Car subscription offers plenty of attractions. For a monthly fee, subscribers have a car but not the hassles of car ownership or car leasing, such as maintenance, repair, or insurance. They can switch vehicles more often — to a different model or just a newer version of the same. Moreover, customers are relatively unaffected by the auto industry’s prevailing supply bottlenecks, and they often get a car delivered to their front door.
But the model has yet to take off, especially in the United States. One reason is that awareness of the services is low. An Oliver Wyman survey found that Americans were attracted to the benefits of car subscription: One in five respondents would adopt the model. But of these, two-thirds did not even know that subscription models existed before participating in the survey. The results indicate the need for marketing and other activities to ignite demand.
Car subscriptions can reduce financial risks and dependencies. But providers need to do educational work to reach the mass market
One market with a relatively large number of car subscription contracts is Germany, where an estimated 100,000 to 200,000 car subscriptions have been taken out, and some studies have suggested that subscription will account for up to 40% of market share by 2030. In the US, rates are typically somewhere between those for leasing and rental and usually start at around $500 a month for small, volume-brand cars, rising to $1,500 for premium brands. That usually covers everything including repairs, insurance, and other expenses apart from fuel. While the rates initially seem relatively high, it could work out not much more expensive than traditional car ownership or leasing — the total cost of mobility is usually underestimated by consumers.
Subscription cars are more available
Currently, a major reason for the positive response to subscription is that it avoids supply bottlenecks. Some automakers are prioritizing their subscription channels, and delivery waits are often just a few weeks in the US, compared with six to 12 months for purchase through traditional channels such as dealerships. In the survey, 21% of respondents highlighted short-term availability as the number-one reason they might opt for car subscription model, making it the model’s most attractive feature.
Quick availability has become more important given the scarcity of components such as computer chips. Subscription providers are less affected, as some manufacturers are prioritizing subscriptions
Most subscription services offer comprehensive online ordering, making the process as easy as online shopping for other products: 12% of respondents cited this as the most important reason to take advantage of subscription.
Customers like flexibility
Another advantage is flexibility. Rather than a large payment – either one-off or in installments – car subscriptions only require a monthly fee, which can usually be terminated at short notice, depending on the contract. This makes subscription less of a long-term financial commitment at a time when many households are struggling.
Around 20% of prospective buyers in the US are also attracted by the option to return their vehicle if necessary. Initially, car subscription services assumed monthly car swaps would be a major selling point, and our survey showed participants preferred being able to change cars frequently. But our research also showed that consumers stuck with their cars for an average of 12 to 18 months before switching, because it’s more convenient to drive the same car than to get used to a new one. As they develop the right service propositions, operators need to be aware of the discrepancy between what consumers say they want and their actual behavior.
The survey also showed that most participants don’t care whether they get a new car: Only one in three would prefer a new one, with the rest happy to have a used vehicle if it costs less. And another 20% of Americans are looking for insurance that covers possible damage at the end of the vehicle’s useful life to minimize unexpected expenses.
New services are appearing
A variety of providers are rolling out subscription services. In the US, these include major automakers, such as Porsche with its Porsche Drive service and Volvo with Care. Among specialized providers, FINN, Europe's fastest-growing car subscription platform, now operates in numerous cities on the East Coast. Kyte, a startup that delivers rental cars on demand, launched a subscription service in December 2022 following a successful pilot with Tesla. Autonomy, the largest electric car subscription service firm in the US, announced in August that it would expand its business with the procurement of 20,000 electric cars over a period of 12 to 18 months with the support of car dealer AutoNation.
In a sign of the rising importance of subscription, NIO, a Chinese manufacturer of electric cars, only decided to put its cars on sale in Europe after market feedback showed the demand; it had initially planned only to rent them out through a subscription service. That points to another trend: Subscription models present a low-risk entry into electric vehicles, letting drivers test whether the vehicles respond to their needs. For 16% of respondents, the chance to drive an electric car was the most important reason to be attracted to subscription. Evidence from other markets suggests that the share of EVs in subscriptions is higher than that among cars bought outright.
First, boost awareness
Customers seem to like subscribing to cars, once they have tried it. One study showed that 80% percent of users remain loyal to the model, and we think the US market could expand at up to 30% a year to become as large as $10 billion in 2030.
However, one of the main current advantages — the greater availability of subscription cars compared with cars for purchase — will likely disappear, as there are already signs of a normalization of vehicle supply. And the proportion of Americans saying they might take up the service (after first being informed that it exists) has not changed for the last three years, remaining at about one in five. (In Germany, the proportion is about one in three.) That makes it essential for service providers to find ways to let a broader range consumers know about the subscription option.
About the study
Strategy consultancy Oliver Wyman surveyed 2,000 people in the United States and Germany for its study on car subscriptions in 2022. They were each asked 10 questions about their interest in and expectations of car subscriptions.