How Can I Best Structure  Vehicle Subscription Tiers To Best Make A Vehicle Lease/Rent Subscription Model Profitable?

    

Subscription services for cars are similar to leases in the sense of private ownership, but the terms are shorter and more flexible. For those who hate commitment and don't mind paying too much for standard leasing or rental finance to access the perks associated with it, car subscriptions are worth considering. Subscription services offer a variety of flexible terms and vehicle options that are not found in the small print of leases. [Sources: 3] 

    

Subscriptions are business models in which customers pay a recurring amount in exchange for the use of a product or service. At the end of a new 24-month contract, subscribers buy a car at a predetermined price instead of leasing it. Subscription models offer consumers premium vehicles directly from the manufacturer and not through a third-party leasing company. [Sources: 1, 3] 

    

Companies like GoPro and Adobe are committed to this business model because it is a reliable way to continue to add value to customers. The subscription business model depends on a strong and lasting customer relationship. Your customers recognize the value of your product or service at every turn and therefore try to pay regularly. [Sources: 4] 

    

Subscription pricing models can be found at software vendors, financial service providers, club membership fees, mobile phone companies, cable TV, garden services, newspapers, magazines and scientific journals. Subscription business models offer consumers the promise of one thing less to worry about. It doesn't matter whether you're a SaaS company, a streaming service or a subscription box; the first step to understanding the model is to look at some of the most successful subscription companies in the industry. [Sources: 1, 4, 7] 

    

Subscription pricing is a business model where customers pay a subscription to access a product or service. Subscription models help you to take advantage of the added value of a customer relationship. A subscription business model works by converting transaction costs into recurring revenue. [Sources: 1, 4, 7] 

    

If your competitors are selling their goods and services on a one-off transaction basis, it is worth considering selling under a subscription model. Subscription models force providers to improve their products and offer customers added value, so they want to renew their subscriptions. Optimal pricing of your subscription offer is critical to your success, and determining the best price point takes into account factors such as your business model, costs, competition and the value to the customer. [Sources: 7] 

    

Developing a subscription business model involves defining new values and creating a transition from the current business model to a subscription model. Future implications include multiple alternative formats and channels, greater dealer unbundling, cross-channel added value, improved choice of services, lower costs, greater emphasis on lifecycle relationships, and closer relationships between manufacturers and consumers. Each of them has its own requirements for buying and owning experience, which are determined by service requirements, which in turn help determine the best cost and operational structure, specific sales formats and customer value promise. [Sources: 1, 2] 

    

In order to adapt, many mobility operators are repositioning their offers in order to increase the flexibility of customers. For example, more rental companies are offering short-term leasings as an alternative to car sales and OEMs do the same. All current market capitalizations of US electric vehicle manufacturers suggest that this will add value for mobility operators in the future. [Sources: 0] 

    

Software subscription services allow people to pay for programs which unlock features such as heated seats and full self-driving features. The providers enable dealers to build on-going relationships with customers and offer them additional flexibility and customization. Driven by high multiples, low incremental costs, and changing customer behavior, EV player offerings are a perfect fit for today's market. Mobility preferences for subscription models are particularly evident among younger consumers in good economic times. [Sources: 0] 

    

Subscription models give the customer the feeling of owning many different products without having to bear the cost or responsibility of dusting them all off and buying them. [Sources: 1] 

    

Leasing is one of the best ways to package and market soft offers and services, and manufacturers are increasingly relying on short-term leasing programs to reduce inventory spikes in new and used cars. If you think you are buying your vehicle at the end of the lease, compare the cost of buying, buying and leasing. [Sources: 2, 5] 

    

For most consumers a lease is closer to the final payment estimated in the monthly calculation than the price at which you would buy the car at the end of the lease. Your rent will be offset against the financing fee, which is the cost you pay your leasing company to use the money to buy the car. A higher residual or higher money factor in a lease can lead to a more attractive payment, but it could also lead to a worse deal if you buy your vehicle right before the end. [Sources: 5, 8] 

    

At the end of the lease period, the leasee can either buy the car back or return it back to the dealer, depending on the type of lease. A closed lease is when the car company or the bank offers this, so it is wise to make sure that your lease is concluded at the end. Some leasing companies charge a fee, called a document fee, to receive the leased vehicle. [Sources: 5, 6] 

    

With rent charge, you need to add the net capitalization cost of the vehicle to the residual cost and then multiply the rental cost by your money factor (for more information on determining the money factor see Lease Basics). Many people think it makes no sense to add the net capitalization cost of the vehicle, but it is actually a simplified method of using bank money. [Sources: 8] 

    

The vehicles total accident insurance pays what you are worth for the vehicle, leaving an outstanding balance for the lender, if you have a gap in cover, it is worth buying a new car with a lease loan. [Sources: 5] 

    

    

        

    

##### Sources #####

    

[0]: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/reimagining-the-auto-industrys-future-its-now-or-never

    

[1]: https://www.garyfox.co/subscription-business-model/

    

[2]: https://www.strategy-business.com/article/10102

    

[3]: https://www.forbes.com/wheels/advice/car-subscription-services/

    

[4]: https://www.priceintelligently.com/blog/subscription-business-model

    

[5]: https://www.manchestermb.com/key-term-definitions.htm

    

[6]: https://www.caranddriver.com/shopping-advice/a15356888/the-terms-you-need-to-understand-before-leasing-a-new-car/

    

[7]: https://blog.blackcurve.com/the-pros-and-cons-of-subscription-pricing

    

[8]: https://www.swapalease.com/lease101/guide/chapters/calculating-your-monthly-lease-payment/