People use monthly subscriptions to pay for lots of things they used to buy: music, smartphones, books and even clothes.
Why not cars?
That's the thinking behind car subscription services that are cropping up in Los Angeles, San Francisco, the New York metro area, Atlanta, and several other cities in the South and Midwest. For a monthly fee and a minimal commitment, you get a car with a warranty, maintenance, roadside assistance, a prescribed mileage allowance and, typically, insurance.
Several carmakers have launched subscription services: Access by BMW, Book by Cadillac, Porsche Passport, Care by Volvo, and Canvas, which offers Ford and Lincoln models. Mercedes-Benz's Collection service starts in June.
Car dealership groups and startup companies also are latching onto the idea. With the exception of Volvo, the cars are not brand new, but with a few exceptions, they are from the current or just-prior model year.
Only Care by Volvo is available nationally. But companies are expanding their service areas, so if there isn't a program near you now, there might be soon.
All the services stress convenience and freedom. But none claim to be the cheapest way to have a car. (That would be buying a used car and driving it until the wheels fall off.) Most services also restrict how you can use their vehicles. In many programs, for example, pets must ride in crates. To track mileage, and to get the car back if someone defaults on payment, some services install GPS trackers.
How subscriptions work
Most often, you apply via an app or a website, agree to a check of your driving record, and enter credit card information. Some services also do a "soft" credit check.
If you're approved, you pay a startup fee of around $500. The monthly fees range from $250 to $3,700, depending on the program and the car. Almost always, a concierge delivers the vehicle you've selected, freshly detailed.
There are variations, but here are three common subscription models:
"Flip" services: These allow car changes, sometimes unlimited, within a month. When the programs are run by a carmaker, such as BMW, Cadillac, Porsche or Mercedes-Benz, you choose from that company's vehicles. When they're run by a dealership group or startup, you have access to cars from different makers. Monthly costs range from $800 or more in dealership programs to $3,700 for BMW's highest tier: its M performance vehicles.
One-car services: This is Care by Volvo's approach. It offers an all-inclusive two-year lease for the forthcoming 2019 Volvo XC40 at a cost of $600 or $700 per month, depending on the trim level. That includes insurance and maintenance. When the redesigned 2019 Volvo V60 debuts, it also will be available through a subscription. Lexus has said it will offer its UX subcompact crossover SUV through a subscription when the car debuts later this year.
"Stay awhile" services: Canvas and Fair, two California-based startups, offer pricing that makes cars more affordable if you stay in them longer. Monthly prices start at around $400 for Canvas, assuming a one-year subscription. If you picked a shorter duration for your subscription, the monthly price goes up. Fair's cars start at around $235 per month with a start-up fee that's about 2.5 times that of the monthly fee, making a subscription more cost effective if the start-up fee is spread over a longer period of time.
Since services and users vary so much, there's no universal answer as to whether subscriptions are cheaper than buying or leasing.
Take, for instance, the difference between subscribing and leasing a 2017 Cadillac Escalade. Book by Cadillac charges $1,800 a month to its subscribers plus a $500 sign-up fee. For that, you'd get 2,000 miles a month and could change cars up to 18 times a year. If you were to lease the same vehicle, your monthly payment would be $1,500 plus the $500 sign-up fee, assuming the same 2,000 miles per month. But you would also have to pay for insurance, which by one Edmunds' estimate would add another $375 to your monthly tab.
The winner? Book by Cadillac.
Now take the difference between subscriptions versus buying used. We chose a 2015 Ford Escape in the Titanium trim level from Canvas, with 1,250 miles allotted per month. For a one-year subscription, the monthly cost worked out to $580, including taxes. That compares with $461 per month to buy a comparable certified pre-owned 2015 Escape, assuming a five-year, zero-down loan, plus $240 per month for insurance by one Edmunds' estimate, for a total monthly cost of $701.
The winner in this scenario in terms of monthly payments is Canvas. On the other hand, if you had financed the Escape, you'd own it at the end of five years.
Edmuds says: If you want a car with a minimal commitment, a subscription can make sense. Run the numbers and read the fine print before you sign up.
This story was provided to The Associated Press by the automotive website Edmunds.