Traditional ownership is ending
The increasing availability of finance and the growth of subscription models is creating a shift in the automotive industry with the age of traditional ownership coming to an end.
However, according to Auto Trader it’s a mistake to think that car ownership, or indeed the traditional retail sector, will be a victim of the sharing economy. Auto Trader’s bi-annual Market Report shows that most motorists (80%), especially younger drivers still want exclusive access to a vehicle. The need for independence (80%), an unwillingness to share (51%) and the pure convenience of a car (48%) were all cited as the top reasons for not wanting to give up exclusive access to a car.
Whilst Uber’s fast response time in central London arguably offers consumers a level of independence, generally these are qualities that ride sharing and driver service models (taxis) struggle to deliver, at least on such a wide scale.
However, almost every day new players are emerging that can give them that independence, such as Drover’s pay-monthly subscription service or Volkswagen Financial Services’ new rent-a-car scheme.
Finance, leasing and subscription deals are set to fuel the market for new cars said Auto Trader. The company predicts that within the next 10 years all new cars will be bought via one of these models, challenging the traditional sense of ownership.
New bundled subscription models and more flexible ways to access vehicles will open-up the market. One in five consumers are already open to using a less traditional ownership model (cash purchase or PCP).
Contrary to speculation that the growth of these models signals the death knell for traditional retail, increased popularity of alternative usership models represent an opportunity for the industry. They will make car ‘ownership’ more accessible to more people, will offer manufacturers a new way to get consumers behind the wheel of their cars, and crucially, will complement rather than cannibalise existing retail models.
Retailers could support by prepping, cleaning, repairing, and even upgrading cars on behalf of the manufacturer or service provider.
Consumer demand for more flexible alternatives offers retailers a chance to repeatedly monetise new or used vehicles. Some franchise dealerships are already working with manufacturers to offer flexible leasing services.
And for manufacturers they represent an opportunity to create a new revenue stream for their cars by making them available through their own subscription programs, such as Care by Volvo and Peugeot’s Just Add Fuel.
However, as the landscape shifts from primarily PCP and HP to leasing, subscription and the array of access models, there will unquestionably be new challenges that both retailers and manufacturers will need to adapt to.