OUR BLOG – Pay-to-use or pay-to-own?
16 April 2018 - 8:40am | Tristan Young
Pay-to-use instead of pay-to-own. This is one of the buzz phrases in the trade and we can all see emerging signs of it but how, if at all, will it impact on dealerships?
The theory is relatively simple. People want mobility but only want to pay for it as needed and in response manufacturers are joining with companies offering cars on a weekly/monthly basis for a one-off charge.
The latest is BMW and Drover, a subscription company, which gives entry to the marque from £131 a week, all bills inclusive bar fuel and no obligations at the end.
On one level it makes sense. Why pay for a lump of metal which spends 90% of its time stationary and where the only thing moving is its value. Downwards.
Mobility rather than ownership is the new way of thinking about cars and there is some evidence to support this. The number of younger people applying for a driving licence is falling and as cities become less car friendly and public transport (maybe!) more convenient, for many the appeal of owning one becomes ever less.
All this is far in the future in terms of significant volume but it is there and I’m sure it will grow.
Should franchises be worried?
Last year Cadillac launched a pay-as-you-go service called Book and one of my colleagues asked its president, Johan De Nysschen, (and the executive vice president of General Motors) how dealers fitted into the business model.
He replied: “A lot of needless anxiety around this aspect. At the moment, dealers earn a flat fee for a referral. Dealers have no capital tied up in the program, no administration cost and no risk. We are working on an alternative model which can allow dealers to provide and maintain the vehicles, handle storage and logistics. Under this scenario dealers assume the business risk, retain all revenue, and pay a flat administrative fee to BOOK, who will run the customer interface.”
Earlier this week I put much the same question to the NFDA which said: “Although systems of ownership will continue to evolve, we expect automotive retailers to continue to supply cars and look after them. The industry has already shown its resilience on several occasions and although automotive retailers acknowledge the need to adapt, they are confident that in the long term they will continue to thrive.”
That’s broadly in line with my thoughts but I would add this. Pay-to-use may only be in the very earliest stages but is just one more possibly existential matter which dealerships need to be thinking about for the long term.
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