After receiving complaints by the California New Car Dealers Association (CNCDA), the California Department of Motor Vehicles will investigate the Care by Volvo subscription program, reports Automotive News. The CNDA, which represents more than 1,200 car and truck dealers in California, filed a petition earlier this year, alleging that Volvo is violating the state vehicle code. On August 15, following a public hearing, the New Motor Vehicle Board voted unanimously to investigate the Care by Volvo subscription service and the CNDAs claims that the service violates the state vehicle code. The NMVB has asked for a written report of the investigation within 180 days.
In their January complaint, requesting an investigation, the CNCDA said Volvo is essentially selling a two-year lease* for an all-inclusive monthly fee that covers the vehicle cost, insurance, maintenance, roadside assistance and normal wear-and-tear. In an August 19 news release, the CNCDA outlines their allegations against Volvo, all of which they say are illegal in the state of California.
- Care by Volvo creates competition between the manufacturer and dealers by diverting the customers away from dealers, bypassing the franchise model.
- Volvo failed to give the required 60 days written notice to affected dealers.
- The Care by Volvo subscription program preferentially allocates vehicles and refer sales to dealers that are controlled, in part, by Volvo.
- The all-inclusive pricing of the subscription program equates to payment packing which bundles services without disclosing the actual cost of the vehicle and the add-on services.
[*Editors note: In Care by Volvos FAQs, they identify Care by Volvo as a subscription lease contract.]
We are extremely pleased with the outcome of the hearing and are encouraged that the New Motor Vehicle Board agreed that all four of our claims against Volvo deserve DMV investigation. This is just the first step in ensuring that manufacturers, specifically Volvo, stop going around their franchisee business partners in an attempt to retail vehicles directly. Franchise laws exist to protect dealers from this type of behavior, said Brian Maas, president of the California New Car Dealers Association, which includes nearly two dozen Volvo dealers.
The world of subscriptions is undergoing a dramatic transformation.
Our dealer members support innovation, including subscription-based models, but we are against violating the law. There is a right way and a wrong way to do business in California, Care by Volvo is the wrong way. We look forward to the results of DMVs thorough investigation into our claims and are hopeful that this illegal behavior will be stopped and punished, said Maas.
According to Automotive News, Volvo said in a statement that it has made changes to the program, following feedback from dealers.
Currently, five vehicles are available in the Care by Volvo subscription program: the XC90, XC60, XC40, S60 and V60 Cross Country. Pricing starts at $700 a month for the XC40 and S60 models. The program includes insurance coverage through Liberty Mutual, factory-scheduled maintenance, roadside assistance, excess wear-and-tear coverage and a 24/7 concierge. The program is 24 months, but subscribers can upgrade to a new vehicle after 12 months.
The outcome of this petition could have a huge impact on the vehicle subscription market. Many of them start out in a few markets to see how they do before expanding more widely. As they grow, they need to ensure they are following each states individual laws and regulations, or they will not survive. Other auto manufacturers with subscription services will be following this closely, and hopefully, learning from Volvos missteps.
We remain skeptical about this model. While we love subscriptions, this is just a way to rent – or lease – a vehicle. The key differences are that the pricing is often higher than a traditional loan or lease, pricing is all-inclusive so you get some added services, and when you are tired of a vehicle, you turn it in – but you dont have anything to show for your investment. For those with an expansive budget and a desire to always drive the latest, best cars, this may be a great option. For the average person, however, an auto subscription – whether by Volvo or another manufacturer – is not affordable.