Short-term use for variety of cars? There's a subscription for that

Hesham Elgaghil of Park Place Dealerships, which launched the Park Place Select subscription service. (Photo: Business Wire)
DETROIT  - 

 A Porsche Boxster for date night; a couple of days later, a seven-passenger Land Rover Discovery to haul Junior and his belongings to college; and a couple of weeks after that, a Maserati Ghibli to pick up that all-important client.

Park Place Dealerships wants to meet a customer’s every driving need, even when it means dropping off and picking up different vehicles for a customer every few days or every few weeks, said Hesham Elgaghil, the group’s vice president of strategic growth and business development.

The Irvine, Texas, dealership group operates Park Place Select, a white-glove, vehicle subscription service for customers who seek short-term, seat-time in a variety of luxury vehicles.

Park Place Select, which started May 1, leverages the dealership group’s 16 luxury brands and enables its customers to rotate in and out of as many vehicles as they want within a month, with no long-term commitment, Elgaghil said.

The cost is $750 to join, and subscriptions are $895, $1,395 and $1,795 per month, depending on the vehicles a customer wants to drive.

Elgaghil admits that luxury vehicle subscriptions aren’t for everybody but believes there is a “hunger” for a new automotive retail experience, and Park Place Select is one solution.

“The purpose of our company from day one was to listen to our clients,” he said. “As we began to understand there may be a possibility that people want to experience a subscription model in the auto industry we wanted to be first to market to provide that experience.”

Vehicle subscription services are expected to become a major disruptor of the retail auto industry and are being positioned an as alternative to buying or leasing a vehicle.

It is among the many mobility services — such as car-sharing, ride-sharing and self-driving vehicles — being created by dealers, manufacturers, tech companies and others that are jockeying for position in the increasingly crowded mobility race.

Though vehicle subscription services differ in terms of customer qualifications to join, vehicle fleet and number of vehicles a customer can drive within a timeframe, there are some similarities.

They are app-based, which allows customers to schedule their vehicles using their smart phones and generally include insurance, maintenance and road side assistance.

Credit-challenged consumers, too

Taking an independent dealer approach to vehicle subscriptions is idrive Atlanta, owned by James Light. Light has operated a Flexdrive business at his Atlanta used-car store for just over a year.

Flexdrive is a vehicle subscription company that give dealers the tools to run a subscription business. It is a joint venture between Cox Automotive and ARI, a global fleet company owned by Holman Enterprises, which also owns Holman Automotive.

Light’s Flexdrive fleet is mostly 2- and 3-year-old Asian brand vehicles in the $12,000 range. But in response to customer demand, Light added some entry-level luxury cars such as Audi A4, Lexus ES, BMW 3 Series and Mercedes-Benz C-Class.

He said it still too early to have a firm handle on customer response to Flexdrive, but he has found that it appeals to credit-challenged consumers because a good driving record is the only qualification.

Interest rates for those customers, if they chose to buy a vehicle, tend to be in the high teens or low-20-percent range, he said. But his monthly Flexdrive payments, with insurance and maintenance, are typically competitive with traditional retail loans and besides, many consumers don’t want to own the vehicle anyway, he added.

“A lot are realizing ‘I don’t have to own it; I can use it for the same numbers,’” said Light, who also owns Momentum Motorcars, an independent dealership also in Atlanta, that carries a wide array of late-model, luxury vehicles.

Works for new and used-car dealers

Drew Heckman, head of strategy at Flexdrive, said the subscription service works as well for used-car dealers such as Light as it does for Holman Automotive, which operates Flexdrive at its dealerships in Austin, Texas; Philadelphia; and in the New Jersey markets of Cherry Hill and Turnersville.

“Every subscription vehicle is used after the first person who subscribes to it,” Heckman said.

“The depreciation curve is steeper in the first year than each additional year. We’ve found success in our model with lightly used vehicles in the 1- to 3-year-old range; some are off-lease vehicles.”

Flexdrive was concerned about operational and legal implications and risks associated with subscription services so it studied how to appropriately insure dealers, Heckman said.

It also tried to create quick resolutions to issues that can arise when drivers get behind the wheel, such as tickets resulting from being caught on camera running red-lights.

“We wanted to understand what are the pieces that don’t fall into a dealers’ day-to-day operational processes and how can we make them part of our platform or make simple to operationalize,” Heckman said.

Flexdrive will launch in five yet-to-be-named markets this summer, said Chowning Aguilera, Flexdrive head of brand strategy and marketing.

Multi-brand, multi dealer

Chance Richie is the CEO of Detroit-based Mobiliti, which he describes as a multi-brand, multi-dealer subscription platform, that he co-founded with his wife, Amanda, last year.

He said the company’s goal is to create a new profit stream for its dealer partners while creating a pleasant experience for consumers.

Mobiliti is being used by Apple Leasing of Austin, Texas, and was to launch in early June with Island Auto Group, a franchise dealership group with 28 rooftops in Staten Island, N.Y., Richie said.

“We try to do a wide range of makes and models across many different price points because we’re trying to drive adoption of the product,” Richie said. “We don’t want it to be a specialty product.”

Mobiliti can work for independent dealers as well as franchised dealers, said Richie.  Vehicles in Mobiliti’s program range from new to up to “3 or 4” years old and are covered by some portion of their manufacturer warranty, he said.

 

Updated: Corrected to fix spelling of Richie. 

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