Perpetual Payments

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New cars are becoming so unaffordable people are going to subscribe to them in the future.

The idea is perpetual payments – for everything. The car, plus insurance and maintenance – all conveniently bundled into one monthly payment.

Which never ends.

The good news is that subscribing will be slightly less expensive than buying the car – which is probably how they’ll get people to subscribe.

For example:

You can subscribe to Volvo’s XC40 – a compact crossover SUV – for $600 per month, all inclusive. Except for gas, your payment pays for everything.

This probably reduces the monthly cost to drive the XC40 relative to what it would cost you to buy it – and then buy insurance on your own – as well as the cost to maintain the XC40 on your own, once it’s no longer under warranty (which would happen before the end of a six-year loan).

And when you buy, you also pay for depreciation – the loss of value that begins the minute the car becomes your car and is no longer a brand-new car.

But you’re still paying through the nose.

$600 per month to rent an entry-level compact crossover SUV is a sum comparable to what it used to cost to buy a top-of-the-line luxury car. Something impressive, that made you feel good about spending $600 per month to own the thing. No slam on the XC40, but it’s as ordinary as a suburban townhouse – with a McMansion-esque monthly nut.

Luxury cars cost even more today, of course – but the alarming thing is the increase in cost of run-of-the-mill cars like the XC40.

If you were to buy one rather than subscribe to one, your monthly payment on a six-year loan would be about $461 – assuming zero interest, which is an assumption you ought not to make anymore as interests rates are on the upswing – which almost certainly accounts for the sudden malaise afflicting the new car market right now. There’s a three-month glut of stacked-up inventory, which is what happens when people stop buying the cars rolling off the assembly lines and the cars continue to roll off the assembly lines.

It isn’t a coincidence that the sudden parking of cars – as opposed to the selling of cars – has occurred at exactly the same time the cost of buying a new car has increased due to the cost of money increasing.

There is no way out. Free or nearly free money – a historically unprecedented occurrence that has kept people buying (borrowing) what they otherwise could never afford to – couldn’t last forever.

If interest rates go up even 1 point – which they already have – then that $461 monthly payment to buy the XC40 is suddenly $500 (or even more) and you haven’t paid to insure it yet, either.

And then there are new tires and brakes and other potentially much more costly things, post-warranty.

Plus, don’t forget the property tax – in states that apply this particularly obnoxious tax. As the owner, you will have to pay the government an additional sum of money each year – based on the book value of the vehicle – in order to retain what amounts to the conditional privilege of being allowed to use it.

Subscribing starts to look pretty good.

You get to drive a brand new car – and you’ll never have to worry about paying to fix it as a used car. The property tax is not your problem, either – because you are not even technically the owner of the car. Volvo pays the tax – or rather, folds the cost of the tax into your monthly subscription fee – along with all the other peripheral costs.

This makes it all go down easier and also “saves” you about $150 each month vs. what it would have cost you to buy the XC – and possibly more, given variables such as depreciation and maintenance costs that are intangible guesstimates at best.

And you get to drive a different new car. Volvo – and the other brands offering these subscriptions – gives you the option to swap out after 12 months and subscribe to another  model, if you like.

But the payments are also perpetual. Six hundred bucks a month –  forever. Unless you want to walk after the 24 months are up. That’s a $14,400 hole in your pocket for the rental of a $33k car for two years.

If you subscribe for say eight years , there will be a $57,600 hole in your pocket – made by a $33k entry level crossover SUV. This assumes the subscription fee never goes up over the course of those ten years, which is an assumption you probably ought not to make.

This is madness.

Not, perhaps, for Volvo – which has figured out a way to approximately double the return on a $33k entry level crossover SUV – “We need to look at the profitability of the car over eight years or longer,” a very candid Volvo CEO Hakan Samuelsson recently told Automotive News

But for the subscriber.

Who may not have any other choice but to subscribe  . . . given the cost of buying.

Got a question about cars – or anything else? Click on the “ask Eric” link and send ’em in!

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  1. The software world has already embraced perpetual rental models, since these folks also drive the self driving train… preview of things to come. Article mentioned you wouldn’t pay property tax since you don’t own it, but perhaps you’ve heard of a use tax? Even leased equipment in a business is subject to a use tax, paid by the end user. I don’t see how the slavers would not abuse this as well. They’ve never met a tax they didn’t like. If say 5%-10% of the new car buying public said F U and refused to buy/rent a new car, this crap would stop instantly. If assholes would stop flying for 2 months, tsa would be just a bad memory. But, Americans are so self absorbed, they will never do the “inconvenient”, even temporarily, necessary to put this beast back in its cage where it belongs. The people against freedom are organized enough, but those who say they want liberty, not so much.

    • Hi Todd,

      I wholeheartedly agree… and have had disagreements over this with good friends of mine. One frequently travels to Mexico for vacations. The interesting thing is, she’s an older Jewish lady and had family caught up in the Unpleasantness which occurred in Germany. I point out to her that Americans are being conditioned to accept being herded like cattle by their masters and that the precedent established is very dangerous. She of all people ought to see this – but refuses to “limit her life” by not flying.

      • I believe one of the reasons for the complacency is simply because the oppression that America (and perhaps other so-called 1st-world countries) uses is far more dangerous than that of the “Third Reich”. Kinda reminds me of the boiling frogs analogy that someone else mentioned in another one of your articles. Basically, the government is gradually turning up the heat, so that the “frogs” are unaware of their slow demise.

  2. It will likely get to the point that the automakers will refuse to sell individuals a vehicle. Because they will make far more renting it.

    • Hi Rich,

      I can imagine laws being passed analogous to those which already exist in Japan that effectively force most cars off the road after about five years or so – via pedantic/unbelievably strict saaaaaaaaaaaaaaaaaaaaaaaaafety inspections, which most older cars fail. No need to actually outlaw older cars. Just make it practically impossible to keep them on the road.

      Then perpetual rent makes “sense.”

      It’s the sail fawn model. Use it for a few years; when it becomes obsolete (you can’t update it) you chuck it in favor of a new one.

  3. I wonder what kind of restrictions will be placed on this vis a vis the included insurance. Could be an okay deal for someone with a DUI, etc on their record who’s otherwise required to pay insane insurance rates. Esp if you could get this deal from a “lower market” brand like Ford/Chevy for around $400/month.

  4. On property tax for my car: leaving aside the issue of charging you a fee for your own property I always felt it was bs that I had to pay the tax when it’s really the bank that owns the car.

  5. The subscription model lends itself perfectly to electric, driverless cars for reasons too numerous to list here. In fact, the subscription model is the only way to make them even marginally financially feasible.

    Basically, it boils down to the fact that electric, driverless cars are far too expensive and complex for one to own outright; you can’t buy one new, pay it off after 3,4,5,6 years, and keep it for another 3,4,5,6 years or longer, because they’re ultimately consumer electronics on wheels, and become not only financially worthless, but functionally worthless, in a far shorter time due to battery degradation and technological obsolescence.

  6. Oh look at the top pric, I mean pic, if it isn’t our friend, ole Sven-the-Svindler, again. Now he looks like an Appalachian-Apple-Head-Doll, anyone remember those?

      • Yeah, a shady non-productive loser who hires 2 psychos to kidnap his own wife to get ransom money from her father, getting them both killed in the process. Parasites and deadbeat murderers, was pretty much the theme of that film, unlike the real ones who never get caught and punished, and are rewarded with luxury, free healthcare, and pensions for eternity, all at our expense.

  7. I can’t decide if the little cartoon guy above is just tired of his car issues, or is trying to poop more cash to feed it money he doesn’t have.

  8. And don’t drive it too far. I’m sure there’s a mileage clause in the contract (sorry, EULA), and I’ll bet isn’t not enough to drive it on more than one short road trip a year. Might work in the northeast, but out here in the way out west that’s never going to work out.

  9. Volvo has turned just as insane as their home country has become. My parents had a 1987 turbo station wagon. It was great. these days no way I’m buying one of these social justice turds.

  10. The one thing no one has mentioned in regards to this is.. the “After Market” parts industry!! SEMA anyone? if you don’t own it you will not be allowed to modify it! no custom wheels, no custom exhaust, etc. to put it bluntly ‘Fk Dat’ I have not owned ANY vehicle that stayed stock for more then 24hrs. Hell I customized my BMX bike back in the early 80’s before even riding it outside!

    Ownership= much greater care taken of property! ( you all know how rental cars are treated! )

  11. This will be the model of every kind of retail going forward.

    People don’t buy operating systems for their computers any more. Now that there’s Windoze 10, they pay a subscription. In perpetuity.

    People don’t buy compact discs with music any more. Now that there’s Spotify, they pay a subscription or get bombarded with “personalized” ads. In perpetuity.

    People don’t buy printed books any more. Now that there’s Kindle and Nook, they buy an e-book that can only be transferred to five devices…and once you’ve reached that limit, you have to buy the book again. In perpetuity.

    Call me crazy, but I much prefer ownership of a physical thing. Might cost more initially, but once I have paid for it, it’s mine to do with what I want. I have never purchased a new car. My idea of a “new car” is to purchase someone else’s beater drive it until it dies. I might pay $2000 a year to keep the car maintained and repaired, but that’s a hell of a lot better than paying $600 a month for seven years, and it’s certainly cheaper in the insurance department over the same time period. I still buy compact discs (and burn my own damn mp3s). I still buy physical books. I said goodbye to Windoze and hello to Linux. It’s bad enough that I will never “own” my home, because I have to pay da gubmint rent (in the form of property tax) in perpetuity. I’m certainly not subjecting the rest of my life to the same insanity.

  12. What you say is true but only IF you are addicted to debt and living beyond your means as most Americans appear to be.

    Call me old fashioned,,, Call me contrary,,, Call me stupid,,, but I like that depreciation thingy. I own a 1998 Regal. Paid it off in 2000. The car isn’t worth a plug nickel book value. I have taken care of it,,, it looks and drives like new.

    I consider the depreciation as wallet appreciation. Let me explain,,,, At today’s low ball average of $500 per month the car returns $6000 per year to my wallet. Last year I had to redo the A/C. Cost $1000. So I only got $5000 returned to my wallet. I have 3 paid off vehicles…. That returns $18,000 per year to my wallet – $1000 for insurance and plates. I also own my home which pays $12,000 to my wallet – $1500 taxes and insurance. All in all I have a wallet appreciation of $30,000 minus $2500 for taxes and insurance and that is covered by the interest I never paid. Any other income earned is gravy.

  13. Not a bad strategy for Volvo since their vehicles rarely make it past the six-year mark without some catastrophic failure. Now they won’t even need to try to engineer the thing to last. When the 2020 needs a new tranny or turbo in 2024, just toss the thing in the trash and give them the new model for a slightly higher payment.

  14. I used to hold Volvos in very high esteem. Even bought a new 850 Turbo Wagon once.

    Now, Volvos stand for the exact opposite of automotive freedom. I’m as likely to buy a chevvy as one of those oppressive, politically correct, socialist, tyranny transits. (In other words, I’ll Never buy…. or “rent”, another Volvo.)

    • Amen, Mike!

      I actually dig the old RWD Volvo sedans and wagons; they were built like tanks and very dependable. Really solid cars.

      Today’s Volvos are homogenized “luxury sport” nonentities; might as well be the latest Audi or Lexus – just without the personality!

  15. I call it “perpetual permission”
    Basically, you are talking about what amounts a rental system. No telling now what kind of terms there will be, but assume no long term contracts – similar to what Cadillac proposed some time back – then whenever you want to go you have to go get your “rental”.

    Sounds to me like the foundation of a decent system of controlling who gets to drive where and when, especially with that car networking system, speed limit restrictions – could restricting a car to certain destinations only along certain roads be much more difficult to implement?

    • It’s much more than control and monitoring of who goes where when but rather everything. The rental economy means anyone who doesn’t go along to get along, doesn’t tow the line, doesn’t keep his nose to grindstone and his mouth shut gets turned off. That’s all. Just no job. No money coming in to make the monthly nut. No savings (because savings will be punished with negative interest rates, no cash). Rental apartment so when the end of the month comes its homeless time. Not many possessions either. One day a person has a life and then he says the wrong thing or looks at the wrong thing or whatever and the switch is turned and that’s it. Unemployable, owning nothing. The whole thing reminds me of something. You might remember it from some years ago too:

      Quite obviously some things didn’t work out the way it was thought to but what is being worked to, the end goal theme, is quite obvious now.

      • This sounds suspiciously like China’s social credit system. Sorry, citizen, you can’t fly on that plane, because you only called your mother once last year, and you made an off-color joke about the Communist Party when you were seven.

        Ever wonder why potential employers get to peek at your credit score? And why they demand the passwords for your social media? Because those things are the precursor to the USSA’s social credit system, that’s why.

        Can somebody just find another inhabitable planet, please? I’m really tired of this one.


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