As with all business models, a company that operates car subscriptions need to make money and whilst some vehicles look too good to be true on their costs, the payment that you pay towards your vehicle subscription will still make the operator money.
How do the firms make their money?
The vehicle subscription companies will make their money from the depreciation of the vehicle, application or documentation fees and even the maintenance. Of course, this all depends on how the business is set up.
Many of the subscription businesses actually rely on manufacturer buy-backs. This is where major manufacturers will sell the vehicle to one of the companies for a discounted price, they will then agree to purchase that vehicle back after a set amount of time, usually 6, 12 or 18 months.
The monthly rental from a buy-back acquired purchase is then usually determined by the amount that the vehicle will have lost during that time, plus a margin for profit. This is so long as the vehicle is returned in a set condition and within the required mileage parameters.
For those businesses that don’t use the buy-back options, they may purchase the car for a discounted price but then it is up to them to guess how much that car will be worth after a set amount of time. The better the vehicle holds its value, the more reasonable the monthly fee. This is why on many occasions, you will see some of the premium brand’s monthly fees on par with budget brands.
Other car subscription firms will rent or lease vehicles for a set amount of time and then put a margin over the figure to make their money.
What about application fees and documentation fees?
Some of the car subscription companies listed on our website, may charge a joining fee, membership fee or documentation fee. This is to cover the administration costs in setting the vehicle up with the finance providers or covering the cost of credit checking facilities.
Some of the providers also use the money within this fee to cover the costs of delivery.
Do Car Subscription companies make a lot of money?
It depends on how they are set up and which option they use to provide vehicles for their customers. Those who are more in control of their own buying and selling of cars (such as Evogo) tend to make more money on the subscription model, this isn’t true in all cases as the risks are much higher and should a particular brand or engine type is affected by a news report or recall, etc. This can have a huge effect on the residual value.
More Information on Car Subscriptions.
Use our website to easily compare the different car subscription companies based in the UK. Find those that offer Electric only subscriptions or those that offer insurance within their subscription deal.
