Few things give as much joy as the arrival of a new car or a new bike in our lives. The sense of jubilation, the feel and the smell typical of a new car fresh out of a showroom is so joyful. But buying and maintaining a car in India, especially for the middle class populace, is an expensive affair. There is a hefty down payment involved, loans, high interest rates and maintenance and running costs too. As your vehicle gets older, its value keeps on depreciating as well. Plus, let us be honest, being with the same car for more than five years car get a little boring. So, there is an alternative to buying, when it comes to owning cars, which is called 'Subscription'. It is much easier, cost effective and a lot less hassle too than actually buying a vehicle. We tell you everything you need to know about subscribing to a car. But, there are downsides too.
Even if you are going for a low cost car, you will end up paying a heavy amount as down payment, be it a car or a bike. But, if you are subscribing, all you will need to pay is a refundable deposit that you can get back once the subscription period is over. For example, if you are buying even a small car, you will have to shell out about Rs. 2 lakh or so as down payment. If you choose to subscribe, all you will have to pay is about Rs. 15,000 - Rs. 20,000. So yes, subscription will burn a considerably smaller hole in your wallet.
If you are buying a car, you will have to finance the purchase and that means you will have to take a loan and repay it in equated monthly instalments (EMIs) along with a high rate of interest as well. The subscription model works out to be more financially viable. Apart from the one time refundable deposit, all one needs to do is pay the monthly subscription charges to the manufacturer. The subscription charge of course differs from car to car. Most companies offer subscription plans starting from 6 months and going up to 36 months. The longer the subscription period, the lesser is the monthly subscription charges. In many cases, the monthly subscription charges come out to be lesser than the EMIs for loan repayment. Most manufacturers have a lock-in period ranging from six months to a year and once the lock-in duration is over, one can either chose to continue to keep the subscription or discontinue. Companies like Hyundai will also offer an attractive price should you choose to buy the car you subscribed.
One of the biggest advantages of subscribing to a car is that there are no hidden costs and you don't have to pay separately for maintenance, insurance renewal, taxes and so on. Monthly subscription charges include all ancillary costs and apart from fuel costs, one doesn't really have to pay anything extra. This is definitely easier, in terms of process and in terms of costs to the subscriber as well. The car company will take of maintenance, insurance costs and so on.
A ZoomCar study says that the utilisation of a personal car is just about 4 per cent. That is a rather low rate of utilisation for a depreciating asset. Most vehicle subscription programs also allow you to share your car with other users if it is lying unused with you. For example, if you decide to go on a vacation for a week or more and your car will be lying unused, you can share the car with other users listed with the manufacturer. Companies like ZAP or ZoomCar allow you to share your subscribed car with others and earn money on the same. So, in a few cases, your monthly subscription rates can be nullified to a significant extent with car sharing.
Once you choose to subscribe, all your needs like servicing, cleaning, maintenance, insurance etc. can be done on a smartphone app. This includes listing your car for sharing and taking bookings for car sharing as well. The digital ecosystem eliminates the need for the customer to visit the dealership, workshop and banks and so on. The need for paperwork is eliminated as well. Again, it makes life easier than buying and maintaining a car.
Subscription works out to be more affordable than leasing in the long run. Leasing usually has a flat monthly payment amount which doesn't include ancillary costs like insurance, maintenance and so on but then the monthly leasing amount is usually lesser than the monthly subscription amount. Plus, subscription has a more flexible lock-in period (minimum 6 months) than that of leasing (minimum two years). The big downside of subscription is that the subscribed car or bike will have yellow registration plates (like commercial vehicles have) while with leasing, you will have the regular black and white registration plates.
The biggest advantage of subscribing against renting is that the car you have subscribed to is available to you at all times. While, the car you have rented, is usually for a very limited time, mostly for a week or so.
Some companies like Zap and ZoomCar have put a cap in term of the service cost that they will bear. Zap has put a cap of Re. 1 per km for hatches and Rs. 1.25 per km for sedans. In case the cost goes up, it has to be borne by the subscriber.
Companies like Hyundai, Nissan and Mahindra offer subscription services by themselves as well along with tying up with companies like ZoomCar, Revv, Myles who offer a decent variety of cars available for subscription. Luxury car manufacturers like BMW and Mercedes offer leasing services rather than subscription and as far as two-wheelers are concerned, so far, only Indian Motorcycle offer a leasing service for select models in partnership with Orix India, who are one of the global leaders when it comes to vehicle leasing services.
