When Dave and Keely Ogden were adding a baby to the family earlier this year, the Ewing, N.J., couple knew their Honda Civic would be too small.
At about the same time, Marc Ziss was growing tired of paying for repairs to his 2007 BMW, and he wondered how a Tesla would fit into his Center City condo lifestyle.
Neither Ziss nor the Ogdens were ready to commit to buying a new vehicle, so they turned to two different new-to-Philadelphia car subscription services to fill their needs — Ziss went for a Model 3 from German-based Finn, while the Ogdens chose a Nissan Pathfinder from Ardmore-based Go.
“When I first discovered Go I was like ‘Oh my god, I want to give the CEO a hug’,” Dave Ogden said. “I was like ‘Yes! A solution, the solution I’ve been looking for!’”
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The services — Go started in 2021 and Finn earlier this year in Philly — may be just the first trickle of newer types of car subscriptions , as people like the Ogdens and Ziss look for ways to make shopping for a car more flexible. Unlike leasing a vehicle, car subscriptions cut out the dealership all together. A customer pays their subscription provider a recurring fee to drive a car for a limited period of time. Finn offers six- and 12-month commitments, while Go offers three-year terms.
Many independent subscription services have come and gone in the past six years. Some manufacturers continue to offer subscription services, including Audi, Porsche, and Volvo, but they’re in limited areas, and because of the brands, pricey.
But Michael Beauchamp, CEO of Go, is undaunted. He expects big things for the small service, which currently has 14 employees and 1,000 subscribers in seven markets in the U.S., Beauchamp said.
“We have a waitlist of 4,000 people for a car that has not yet arrived,” Beauchamp said.
Beating supply chain issues
While consumers on that waitlist may not be quite so eager to hug Beauchamp, they could still wind up in a new vehicle more quickly than if they’d gone the traditional car-buying route.
Throughout 2022, manufacturers have been building new cars almost on a made-to-order basis, as pandemic-induced supply chain issues have rendered vehicles and the chips that power much of their system hard to come by. Dealers often have empty lots, or lots filled for a short time with vehicles that are already contracted to customers, while prices are rarely discounted and in many cases, over MSRP, the price a product’s manufacturer recommends it be sold for.
But both subscribers said their cars came fairly quickly for their spring deliveries — Ogden’s in about two months and Ziss’ in just one — and that they knew clearly what they were paying.
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“When my car came, it came on the day they initially promised,” said Ziss, a 55-year-old software developer. “If you buy a Tesla there was a long wait like, I don’t know, six months’ wait time, and Finn said they’d have it to me within a month, and they did.”
How car subscriptions work
Subscribers have cars delivered to them, usually with just a few miles on the vehicle , although both services might bring cars with a few thousand on the odometer. All are still considered “new,” though, because they’ve only been titled once.
Both services are web-based. Log in to Finn.auto or drivego.com, fill out some forms, and get started. Potential subscribers need to be at least 25 with a valid driver’s license, a clean driving record, and a credit score of 640 or higher for Go or 680 and above for Finn. And, of course, plenty of room on a credit card. Go requires an insurance purchase as well when ordering, while Finn’s is included in the fee.
Two auto industry analysts agreed that Finn’s and Go’s success may lie in the fact that they follow the model of Volvo Care subscriptions, another service available in the region, which also focuses on months-long commitments to one car. Other services have aimed for people who would like to switch frequently, or at least on occasion.
“What Volvo has done is really make it almost one person, one vehicle, and it’s a short-term lease more than anything, so that can work,” said Tyson Jominy, vice president of data & analytics at J.D. Power and Associates in Troy, Michigan. “You’re basically tying down the one vehicle, and you don’t really have the vehicle until you have a consumer for the vehicle.”
Finn offers Cadillac, Chevrolet, Nissan, Jeep, and Tesla; Go has BMW, Chevrolet, Ford, Nissan, and Toyota vehicles, as well as offerings from Stellantis — which includes Jeep, Ram, and Chrysler .
Affordability is key
Both Beauchamp and Finn CEO Max-Josef Meier come from outside the auto industry and were looking to change the model for car ownership, and for the buying/leasing experience.
A sharp bend in the learning curve for the CEOs: sales taxes. Meier learned this because Finn serves Pennsylvania, New Jersey, Connecticut, Massachusetts, and the District of Columbia, with more places planned for the future. Go offers vehicles in the Philadelphia region, New Jersey, Delaware, Miami, Orlando, Atlanta, Charlotte, Dallas, and Houston.
“Sales tax state by state is quite a complex thing when you run car subscriptions, because you’re always between renting and leasing and that makes things a little bit complex,” Meier said.
Go and Finn both offer longer-term contracts — Ziss has a one-year deal on the Model 3 Long Range and the Ogdens, three years.
But for Finn at least, short-term leases were the original focus.
“One of the many surprises very early on when we started in 2019, we thought flexibility is the coolest thing, ” saidMeier . “But then we introduced these longer terms, [and we learned that] affordability is more important than flexibility.”
The company, which has 300 full-time employees, now projects it will have 25,000 subscribers by year’s end — about 4,000 in the U.S. and the rest in Germany.
Happy drivers, cautious optimism
So far, users seem pretty happy with the services. Finn has 940 reviews on the review website TrustPilot, with 86% in the “excellent” category and another 7% in “great,” and just a handful in the three lowest categories. With just 50 reviews, Go has 72% in the excellent pile and 8% in the great stack, but another 18% at the bottom of the five levels.
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Ogden, 34, pointed out that Go has plenty of positive ratings on Google reviews, which helped reassure him.
“It’s hard to get good ratings on Google reviews because people naturally talk the loudest when it’s something negative when it comes to reviewing stuff, and their reviews on Google are like 99% approval,” the IT systems administrator said.
Ogden said Go’s price was comparable to a lease, but with no money down. As for Finn, Meier said it may not be the cheapest but it’s competitive.
Among other subscription services, Hertz My Car and Sixt+ also service the Philadelphia region.
As the pandemic and inflation continue and interest rates rise, unpredictability is being injected into just about every business model. But another analyst sees a reason for cautious optimism for subscription services like Go and Finn, in spite of previous services’ failures.
Bertrand Rakoto, a senior engagement manager for Ducker Carlisle LLC consulting in Michigan, said: “There’s a trend that customers are willing to have benefits of the lease but a little more flexibility; I think it’s one step toward that direction.”
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September 21, 2022 at 11:02PM
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