Defining the Product to Address Demand

Car subscription addresses the well-publicised shift in demand from ownership to car usage. Initially targeted at the millennial generation, the availability of a car bundled with insurance and maintenance with little-to-no commitment also attracts huge demand among more traditional consumer and commercial customers.

An emerging mobility-as-a-service product, subscription sits squarely between daily rental and those leasing products that have come to dominate new car sales. In fact, it is that lack of definition that has somewhat hindered uptake, is it an extended daily rental or is it a fixed-term lease-like arrangement? More than just semantics, more precise definition determines the specific resources required to provide the service at an economic price.

Two pieces of evidence define where the commercial opportunity lies in car subscription:

Willingness to Pay - In their 2019 survey "A Car Without the Commitment", consultants Oliver Wyman identified the greater share of opportunity at that €500/month level (demand at that much higher >€1,250/month level is really for luxury brand fanatics and not necessarily a measure of opportunity at scale).

Pricing - The chart at right compares monthly cost associated with daily rental, fixed-term subscription and contract hire (all adjusted to include maintenance and insurance) for a brand-new Ford Puma (offered by both Cazoo and various leasecos).

While customers are willing to pay a premium for flexibility, it's unlikely they require or are willing to pay the nearly 3x premium associated with daily rental. Instead, for a fixed-term commitment of as little as 9-24 months, customers can subscribe at a price comparable to more traditional 36-month contract hire.

Therefore, the economically viable form of car subscription that captures market demand should be defined as:


A new product in a mature sector, the promotional, operational and fleet-related resources required to deliver our more precisely defined subscription are already endemic in established retail automotive enterprises. The next two articles in this series look at the separate abilities of leasecos and franchised dealer networks to deliver an attractive subscription product at scale.

Grace brings clarity to a chaotic retail automotive sector helping business leaders take more well-informed and impactful decisions.