Should you own your vehicle, or take out a subscription?
The pandemic has changed so much for so many that Iain Robertson found himself drawing parallels with the title of 1932 science-fiction novel, Aldous Huxley’s ‘Brave New World’, albeit without the dystopian references, or the man versus machine inferences.
In many respects, the economic crash of 2008 could have been a dress rehearsal for last year’s Covid-19 crisis. Had the government not tried to soften its impact, as a result of having removed its eye from the ball stupidly, the ramifications should have been as severe as those occurring over the past 15-18 months. Despite talking up the ‘economic recovery’, so much altered from that period that I have long believed that the British economy was simply bouncing off the buffers, until something more serious drew the focus.
Lessons ought to have been learnt but, with the consumer having enjoyed relative economic freedom since the early-1980s, with a broad range of ownership options across almost all manufactured product types, from white goods and transport to property, the prospect of non-ownership was hardly ever under consideration. In fact, the time honoured ‘Englishman’s home is his castle’ grew in relevance and has inferred a crenelated safety blanket of such immense desirability that ownership by whichever method took precedence.
Runaway pricing has been a coincidental occurrence. British consumer demand for insufficient affordable property has grown into an unquenchable desire for the rental alternative, while unrealistic values are posted on-going, enabling breathless former council house dwellers to gravitate to six-figure living over the past forty years. Yet, it is a vicious circle buoyed falsely by reports of one of the strongest economies in the western world. Unfortunately, if the consumer is not in the loop, he is unlikely to ever be so.
Fashion has a role to play most especially in the hire purchase scene, as increasing pressure on post-taxation resources continues. The desire to have ‘the next best thing’, the biggest TV screen, US-style refrigerators, intrusive and security invasive electronica, let alone the ‘seven-year itch’ to replace kitchens and bathrooms, is matched equally with the uncanny growth of the SUV automotive sector. While minority eco-warriors steel themselves for the disappearance of natural resources, a majority favours fat tyres and hiked-up suspension all without questioning true operational overheads.
Yet, a groundswell of rental protagonists has been maturing over the past decade. After all, why invest and have sole responsibility for upkeep, when rental infers a greater opportunity to obtain value-for-money, without responsibility beyond basic care? For businesses, removing major expense from the balance sheet is a boon, even for cash-rich enterprises, because rental presents taxation benefits. When the list prices of vehicles seldom decrease (other than with old stock clearance sales) and engaging with a future of electrification demands a further 35-40% spend, rental might soon become the preferred option. Those firms already latched into contract hire arrangements can already perceive the benefits.
As Toby Kernon, CEO and founder of Wagonex, the UK’s biggest vehicle subscription business, told us: “The whole point of car subscription is to find a new, more user-friendly and flexible way of owning it. We’re all used to subscribing to all sorts of products and services these days, why should cars be any different? Think about it, why would anyone want to take out a big loan to buy a car that falls out of date in three years? They’re going to lose money on it, or pay to repair something they don’t actually own. In addition, when times are as uncertain as they are at present, why would anyone want to sign up for a big financial commitment, when they don’t know what the future may hold. Car subscription offers a solution to all of those problems and more.”
For several years, unlucky motorists have been left facing three choices, when their vehicle contract has run its course: 1. Keep the vehicle by paying a final balloon payment often amounting to several thousand pounds; 2. Find the money for a new down-payment and sign up to a new deal; or, 3. Hand back the keys. Some of them will have taken out GAP insurance (a policy to protect them in case a vehicle’s value at the end of a contract does not cover the outstanding finance), while those who chose to buy outright have to deal with the dreaded pain of depreciation, observing thousands of Pounds being written off the value of a new car the instant it is driven off the forecourt.
Of particular relevance, given the economic turmoil caused by the pandemic, many owners have found themselves tied into expensive contracts that they no longer need, or can no longer afford, following changes in their personal circumstances. Recent data suggested that 80% of drivers simply did not use their cars at all during lockdown periods, wasting essentially more than a billion Pounds on payments for cars that were not driven, according to research carried out by Go Compare.
Those people choosing the vehicle subscription model will find that they have a choice of thousands of new cars available for subscriptions of anywhere between one and 36 months. Deposits are fully returnable at the end of the contract and can be carried over to the motorist’s next car. Having to deal with the variable headache of parts, maintenance and road tax disappears, because they are included for the duration of the subscription contract, which means zero unexpected bills, scheduled, or not. Finally, fully comprehensive and totally transparent insurance can be included in the monthly subscription payment, if required.
Wagonex (est. 2016) is the UK’s leading ‘non-ownership’ player, because the precepts are still quite fresh but, with continually upwards spiralling new car costs confronting consumers and businesses in coming years, its services may become the favoured path of no resistance.
