Here’s a look at the Future of Transportation, also known as “transportation as a service” – the new business model that is being pushed hard by several major car companies, for the obvious reason that they stand to make a lot more money doing business this way.
The idea is that instead of selling you a car, you pay to rent cars – plural. Rather than a single monthly payment toward ownership of a single car, you pay a monthly subscription fee – ongoing – to never own any particular car but to have the use of several different cars.
Cadillac calls this “experience the brand.”
Volvo just announced a similar offer and . . .such a deal!
For only $600 per month, you get to subscribe to a base trim 2019 XC40 – the company’s entry-level, compact-sized crossover SUV. At the end of 12 months, you can upgrade to an R-Line for $700/month.
This sum is in the ballpark of what you’d pay to own something larger and nicer – a new BMW X5, for instance. It stickers for about $57k to start. Finance that over six years and you’d own the thing at the end of the deal; have some equity in the thing, too. Subtract that equity from the 72 months of payments and you are paying less to own the larger/nicer X5 than to have 24 months’ use of an XC40.
But hey, the subscription fee does include insurance, maintenance and “concierge” services.
Will people buy in? Why not? People have already become comfortable with never-ending debt, the perpetual payment. With never building equity in anything. Not their homes, not their cars. Leasing – at one time a small slice of the market – now accounts for about 30 percent of the market (see here). This has happened for two reasons: The first is that leasing makes it financially feasible to drive “more car” than a person could otherwise afford to drive – assuming he had to buy the car rather than rent it for a time – and the second is that more and more people are ok with the idea of never owning a car – and never being without a monthly payment.
These “subscription” plans leverage this economic dementia, take perpetual debt to the next level. Shorten the contract interval; jack up the price.
Really stick it to ’em. But market it to them. Tell ’em they are “experiencing the brand” or – as Volvo styles it – receiving special “care.” (The Germans once used that term, too – in a slightly different context.)
“This is a national program, not a pilot or a test,” says Volvo North America CEO Anders Gustafsson. “Everyone wants to simplify, and we handle and balance this all on our own books.”
But “simplicity” has its price, eh?
The included maintenance thing, for example. It’s largely a non-issue with a brand-new car. But most people are blissfully unaware of this. Blissful, that is, as far as the car manufacturers and dealers are concerned.
They are counting on the enstupidation of the typical car buyer and they are likely not counting wrong.
The first two years out, a new car might need a couple of oil and filter changes. Even assuming top-shelf synthetic oil/premium filters and someone else doing the job, it’s maybe a couple hundred bucks, total. Unless the car is driven Indy 500 style, constantly, that is the only maintenance it ought to need. Tires and brakes, for instance, shouldn’t need replacing before three or four years – long after the subscription is over.
Bu the marks don’t know this. They feel “secure” knowing they are “covered.” And in a way, they are . . . like a deer spotlighted by a redneck with an AK.
Concierge service means a phone number you can call to get help with various things – which sounds pleasant enough. But how much help, really, should be necessary with a brand-new car? One of the concierge services touted is that they pick up the car at your home or business in the event it needs . . . maintenance – and then bring it back when it’s ready. But it’s a brand-new car. How often should anything need to be done to it except fill it up?
Maintenance and concierge service, then, are the equivalent of the next-to-worthless (because superfluous) paint/fabric protection scams dealerships used to use to peel more money out of the hides of marks. It’s the oldest game in the business, re-invented.
For $600 a month.
$700 a month if you “upgrade.”
To get a handle on the mark-up, on the milking Volvo (the entire industry, if they pull this long con off) has in mind, observe that you can lease a 2018 BMW X1 (a vehicle of the same type as the XC40) for $389/month for 36 months.
That is one more year – at $389/month – than Volvo wants to dun you $600-$700/month for to “subscribe” to the XC40.
But hey, you get paint protection/fabric protection thrown in. And insurance, too.
How is that going to work?
Generic coverage? This inevitably means more expensive coverage. Has to.
The way health insurance works provides the example. Thanks to Obamacare – another long con – premiums are not based on individual risk profile, with low-risk people paying significantly less than high-risk people, as of course it ought to be. That is considered unfair and so the low-risk (healthy, risk-avoiding) people get to pay more to cover the costs imposed by the high-risk (unhealthy, risk-incurring) people – the obese, smokers, diabeetus afflicted, etc.
All-included car insurance will work the same way – and probably accounts for a big chunk of the $600/$700 per month subscription.
Most alarming is the prospect of this becoming the way business will be done generally in the not-so-far-off future. That scams such as this will no longer be optional idiocy for the milking of the incorrigibly innumerate. Instead, everyone cattle-chuted into the “transportation as a service”/subscription model – experiencing the brand and being “cared” for . . .with automated cars providing the other half of the pincer.
Better buckle up. It’s going to be an interesting ride.
. . .
Got a question about cars – or anything else? Click on the “ask Eric” link and send ’em in!
If you like what you’ve found here, please consider supporting EPautos.
We depend on you to keep the wheels turning!
Our donate button is here.
If you prefer not to use PayPal, our mailing address is:
721 Hummingbird Lane SE
Copper Hill, VA 24079
PS: EPautos stickers are free to those who send in $20 or more to support the site. Also, the eBook – free! – is available. Click here. Just enter you email in the box on the top of the main page and we’ll email you a copy instantly!