Charles Chesbrough, Senior Economist and Senior Director of Industry Insights, Cox Automotive
Taylor Sandusky, Head of Business Development,
The US vehicle market is facing an affordability crisis. Price points that are affordable for the mass market are increasingly hard to find. Cox Automotive data shows that in 2019, monthly payments on new-car loans are $145 higher than those on used-car loans and $67 higher than new-car lease payments. Several major manufacturers have ceased production of affordable cars, reducing the units available for sale. And for some consumers, credit availability may constrain access to the more affordable used market.
Subscription will solve the affordability challenge for many consumers. Vehicles offered in a month-to-month subscription can be offered with a lower monthly payment for consumers than the payment for a consumer loan for the same vehicle. And the dealer or manufacturer can make substantially more margin than if they sold that vehicle outright! How is this possible?
In this session, attendees will learn how vehicle subscriptions are using fleet financing to lower the cost of consumers’ monthly payments by “lending” the fleet cost of borrowing to the consumer. As no credit is being extended, there is limited downside for the dealer or manufacturer.
And there’s more! From a consumer perspective, subscription also brings the benefits of simplicity and convenience in the purchase process and eliminates the hassles of ownership. Dealers are finding that subscription is a solution for specific challenges such as making a profit from off-lease vehicles that might be under-water or have too much supply in the model. Finally, subscription is a great way for dealers to build continuous, trusted relationships with consumers.