A few years ago, subscription cars were labeled as the automotive industry’s next big thing. Despite its appeal, the subscription model (which bundles the car, insurance and maintenance into a single, no-obligation monthly payment) never took off. You can still subscribe to a car today, but the pool of providers has shrunk considerably.
However, subscription cars have made their mark. In the mature automobile and insurance sector, subscribing to a car was an innovative concept. Innovation supported advances in auto insurance that continued, including pay-per-mile, pay-as-you-drive, monthly and on-demand coverage. Like subscription cars, these programs offer flexibility as a primary selling point.
Why the subscription model had problems
“The hallmark of a successful subscription service is increased value and benefit,” said Mark Thomas, executive vice president of automotive app Way.com. Unfortunately, auto subscriptions struggled on both fronts.
According to Thomas, early car subscriptions emphasized freedom of choice. You can drive a convertible in the summer months and an SUV in the winter. Later iterations attempted to offer all-inclusive pricing, where one payment covered the car, insurance, maintenance and roadside assistance.
The benefit of seasonal car switching simply wasn’t compelling enough to create large-scale demand. And without scale, the subscription model was too expensive for drivers and too operationally complex for providers.
The all-inclusive subscription price dropped as value added because it seemed much more expensive than a short-term lease. “The challenge with this model came down to perceived value,” Thomas said. “People didn’t really understand the full cost of owning their car.”
What subscription models still exist?
Some car subscription programs are still operational, including:
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sixth
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Finn, available in 12 US states.
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GO
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Enterprise Subscribe, available in three US states.
These car subscriptions primarily support short-term living situations, urban drivers, and others who want a car without a long-term commitment.
How subscriptions have evolved
Car owners still want flexibility, as evidenced by the growing popularity of these alternative insurance programs:
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Pay Per Mile Insurance: A subset of usage-based insurance (UBI), pay-per-mile insurance incorporates a variable pricing component based on the number of miles you drive.
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Pay-as-you-go insurance: Pay-as-you-go is also a form of UBI. The insurance company uses the collected driving data to set personalized insurance rates.
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Monthly adjustable insurance: Traditional auto policies have policy periods of six or 12 months. Instead, a true monthly policy renews at the end of the month. This provides more flexibility for cancellations or adjustments without additional charges. Monthly adjustable auto insurance is not widely available. Alternatively, car owners can purchase a six-month policy with no cancellation fees, pay monthly and cancel as needed.
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Insurance on demand: Policyholders can activate and deactivate coverage, and charges are incurred only when the policy is active. On-demand auto coverage is also uncommon, but pay-per-mile insurance offers similar flexibility.
These programs work like subscriptions because prices adjust dynamically, coverage is flexible, and no long-term commitment is required.
Read more: Most Common Types of Car Insurance Explained
Finding Flexible Subscription-Based Auto Insurance
If you like the concept of a more flexible insurance model, there are ways to identify a solution that works for you. Try these strategies:
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Test your driving. Download an app, like DriveSafe Pro or Toot, that rates your driving. Good driving scores mean you may qualify for cheaper rates with pay-as-you-go insurance. Bad driving scores will show you where you can improve.
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Check your mileage. If you don’t drive much, a pay-per-mile policy could provide flexibility and cost savings.
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Calculate your total cost of ownership. Car ownership expenses can include finance charges, insurance, maintenance costs, inspection fees, personal property taxes, and more. Add up the fees that apply to you and compare them to the cost of a car subscription.
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Put a value on flexibility. Convenience and flexibility may be worth something to you. Consider what that value is by comparing the cost of a traditional car lease to that of a subscription car.
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Understand the insurance included with a subscription car. Joshua Morrison, owner of BadDrivingRecord.com, warned that underwriting insurance may not provide the coverage you need. He recommended asking which provider provides underwriting coverage, how much coverage you get, and how your personal insurance history might be affected by underwriting claims.
The next wave of car subscriptions
Thomas believes car subscriptions could make a comeback: “The next generation of subscriptions will be offered as short-term leases, with vehicles that will be profitable to lease,” he said.
Flexcar is a provider to watch in this space, offering month-to-month car leases with no money down, including insurance and maintenance. Notably, Flexcar calls itself “the flexible car leasing company.”