Chase Dealer Services - Setting the Pace Newsletter
News & Stories
Chase Auto tests new dealer floor plan product for subscription services
The Germain Motor Company tests the concept in Columbus, Ohio
While the market is small and new, there is a growing segment of consumers who prefer to access vehicles via new forms of mobility that are more flexible than traditional ownership models.
Subscription services allow dealers to meet this new demand for options by providing consumers access to a fleet of different vehicles. Subscription services can range from a monthly subscription of a single vehicle to a high-end multi-vehicle service—across brands or OEM-specific models—where the driver can swap in and out of vehicles. Dealers often use sophisticated fleet management software to manage these services.
Chase Auto is helping dealers test these new mobility models by offering a floor plan product supported by Clutch Technologies to finance subscription vehicle fleets.
“The auto industry is transforming rapidly,” says Kevin Point, Head of Research & Development for Chase Auto. “Creative solutions and strategic partnerships will be key to staying relevant and profitable as the industry adjusts to new technology and the evolving needs and behaviors of consumers.”
Subscription may deepen relationships with customers
Subscription can serve as an alternative to buying, leasing, renting, ride sharing, or even ride hailing. A fleet of subscription vehicles can support a range of offerings as the dealer tests and learns the best way to serve their customers.
Drive Germain, which launched more than a year ago, offers subscribers access to more than 50 vehicle models across 15 manufacturers with the ability to swap in and out of vehicles based on their needs.
Germain Motor Company has found that about one third of its subscription users are short-term participants who are using the service to see which vehicle they may want to buy or lease. One third live elsewhere and only need a vehicle for part of the year. And the final third want the flexibility of getting into a new car faster than a typical lease.
Originally launched with new vehicles only, Germain has since added certified pre-owned vehicles after learning that “customers want clean, newer technology in the car, but were less sensitive to mileage,” says Jessica Germain, General Manager of Germain Mercedes-Benz.
Making the financials work
Subscription services introduce a new channel to monetize vehicles along with operational impacts as dealers scale their fleet and optimize the service.
“We buy from our stores, sell back to our stores, service and repair at our stores,” says Austin Germain, Brand Experience Manager for Germain, explaining how the program is integrated into multiple parts of the business.
One of the challenges subscription presents is how to address the cost of vehicle depreciation.
“Depreciation is the largest expense of a subscription service, so we consider vehicle mix and carrying cost when financing a fleet,” says Point. “We also recognize that vehicle utilization rates may vary as the service scales and a strong technology partner will be critical to managing and optimizing vehicles.”
Subscription services represent just one way the auto industry is adjusting to technology advancements and evolving consumer demands that include placing more value on mobility than vehicle ownership. Dealers, manufacturers, financial institutions and technology companies must continue to work together to create new pathways to market and innovative ways of helping tomorrow’s consumers get where they want to go.