Insights

Rent or buy – What does the future of car sales look like?

Whether it’s cars, food, or music, on-demand services have spread into many areas of our lives. Where once you would have had to own something in order to make use of it, technology – and our society as a whole – have shifted to a point where oftentimes, the most that you need to do to access a service or a product is make an account for it.

Subscribing to experiences not objects

On-demand services have shifted the landscape of many industries during the past few decades. While some may have once argued that the likes of Netflix or Spotify wouldn’t last, it now seems undeniable that people are invested in the benefits of a subscription service, rather than buying songs or movies outright. 

It’s not just media that people are deciding to subscribe to rather than own, however – the automotive industry has seen new services arise that grant customers a range of benefits for a monthly fee. From additional features like in-car WiFi or a companion app like Porsche’s to being able to drive a different car each month, numerous options exist for those that are interested in experiencing cars in a different way.

Drop of value

There are, of course, many benefits to not having to own a car yourself. For one, deprecation in value becomes a non-issue when you don’t have to think about buying or selling the vehicle in the first place. A high-end supercar might be valuable at first, and within the first few years – or miles – of its life, you can get a decent amount of your money back if you decide to sell it. But the longer you keep a hold of it, the more its value goes down, exponentially decreasing until you get more for it being scrapped than from selling it. According to Mr de Groot from Dataforce: “People are also moving away from owning as they want to reduce their capital risk and do not want to deal with expensive repairs.” 

This doesn’t even include the time spent trying to find the right car and the right place to buy it from, nor the time spent finding someone to buy your aging sports car when you no longer need or want it. A recent study reveals that the global car rental market is expected to witness a significant amount of growth over the years. Additionally, car registrations in Western Europe have decreased by roughly 80% by April 2020. The impact of COVID-19 pandemic has forced mobility industry players to reconsider ground transportation options as car purchases have declined compared to previous years. 

There is a cultural spin to this topic as well. In Western societies especially in the UK, people are increasingly becoming less dependent on cars and open to car hires for occasional trips due to changes in lifestyle, cultural thinking and city planning. In contrast, in Eastern Europe, inhabitants there are much more conservative about car ownership – because of their view that cars are meant to be functional rather than being used as status symbols.

Meanwhile, simply making a monthly payment to drive a Ferrari instead of buying it removes this concern entirely. You can have a car of your choice to drive for as long as the contract permits, whether you want to take the wheel to a Mercedes or a Lamborghini. And, when you decide that you’d like to change what you’re driving, the issue of selling the old car and buying a new one can be skipped for simply filling out some forms to organise a different vehicle. Your focus doesn’t have to be on the car’s shifting value – instead, it can simply be on the experience that comes with driving it.

Spoilt for choice

Variety is an important factor to consider when deciding whether to buy a car or to rent one from a subscription service. If you want to drive a Ferrari Portofino past the coast one month, then go across a mountain route with the rugged strength of Range Rover’s selection of SUVs, subscription services provide the means to do so. A different vehicle can be delivered to you as often as the contract allows – whether you’re looking for a sports car, convertible, SUV or executive – giving you a wide and varied range of experiences available each year. Without having to own a car, you’re not tied down to a single make or model and can change at your leisure.

But what about car ownership?

Owning a car yourself does still have its advantages over subscribing, however. Chief among them is the freedom that owning a car grants. Subscription models and similar services offer you a wide variety of different cars to drive at your leisure, with the ability to exchange one for another at regular intervals.

However, there may be limits to how many miles you are allowed to rack up while the car is in your possession. While the exact limit will vary between services, going over them is likely to incur extra charges on top of what is already being paid that month. This is likely not a concern for those that can reliably gauge where they will be travelling and when – such as those commuting in the car, or those only intending to make a single journey. But if you cover a lot of ground during the months, it may be that the limits imposed on you hinder that. 

On the other hand, owning a car yourself affords you the freedom to do with your vehicle as you wish. While you are limited to what you can afford to buy and maintain, the only limits that are set on what you can do with it are the ones you – and the law – set. You can take it wherever you wish, and drive it as much as you feel like doing so. Even if you wish to make modifications to the car itself – whether it is a cosmetic change such as paint, or one to performance – it is entirely within your rights to do so. 

Going your own way

Ultimately, the decision rests on what your lifestyle is like, and whether a car you own or a subscription to a service that grants you permission to drive theirs would be more beneficial. Each option available to you provides a different set of benefits, each suited to a different lifestyle. The most practical option would be to weigh up what is offered by both options and make a decision based on that – whether you prefer the freedoms offered by subscribing or ownership.

Thomas Furcher from McKinsey & Company hits the nail on its head when he says:

“There is no model that fits to all customers. What today’s customer wants is a car purchase process that is personalised and fun.”

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