Financial incentives have been one of the most powerful tools for manufacturers to boost sales and finance volume for years, and in the past, OEMs have relied heavily on their captive finance arms to help make these promotions happen.
That might end soon.
“You will see OEMs that will say, ‘Hey, if you stay with our brand for six months, we will lower the price by X,’ or ‘If you stay for three months, we will lower the rate by X,’” Grayson Brulte, president of Brulte & Co., told Auto Finance News.
Brutle called this financing model “Netflix for cars.” And just like Netflix, a consumer’s preferences can change at the drop of a hat.
Currently, financing does not work that way. For example, a consumer wants an SUV — such as a BMW X5 — because “it’s that time” in the person’s life where he or she needs safety, space for a stroller, etc., Brulte said. The cost of the vehicle is around $1,200 to $1,500 a month, depending on all the options. But then the consumer factors in the ancillary products, service package, wear and tear, gas, warranty, insurance, and parking. In the end, the cost per month runs closer to $2,000 for that particular vehicle, he explained.
“What if I told you in the future, you can have not only the X5, but you can have a BMW 5 Series as well for $500 a month, all-in, including your insurance,” he said, referring to an autonomous vehicle carshare subscription model that OEMs could offer. “That’s a lot more affordable. You are saving $1,500 a month.”
Then, when the consumer wants to go on a date night, for example, they can summon a convertible instead.
“Today, when you buy, lease, or finance a car, it’s going to one family or one individual,” he said. “In the future, that same vehicle can go to four to 10 different families. The use rate will be higher,” and consumers will be subscribing to a brand.
Brutle said this “Netflix” subscription model has other implications.
“You will see a lot of brand jumping around, and you will see the loyalty for car brands will change,” he said. “There will be certain individuals that will be super loyal, and then there will be individuals that will want to jump around depending on the lifestyle.”
There could also be family subscriptions offered a discount, similar to the way Apple Music operates.
“If you look at Apple Music, today you can pay $9.99 for single subscription or get a family subscription for $14.99, which allows up to three individuals in your family to use that,” he said. “I believe you will see the same thing with autonomous vehicles. You will have individual subscribe to a brand or a family subscribe to brand.”
To learn more about the evolution of transportation, join us at the second annual Auto Finance Innovation 2017 conference, May 17-18 at the Hilton Bayfront in San Diego. Visit www.autofinanceinnovation.com to register or learn more.Like This Post