a car, you’ll likely be responsible for a cleaning fee to get the smell out
- Other drivers: In general, most car subscription services won’t allow other drivers to get behind the wheel of your borrowed car. Should something happen while someone else is driving, you will be held responsible
- Drinking or drugs: These are prohibited for obvious reasons
- Leaving the U.S.: Most car subscription services prohibit crossing the U.S. border into Mexico or Canada
Additionally, you should be aware that most car-subscription services track the vehicles you are loaned. Car subscription companies obviously want to keep track of vehicles in case they are stolen, damaged or the consumer violates rules of the contract. Many of those rules also include mileage limitations. It’s important to know that most modern vehicles have various safety systems and navigation systems that can track location, speed, braking, acceleration and evasive or erratic driving behaviors. Some car subscription services will upsell you on additional access. For example, in order get unlimited mileage or to gain access to the top tier of vehicles, you have to step up to the pricier plans. Most plans also only allow you to switch vehicles a limited number of times per year. When you sign up with a car subscription service, read the fine print. Understand what sort of access you’re granting the car subscription service. Finally, don’t expect the car insurance provided by the subscription service to be the same as your current personal insurance. The subscription fee may include a lower level of coverage. In any case, you should read the contract to understand your liability in the event of an accident.
Where are car subscription services available?
Car subscription services are available in most major cities and regions across the U.S., including:
- Los Angeles
- Silicon Valley and San Francisco
- New York City
- New Jersey
If you live outside of a major city, you may be out of luck, so check with your chosen subscription service to see if your location is covered. It’s best to search for the name of your city and “car subscription services” to find out what services are offered in your area.
Are car subscription services a cost-effective alternative to leasing or buying?
It depends on your specific circumstances. If you are someone who doesn’t believe in paying cash for a depreciating asset, the answer is yes. If you are someone who likes to always be driving newer cars and does not want to be tied to a loan or lease commitment for three to five years for one specific car, the answer is also yes. If you are someone who wants to buy a car and keep it for many years, car subscription is probably not the most cost-effective solution for you.
The bottom line on car subscription services
Vehicle subscription is ideal for the average customer who wants to avoid dealing with cumbersome car ownership/rental/lease processes. It is tailor-made for groups like new immigrants, expats and millennials who want simple, economical, hassle-free temporary mobility solutions with easy cancellation and return policies. If you someone who also wants to drive the latest and greatest cars, you can find a subscription service that’s right for you. Car subscription services can be a great alternative to leasing or buying a car if they fit your budget, your needs, and your location. Just do some homework first and always read the fine print.