The latest Australian new vehicle sales figures show the automotive industry is still feeling the effects of COVID-19, with new car sales down almost 22% year-on-year to September 2020.
While new car sales continue to plunge, car subscription services, such as Carbar and Carly, have reported significant growth in recent months.
So, what exactly are car subscriptions, who do they suit, and what are some of the pros and cons of these services? Let’s pop the bonnet and take a closer look.
- What is a car subscription?
- How do car subscription services work?
- What is the difference between a car subscription and a car sharing service?
- How do car subscriptions differ to car leasing?
- Who do car subscriptions suit?
- What car subscription services are available in Australia?
- Can a car subscription save you money?
- What are the pros and cons of car subscription services?
- What should I consider in choosing a car subscription service?
What is a car subscription?
A car subscription service allows you to pay a recurring fee to access a specific vehicle for a certain period of time (such as month-to-month), instead of buying a car or leasing it. These services may be offered through a car manufacturer or dealer or through a third-party provider, such as Carly or HelloCars, according to CarAdvice journalist Susannah Guthrie.
Carbar’s co-founder and CEO, Des Hang, told Business Insider Australia that the flexibility, variety and ability to pay as you go provided by the service was working to their advantage during the COVID-19 crisis, with the company growing more than 160% since the beginning of the year to June 2020.
Carbar’s competitor Carly, operated by Collaborate Corporation, has also reported an almost 80% year-on-year growth to June, along with an almost 60% increase in new enquiries during May, 2020.
While the economic uncertainty of the pandemic may have led some to embrace what has been called the ‘Netflix for cars’, these subscription services are still fairly new to the Australian market and are not without their limitations.
How do car subscription services work?
Each car subscription service will differ in how it operates; however, most third-party services allow you to sign up online; choose a new or used car from a range of makes, models, sizes and powertrains; then make a weekly or monthly payment to subscribe to that car – as you would do with a monthly or weekly fee for Netflix, Stan or Spotify. The price you pay to subscribe will typically include the cost for servicing, insurance, registration and roadside assistance, but may exclude the cost of petrol and other additional usage fees (e.g. tolls).
CarsGuide said standard car subscription plans will generally allow you to either keep the car you have at the end of your subscription period or return the car and cancel the subscription, usually subject to a notice period (such as two weeks). Some providers may also allow you to switch the car you have with another during or at the end of the subscription period (such as swapping from a hatchback to an SUV), but this may come at an additional cost.
What is the difference between a car subscription and a car sharing service?
Car sharing services, such as GoGet, Flexicar and Car Next Door, generally allow users to access different cars in their area for shorter periods of time (such as by the hour or the day) and then to return it, whereas with a car subscription service you have exclusive access to one vehicle for a longer period of time.
The cars you can access through a car sharing service may be owned by companies such as GoGet or by people in the area who want to rent out their own vehicles for certain periods of time, through services such as Car Next Door and DriveMyCar.
How do car subscriptions differ to car leasing?
With a car lease you will generally have to enter into a set-term contract to lease the vehicle (usually around two to five years) and typically have to wait until the lease term has ended to be able to return the car or upgrade to a newer model. If you cancel before the lease term has ended you may face extra charges.
→Related article: Novated car lease: How does it work?
With a car subscription, your minimum commitment may be as short as one week or one month, and you can usually cancel the subscription at any time (subject to a notice period) or have the option to swap to a different car as your needs change.
Who do car subscriptions suit?
Ms Guthrie said car subscription services may suit people who:
- Don’t want to take on the full annual insurance and registration costs associated with owning a vehicle.
- Want to trial a specific car model before committing to the full purchase.
- Want the flexibility to access a variety of vehicle types over a period of time.
You may also be interested in reviewing traditional hire car options in Australia.
What car subscription services are available in Australia?
Below is a snapshot of some of the car subscription providers currently in operation in Australia, sorted alphabetically by name. Information has been sourced from providers’ websites and CarAdvice. This is not an exhaustive list and should be used as a general guide only.
Sydney, Melbourne and Brisbane.
How does it work?
You can sign up to create an account for free online, and from there you can choose a car and pay to secure the subscription. You can arrange to pick up the car from one of Carbar’s dealership locations, or have it delivered to you for free if you live within 50km of the Brisbane, Melbourne or Sydney CBD (delivery is available for longer distances for a fee).
Pricing starts from $124 per week for a 2016 Nissan Pulsar and goes up to $616 per week for a 2018 BMW X5, as per the cars available on the platform at the time of writing.
The weekly subscription fee includes maintenance, servicing, insurance, registration, roadside assistance and warranty (even if the manufacturer’s warranty has ended).
There is a non-refundable upfront fee taken at the beginning of the subscription. It is determined by Carbar based on the market value of the vehicle (excluding government costs). This fee starts from around $900, but varies depending on make and model.
Carbar also has a new car levy fee that is payable for some vehicles.
There is no cancellation fee (however, the unused portion of your fortnightly payment is non-refundable) and no minimum or maximum term.
- Two weeks notice to cancel or change your subscription
- 500km per week or 26,000km per year limits (excess kilometres are billed at $0.14 per km)
To apply you need to provide:
- 100 points of identification
- Proof of your residential address
- Bank statement(s) from the last 90 days showing proof of income and ongoing expenses
- A copy of a valid driver licence (either domestic or international)
- Payment for the upfront fee
You will also need to complete a driver declaration.
Please note that due to Government restrictions during the COVID-19 pandemic, orders for Victoria will be limited to selected Carbar stock until further notice. Due to a high current volume of orders, delivery promises are significantly longer than usual – allow for up to six weeks.
Sydney, Melbourne, Gold Coast and Brisbane.
How does it work?
You can sign up for a Carly car subscription via their website or by going through the Carly button on a participating dealer’s website. From there you then need to choose a subscription level. There are three subscription levels depending on the amount of mileage and the insurance excess you need, but all plans offer the ability to switch cars each month. Once you have chosen your subscription plan and have fulfilled the eligibility requirements, you can then pick up your car from a participating dealer.
Pricing starts from $115 a week (depending on the plan chosen and vehicle availability), but can climb to more than $400 a week for a luxury car.
The car and plan you choose will determine your weekly subscription fee.
- Entry level plan – From $115/week
- Medium level plan – from $133/week
- Large level plan – from $147/week
The weekly subscription fee includes the cost for insurance, registration, maintenance and roadside assistance and is taken every 15 days. There is no deposit required.
- Minimum subscription period of 30 days
- 30 days notice in writing to cancel your subscription
- Entry level plan: 1 switch per month, $3,000 excess damage liability, 1,000km per month, excess km charged at $0.30 per km
- Medium level plan: 1 switch per month, $2,000 excess damage liability, 2,000km per month, excess km charged at $0.15 per km
- Large level plan: 2 switches per month, $1,000 excess damage liability, 2,800km per month, excess km charged at $0.10 per km
To subscribe you must be over 21 years old, have a full driver licence (plus a passport or Medicare card to confirm your identity) and a valid credit card. You will also need to consent to a credit check.
South-East Queensland (expanding to NSW and Victoria soon).
How does it work?
You can apply to subscribe on the FlexiGO website. Customers in the serviced areas can have their vehicle delivered to their home or can pick it up from the FlexiGO dealership in Brisbane.
Pricing starts from around $159 a week for the most affordable car available and can go up to $380 a week for the more expensive sports or luxury brand vehicles.
The weekly membership fee includes registration, insurance, servicing and roadside assistance.
You must also pay a $250 non-refundable membership fee at the beginning of the subscription.
- Minimum term of one week
- One-week cancellation notice required
- You can swap the car for free every three months or pay $150 to swap at any time
- Available for all Australian licence holders, including ride share drivers
FlexiGo require the following documentation to complete an identity check:
- Australian Driver Licence and Australian Passport or International Passport
- Australian Medicare card or Citizenship Certificate or Immigration Card
You will also need to consent to a credit check.
Sydney. Customers from Queensland and Victoria can also subscribe, but must pay a higher security deposit and delivery fees if they cannot collect from Sydney.
How does it work?
You can apply online to subscribe. From there you can book any available car for next-day collection from HelloCars in Sydney (near Parramatta) using a refundable deposit.
There are three subscription plans to choose from (Economy, Cruise and Explorer) that have different pricing, terms and conditions.
Pricing starts from $119 per week for the most affordable car on the Economy plan.
Included in the weekly membership fee is registration, servicing and maintenance, insurance, warranty and roadside assistance.
Economy plans include an upfront joining fee of $399. Cruise and Explorer plans have no upfront fee for new customers.
A security bond of at least $500 and up to $2,500 is also required, but is fully refundable when the vehicle is returned to HelloCars in the same condition. You can reduce your security deposit amount by paying a non-refundable weekly $25 Assessment Premium, which is payable for the duration of the subscription.
- Minimum subscription term: Economy 120 days, Cruise 45 days, Explorer 30 days
- 21 days notice to cancel (early return fee may apply if you return the vehicle before the minimum subscription period)
- Swapping cars available with at least 21 days notice: Economy pay to swap for $350 fee, Cruise and Explorer free to swap every 90 days (there is a fee if before the 90 days)
- Mileage limits – Economy includes 175km/week, Cruise 450km/week, Explorer 650km/week ($0.33/km additional weekly kilometre usage fee)
To subscribe through HelloCars you must meet the following criteria:
- Hold a valid Australian (P2 or above) or equivalent international driver licence that has not been cancelled or suspended in the past three years
- Be at least 21 years old and not over 75 years old
- Not use any subscription vehicle for the purpose of operating a ridesharing service
- Not have had any criminal, drink driving or drug convictions in the last five years
- Not have made more than one motor insurance claims in the last three years
Loopit (formerly known as Blinker)
Over 1,000 dealers nationally.
How does it work?
Loopit is a software platform allowing car dealerships and organisations to offer subscription services to customers. You can apply to subscribe by visiting a participating Loopit car dealer online or in person. From there you can choose a car and a subscription plan, and then pay week-to-week as you drive.
Pricing starts from $129 a week but varies from dealer to dealer. Each dealership is free to set their own car subscription plans and pricing.
The weekly subscription fee includes registration, insurance, servicing and maintenance, vehicle warranty and roadside assistance.
- Minimum terms of at least 30 days
- Notice periods for cancellation range from seven to 21 days, depending on the provider
- You can earn free swaps (e.g. change your car to another car) while you drive or pay a fee to swap at anytime
Subscribers must be over 21 years old. Depending on the participating dealer you may be allowed to subscribe to drive for the purpose of operating a ridesharing service.
Brisbane, Sunshine Coast and Gold Coast.
How does it work?
You can sign up online and once approved, can choose which car and subscription plan you want to book. There are three different subscription plans to choose from – Starter, Value and Premium. Each plan has different pricing and terms and conditions. Once you have chosen your plan and car, you can pick up your car from a Motopool dealership.
Pricing starts from $154 per week for the Starter Plan and goes up to at least $224 per week for a Premium Plan. The Value Plan is offered from $194 weekly. Additional costs to the weekly fee will apply depending on the car you choose.
Your weekly subscription fee includes registration, insurance, servicing, maintenance and roadside assistance.
A security deposit of at least $500 is required under all plans.
You will also have to pay a one-off $250 joining fee under a Starter or Value Plan (there is no joining fee for a Premium Plan).
- Minimum terms: Starter Plan – 3 months, Value Plan – 3 months, Premium Plan – 2 months
- There is a 7-day notice period for cancellation provided you have completed your minimum term
- Mileage limits: Starter Plan – 250km/week, Value Plan – 500km/week, Premium Plan – 750km/week ($0.30 charged per additional km)
- Changing cars: Starter Plan – $300 swap fee, Value Plan – free swap every 3 months, Premium Plan – free swap every 2 months (three days notice required to change cars)
To be eligible to sign up to Motopool you need to:
- Be at least 21 years old and not over 75 years of age
- Have held a driver licence for a period of no less than 12 consecutive months
- Have no history or suspensions or cancellations of any driver licence in the last three years
- Have not made two or more motor insurance claims in the last three years
- Have not been bankrupt at any point in the last seven years
- Provide Motopool with the necessary documentation to approve your membership, including 100 points of ID (e.g. driver license, passport, Medicare card)
- Provide Motopool with any documents that are reasonably requested (such as photo IDs and proof of address)
- Provide Motopool with an acceptable and valid bank account to set up a direct debit
Can a car subscription save you money?
Many car subscription services are promoted as an affordable alternative to owning a car, with the savings that can be made when it comes to car running costs and depreciation touted by supporters. However, whether you can save money by using a car subscription service instead of buying a car outright will really depend on your intended usage, according to Ms Guthrie.
If you regularly use the vehicle you subscribe to, Ms Guthrie said you may be able to make up what you spend on an upfront joining fee or weekly/monthly subscription fee through the potential savings available on the car’s depreciation, insurance, registration and regular servicing costs (which are often bundled together in the one subscription fee).
However, it may be worth taking the time to calculate the yearly cost of a car subscription against the upfront and yearly ongoing costs for owning a car outright, or under a lease, to gain a better idea of how the costs for each option stack up against the other.
“If you do your research, it [car subscriptions] may work out to be an economical transport option,” Ms Guthrie said.
What are the pros and cons of car subscription services?
It’s important to understand both the potential advantages and disadvantages of using a car subscription service before signing up. Some pros and cons include:
- All-inclusive regular fee: most services include registration, insurance, servicing and roadside assistance costs into one regular weekly or monthly subscription fee. This means these services will also handle all the paperwork for registration and insurance, which may take a lot of the admin work out of using a car.
- Flexible terms: most services only require two weeks notice if you want to cancel your subscription, and also allow you to switch between cars as your needs change.
- Online sign up and delivery: Many providers have an online portal that can make it easy for customers to scroll through the different vehicle options available, and then apply to subscribe. Some services also provide delivery of the car to a customer’s
- Try a car before you buy: these services can allow you to try a model or type of vehicle before committing to buying one outright.
- Limited model choices: car subscription services through manufacturers or dealers may limit the type of vehicles on offer.
- Limited availability in some areas: car subscription services are still in their infancy in Australia and may not be available in your area, particularly if you live outside of the eastern states or in rural or regional areas.
- Usage/mileage limitations: your subscription may restrict how many kilometres you can travel, who else can drive the car, and using the car for business purposes.
- No modifications: as you don’t own the car, you cannot make any modifications to it (such as tinting the windows or adding roof racks).
- Paying depreciation on a car you don’t own: the weekly or monthly subscription cost may factor in depreciation (the fall in value in a car from age and wear and tear), which means you are paying depreciation for a car you don’t own.
- Additional fees and charges: while the monthly fees for a service may look attractive, there can often be a pricey joining fee, security deposit and cancellation charge you’ll need to factor in, and accessing some models can add more to the price than others (for example, a Toyota often requires a different subscription fee to an Audi), according to Ms Guthrie.