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Car Subscriptions: Which Manufacturer Will Become the Netflix of Vehicles?

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The automotive industry is changing. By the middle of the next decade, Volvo Cars anticipates half of all its sales will come from fully electric cars, and a third of Volvos sold will be capable of autonomous driving. And if those two paradigm-shifting advancements weren't enough of a shake-up already, the manufacturer has now announced that over that time frame, half of all vehicles it offers will be distributed through a subscription model, rather than traditional car ownership.

"Our customers' expectations are changing rapidly. This means that Volvo Cars is also changing rapidly," said CEO Hakan Samuelsson in a statement. "These initiatives will help transform Volvo from being purely a car company to being a direct consumer services provider."

With this announcement, Volvo joins manufacturers such as Mercedes-Benz, Cadillac, Ford, Porsche, Lincoln, Jaguar and BMW in an industrywide scramble to become the Netflix of vehicles.

Although the specifics of each package differ, manufacturers are offering subscribers the opportunity to bundle the costs of their vehicles, maintenance fees and auto insurance premiums into one predictable monthly payment. They'll also be experimenting with a host of other features they hope will appeal to a younger generation of drivers. Care by Volvo will enable some drivers to receive package deliveries to their cars and order on-demand refueling. Porsche Passport will offer unlimited vehicle exchanges between its subscription-eligible models.

In the age of Dollar Shave Club, Blue Apron and Spotify, it's no secret that subscription-based sales models are popular among millennials—especially when they save money or simplify an inefficient buying process. However, the finances of car subscription packages, as they've been marketed so far, tend to favor convenience more than savings.

Our study found that subscribing to a Cadillac or Porsche would cost drivers up to $9,732 more per year than leasing the same vehicle. If the option to switch between an SUV and a sports car is valuable to you, or if you think you'll only need a car for a few months out of the year, then you might be able to justify this difference in cost. If not, buying or leasing a car might still be your best bet.

Currently, car subscriptions are only available to drivers in or around San Francisco, Los Angeles, Atlanta, New York City, Philadelphia, Dallas and Nashville, where manufacturers are running pilot programs. However, if these programs meet car makers' expectations, programs will soon be expanded across the country.

The article, Car Subscriptions: Which Manufacturer Will Become the Netflix of Vehicles? , originally appeared on ValuePenguin.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.