In the latest installment of the annual Power 300 issue of Auto Remarketing, we go behind the scenes with some of the leading companies in the used-car space and their top executives with a few Q&A features.
Next up is Vince Zappa, president of Clutch Technologies.
Auto Remarketing: What is the biggest misconception that folks have about vehicle subscriptions?
Vince Zappa: Many think subscription is only for those interested in luxury cars. While some initial programs have offered luxury models, subscription has appeal for the mass market as well. Dealers and OEMs are recognizing this and have begun to offer more affordable pricing options as well as packages developed specifically for unique customer segments.
AR: I think many would agree that subscription will be a complement to traditional vehicle ownership rather than a replacement. What would you say is a reasonable expectation for subscription’s market penetration in five years?
VZ: It’s always hard to predict when the exact tipping point will occur. We see a lot of interest from OEMs, dealers and rental car companies, both domestically and internationally. We know consumers want a different relationship with their transportation. I think consumers who lease vehicles today are prime customers for a subscription-based product as they exhibit the following traits: 1) want shorter term commitments regarding transportation; and 2) value changing a vehicle more frequently than a traditional owner.
It’s just a matter of time before the industry finds ways to leverage the massive footprint and infrastructure to reach scale quickly. We’ve seen other industries undergo similar transformations and once the tipping point occurs, things happen very fast.
AR: We’ve seen this in digital retail, where some providers have decided to work with dealers as a provider, rather than as a competitor. Why did it make sense for Clutch to go this route in the subscription space?
VZ: From the start, Clutch’s mission has been to provide technology to the automotive industry to enable subscription. Given the dealership infrastructure already in place, as well as the customer relationships, it makes perfect sense to work in partnership with dealers to implement a subscription offering.
In addition to multi-car subscription, dealers can offer their customers new experiences across their entire operation. The service department can use “Pick up and Delivery” services as a way to enhance their customer service; the new-car department might use subscription as a way to provide extended test drives for those interested in an eventual vehicle purchase. The dealership can also offer affordable alternatives to financing and leasing with a single vehicle subscription offering. Working with the dealership versus around opens the subscription market to consumers across the country.
AR: Why might subscriptions make sense for independent dealers, too?
VZ: Independent dealers are also in a great position to offer a single vehicle subscription to their customers. Many customers don’t want to commit to paying for a vehicle for multiple years. Offering a monthly subscription allows the customer the option to give the vehicle back to the dealer should their needs change.
Since the vehicle is owned by the dealer, at any time they can decide if they want to continue offering the vehicle in a subscription or they can put it on the lot to sale — there are so many options that make subscriptions sensible for independent dealers.