By Ray Birch
PHOENIX—The automobile subscription model—where consumers pay for the use of a vehicle on a month-to-month basis—is picking up steam as auto prices skyrocket and electric vehicles (EVs) become more mainstream.
Now one expert, whose company offers such a service, says the model can also be an answer to rising vehicle prices that are giving credit union members sticker shock while damaging the household balance sheet. It is also an opportunity for CUs to play in this space and make additional revenue while keeping members in the fold, the same person says.
Jesse Toprak, chief analyst at EV subscription provider Autonomy, spoke with CUToday.info about how a great deal has changed within the automotive industry in just the past year alone, including how the average price for a new vehicle has risen to more than $47,000, according to Consumer Reports, well above the $33,000 record that was set less than two years ago.
Driving prices ever higher are both the limited supply of new cars and the move to EVs, which typically come with a high price tag.
Toprak, whose company offers subscription pricing for the Tesla 3 EV, said his business is growing quickly.
“We’re growing by almost 20% week to week,” he said. “I know this is the early stages, so this growth pace won’t be sustainable. We have a waiting list and we're basically just waiting for more cars from Tesla.”
The monthly subscription price for a Tesla 3 through Autonomy is $490, said Toprak. That compares to the current average monthly payment of $644 for consumers who finance their vehicle, according to LendingTree.
What the Consumer Pays
What a consumer pays with Autonomy is based on the down payment, and there is an initial three-month commitment, after which the individual is on the month-to-month subscription.
“With $4,900 down your payments are $409 a month. Or, you can put $990 down and pay $990 a month,” Toprak said.
The “EV premium” is contributing to much higher car prices, according to Toprak, who added as more charging stations are installed across the country and as EV batteries’ mileage range increases, more consumers are choosing EVs.
“It is a chicken-and-egg situation—more charging stations are needed but they won’t be built until more EVs are on the road. And more EVs will be purchased when there are more charging stations available,” said Toprak.
But Toprak noted that more pure EV models are being manufactured, with the total number of EV options in the market now at 26. He said Autonomy is looking into offering additional EV makes and models.
The ’EV Curious’
With consumer interest in vehicle subscription services increasing, Toprak said it will likely quicken the pace of consumer migration from the internal combustion engine (ICE) vehicle to an EV.
“There is a segment of consumers we call the EV curious,” said Toprak. “They know about EVs. Say their friend has a Tesla, and they're kind of interested, but they're not sure it's going to fit their lifestyle. Plus, you're considering a $50,000-plus purchase. But with a subscription service you can subscribe for three months, and you can have essentially have an extended test drive.”
Toprak believes the subscription pricing model will push the U.S. closer the ICE cliff—the point at which the value of gas-powered cars begins to drop due to the growing acceptance and consumer demand for electric vehicles.
“The extended test drive could get people over the EV hump,” said Toprak.
The Role for Credit Unions
Toprak said credit unions can play a role as the new model grows by referring members who are seeking a loan for a new car to Autonomy.
“A monthly payment for a vehicle subscription service does not go on your credit report as additional debt,” noted Toprak. “And members, too, must qualify at the credit union for a loan. If a member’s credit falls short, the credit union can refer that person to Autonomy and receive a $300 referral fee—and they keep the member in a new car and happy.”