Volvo is the latest car manufacturer to try the subscription model on for size with its new Care by Volvo subscription service. Volvo will test the service with its new XC40 model, a compact crossover SUV, said the company in a September 21 announcement. According to the company, Care by Volvo will make ‘having a car as transparent, easy and hassle free as having a phone.’ After ordering their car online, subscribers will pay a flat monthly fee that includes maintenance and insurance costs.
‘This is simple and clear, everything but fuel is basically included in one flat rate,’ said Lex Kerssemakers, President & CEO of Volvo Car USA, ‘This is the next step toward making life less complicated for customers.’
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Additional details and pricing for Care by Volvo will be disclosed at the 2017 Los Angeles Auto Show. The program will officially launch at the event, allowing customers to enroll in the subscription program for the first time. In addition to the subscription service, the Volvo XC40 model will also be available through traditional financing and leasing options. Over time, other Volvo models will be available through the subscription service. Volvo also plans to add digital concierge services as well.
Hakan Samuelsson, president and CEO of Volvo almost commented on the new subscription program.
‘With Care by Volvo, we introduce a new car access for the modern age. In a time where consumers are used to transparent flat fees for all sorts of services, the traditional process of buying and owning a car can be perceived rather complicated. Care by Volvo changes all of that,’ Samuelsson said.
Volvo is the latest in a growing line of vehicle manufacturers and car-related companies offering subscription options for their customers. Here are a few we’ve covered in the last 10 months:
Hyundai to Make Ioniq Electric Car Available Via Subscription, November 2016
GM Launches Book by Cadillac, a Luxury Car Subscription Service
Cox Automotive and Holman Enterprises Launch Flexdrive
Ford Launches Month-to-Month Car Subscription Service ‘Canvas’
We’ve also written about ‘The Coming Car Crisis: How Detroit Hopes Auto Subscription Services Will Help Minimize the Damage,’ an in-depth report about how car manufacturers are banking on subscription options versus traditional car ownership to save the industry.
Is this a good deal for consumers? According to Business Insider, no. No hassle, no negotiation pricing is never good for the consumer, but consumers have no leverage over pricing, said Business Insider. Car manufacturers can build in whatever costs they need to (e.g., maintenance, insurance, overhead, margin to cover bad debts and vehicle damager, etc.), and the consumer can either take it or leave it. In spite of that, car subscriptions will appeal to some consumers because they can cut out the negotiation process and essentially order their car online.
We can see how the subscription model would be attractive to car manufacturers, particularly if they are having difficulty getting consumers to buy vehicles through more traditional methods. However, a car subscription looks a lot like an auto loan or auto lease, but with a few more bells and whistles – and costs – thrown in. The manufacturer pre-packages the car subscription to include insurance and maintenance costs, but it is possible the consumer might do better paying for these items on their own, particularly drivers with a good driving history and solid credit rating.
As a consumer, I’d like to see the subscription model for cars evolve a little before I’d be willing to take it for a spin. I’d want to see what works, what doesn’t, and how transparent car manufacturers are about their costs and profit margins. For example, who is the insurance carrier and what type of coverage is offered? Does everyone get the same insurance plan, or can you choose higher limits? How often can you trade in the vehicle? What fees is the owner ultimately responsible for at the outset, during the subscription period and when the vehicle is turned in?
There is still a lot to learn about the subscription model for cars, and we think it is too new to really draw any conclusions as to whether it is advantageous to the consumer. What we can say now is that all subscription companies – whether they are SaaS, subscription box or car manufacturers – should always be transparent about their products and services.