Car subscription has long been hailed as the next big thing but has made little impact. However, its time might have now come, with at least one recently launched venture, My Car Direct, claiming to have moved into profit 18 months ahead of schedule.
Subscription enables drivers to get behind the wheel of a new or nearly new car for no initial outlay, aside from the one-off membership fee charged by some (around £250) to cover collections, deliveries and administration.
Users effectively rent a car for as little or as long as they like, with the option to change it at any point, adjust their mileage cap or terminate their contract with only a modest or even no penalty to pay. Maintenance, replacement tyres, road tax and breakdown cover are all included.
There are generally two types of subscription provider: independent ones offering multi-brand new and used cars, represented by the likes of My Car Direct and Wagonex (it's also a platform provider for other companies); and those operated by vehicle manufacturers, including Jaguar Land Rover, Stellantis and Volvo.
Unsurprisingly, subscription's flexibility can come at a price, with monthly rentals having the potential to be more expensive than other forms of vehicle acquisition. For example, a one-year-old Ford Puma 1.0 Ecoboost MHEV 125 ST-Line X on a 12-month, 12,000-mile subscription with My Car Direct costs £625 per month. This compares with £464 for a new example of the same model on a longer 24-month, 12,000 miles per annum personal contract hire deal with maintenance through What Car? Leasing.
Although cheaper than subscription in these examples, personal contract hire is less flexible (contracts less than 24 months are unusual) and a customer wishing to cancel their agreement would be obliged to pay all remaining rentals.
Despite subscription's advantages over other finance products, it has had a chequered past. In December 2020, Cazoo paid £65.4 million for Drover, a leading UK subscription business, only to close the business last June. The purchase was one of a number of European subscription companies Cazoo had bought, spending around £200m in total. Explaining its decision, a Cazoo spokesman said vehicle subscription was a "highly cash-consumptive business model".
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