- Low cost alternative to used vehicle ownership
- Program includes insurance and maintenance
- Monthly mileage capped at 1,500 miles
- Subscriptions start at about $300 per month
Imagine finding a reliable used car that costs $350 a month and includes insurance, license plates, maintenance and all repairs. Best of all, there is no car loan, no lease, no long-term requirement. The consumer can literally cancel the program after just one month.
Sounds too good to be true? A dealer in Reading, Penn., launched the program in June and believes this is the auto industry’s big thing. The consumer pays to drive a used vehicle on a month-to-month basis, the industry calls it “subscription” to differentiate it from buying and leasing.
The used subscription program created for the Tom Masano Dealer Group is aimed at reducing a consumer’s cost to use a car as well as creating another revenue stream for the group.
Compared to Netflix
Johnny Masano, general manager of REV by Masano, mentions Netflix and Apple Music as the inspiration for the program his dealership adapted. Masano had been trying to create a used car subscription program for two years when earlier this year he discovered Clutch Technologies.
“Netflix and Apple Music have taken over ownership of music,” making it available through subscription. “It just seems to be the thing of the future” as well for the car business, he said. A used car subscription eliminates “a lot of the hassles of car ownership. It seems like a product consumers would demand, being able to get a used car with a full warranty, insurance included and not have to worry about being stuck into a long-term car loan or lease.”
The dealership markets used car subscriptions under the REV by Masano banner. The Masano Group sells BMW, Mercedes-Benz, Sprinter, Lincoln and Ford in its new car showrooms. REV by Masano is comprised of mostly high mileage cars taken off their 600-car used vehicle lot.
Month-to-month contract
Used-car subscriptions run on a month-to-month basis and are priced and require a one-time activation fee that varies by class of vehicle. Each subscription covers everything except gasoline — insurance, maintenance, license plates, repairs and a concierge service. The program is available within a 50-mile radius of the dealer’s headquarters in Reading. Subscribers can drive 1,500 miles per month.
Cars and trucks in the subscription program are used but not worn out, said John Masano Sr., president of the Tom Masano Auto Group. He doesn’t expect age and mileage to deter prospective customers.
“The sweet spot is going to may be a 5- or 6-year-old car with 70,000, 80,000 miles. That is a good car for somebody,” said John Sr., Johnny’s father. Each vehicle receives a 150-point safety inspection and is reconditioned.
Subscribers can suspend the program without penalty if a vehicle is not needed. For example, members can use the service for two months, suspend it for three, jump back into the program, later suspend it, and so forth.
Developed by Clutch Technologies
Clutch Technologies, a subsidiary of KBB parent Cox Automotive, created the technology and pricing data. Masano is the first dealer to use the Clutch Subscription Platform for used vehicles.
“We are working with all the data experts inside Cox Automotive, think Kelley Blue Book, Manheim Auctions” and other properties, said Taylor Sandusky, head of business development, Clutch Technologies.
“We worked with them to put together an analysis and basically be able to go to the dealer and say, here is what we think your car is worth down to the features level. Then we advise them on what we think the price point should be,” Sandusky said. Clutch screens driving records, credit references and prequalifies consumers. Clutch created an app to contact REV by Masano and for subscribers to manage their subscription.
First-ever used vehicle subscription service
Subscription car programs are not new, some dealers and brands have been offering programs for a few years. However, those programs are limited to new vehicles requiring most subscribers to pay $1,000, $2,000 or more per month plus a large activation fee. A used car subscription program has not been attempted, this is the first.
REV by Masano’s website lists four price categories. The least expensive is listed as “$300s” and includes such vehicles as a Honda Civic, Toyota Camry and Ford F-150 pickup. The second category is “$500s”, listing a BMW 3 series and Scion iA. The next expensive category is “$600s” with such vehicles as a BMW X1 and X3. The most expensive used car monthly subscription rate is “$700s plus” with such models as a BMW 6 series and Porsche 911 Turbo. Each category has a long list of available vehicles.
The website does not provide each vehicle’s model year, mileage or condition. The consumer must contact the dealership or download the app for details.
Variable activation fee
In addition to the monthly subscription fee, a one-time activation fee is charged. The activation fee may match the monthly payment for the vehicle or it could be as high as double the monthly subscription. For example, say a 4- or 5-year Ford Fusion is available for $350 per month. The subscriber also is charged a one-time activation fee of at least $350, bringing the first month cost to at $700. The subscription cost for the second, third and additional months remains at $350.
Johnny Masano said one of the advantages of the program is subscribers can “switch in and out of vehicles. Let’s say you are Ubering for the weekend, so you pick a fuel-efficient vehicle. Let’s say you are going camping, so grab a Jeep. Let’s say you are going to the beach, so grab a convertible.”
There is no additional fee for switching vehicles within a member’s monthly price category.
Speaking of Uber, Lyft and other ride-sharing businesses, John Sr. said “somebody can get a somewhat inexpensive car from us, know their complete costs, and get into business the next day.”
Replacement for used car ownership
Clutch’s Sandusky believes the month-to-month subscription program is a common-sense replacement for used car ownership, appealing to people who have been stretching their budget to handle a high interest, long-term loan and car-related expenses.
“It is incredibly expensive to get a used car loan for a good portion of America. They sign up for a 6-, 7- or 8-year loan to get that (manageable) monthly payment,” Sandusky said.
“Fifty percent of the market is super prime and prime which is like 3 to 7.9 percent and the other half of the market is 8 to 20 percent [interest],” he said. By comparison, a dealer might get a 4 percent annual rate to finance his used car inventory, a savings reflected in a much lower monthly payment for the subscription program compared to owning that vehicle.
Sandusky is optimistic about the future of used car subscriptions: Dealers are watching REV by Masano, and “I think they will want to do the same.”
