Subscription Programs Spur Innovation Opportunity | Auto Finance News | Auto Finance News

Subscription Programs Spur Innovation Opportunity

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With all the consolidation taking place at dealerships across the country, managers are looking for new ways to drive sales and keep customers coming back, and one of the most popular solutions this year has been subscription programs.

BMW Financial Services, Mercedes-Benz Financial Services, Fiat Chrysler Automobiles, and Toyota Financial Services’ Lexus brand have all announced or launched car subscriptions of their own, but dealers aren’t sitting on their heels.

“Almost all of the manufacturers we deal with have their own programs they are planning to launch,” Dan Fields, president of Fields Automotive Group, told Auto Finance News. “They are going to offer those products to all their dealers [eventually]. But what’s different with our product is consumers can switch a car any time they want and switch brands any time they want. In a manufacturer program, they are locked in.”

For example, because of the wide range of brands Chicago-based Fields Automotive Group carries across four states, they can offer consumers a BMW 3 Series for the week and a FCA pickup truck or Jeep on the weekend, which would be impossible under either manufacturer’s stated programs. Not to mention, neither of those brands offer a full range of vehicles from sports car to pickup truck. 

“For us, it’s not about identifying a new financial model, it’s how do we create meaningful experiences that resonate with our clients and allows us to retain them long term,” said Hesham Elgaghil, vice president of strategic growth and business development for Texas-based Park Place Dealerships. “Ultimately we’re able to retain that customer long-term, whether they leave the subscription program to purchase a vehicle or stay in the subscription program.”

One of the most difficult aspects of launching a program like this is deciding what to do with the vehicles in the fleet that have been used and when to take them out to maximize the residual value. Fields is working now through vehicle forecasts in order to establish the proper fleet.

“The key is to put the proper car in and take it out at the proper time,” he said. “That largely depends on what that residual value is going to be, which differs on make, model, style of vehicle, and even option package.”

But the dealerships do have help in this regard via their technology partners. Fields and Elgaghil have both teamed up with Clutch to provide the consumer interface and identify vehicles that need to be taken out of the fleet.

“We’ve determined that we’ll cycle the bulk of the fleet out once the vehicle hits 9,000 miles,” Elgaghil said. “Additionally, we have a huge audience that would love to purchase a certified pre-owned car and having it under 10,000 miles for our market makes a lot of sense.”

Other technology providers include Mobiliti, which opened shop with Island Auto Group in May for the Staten Island, New York area, and Flexdrive, which expanded its footprint to 23 cities in February.   

“We agree with the thesis that over the next five to 10 years there will be a big shift from retail to fleet,” Jesse Hord, chief executive of Albany, NY-based Keeler Motor Car Co., told AFN earlier this year after developing a subscription program with Clutch. “We knew that the OEMs are going to start to experiment with pilots and we wanted to figure it out for ourselves before they design the programs.”

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