Subscription Model As A Financial Management Tool

Sakshi Vij
03 Nov 2022
01:00 PM
3 Min Read

Subscription-based models are hassle-free, economical, and flexible and hence are gaining popularity among a large pool of individuals.

Vehicle subscription

One of the fundamental decisions people need to make while managing personal finance is the decision to subscribe or buy. As the name suggests, this dilemma refers to analysing the costs and benefits of owning or taking up a subscription-based plan for enjoying an asset. Subscription models are hassle-free, economical, and flexible and hence are preferred by many individuals. 

Having a car that suits the requirements of an individual (and family) requires a significant amount of costs in the form of upfront payments, repairs, maintenance, insurance costs, and other applicable taxes. Hence, individuals often have to either compromise with the available option or spend out of their capacity to own a vehicle, affecting their personal finance balance. This is where subscription models step in. 

Understanding That A Car’s Cost Is Never An Investment

Whether buying a new or a second-hand car, always consider that any cost incurred in purchasing a vehicle is not an investment. A car is a depreciable asset, and its value reduces each year. 

However, a subscription-based model is better than having a second-hand vehicle. Why? Because the customer has to spend a lower amount than they would shell out to buy an old car. Additionally, the model provides the freedom and luxury of choosing from a wide range of vehicles without the hassles of owning one. 

Financial Preferences Of GenZ

There has been a shift in the consumption patterns of users. The trend has shifted from the traditional save and buy alternative to renting an asset. Even though buying and subscription have their financial advantages, the overall popularity of different subscribing models underlines that the consumers are more interested in the benefits than the risks and costs. 

Some of the most important benefits include no maintenance costs or repairs, no regulatory taxes, no down payments, and a higher level of flexibility. Some prominent examples of subscription-based services are Kenko Health, Amazon Prime video membership, and Country Delight. 

While Kenko covers healthcare expenses across OPD and hospitalisation as part of the subscription, Amazon Prime offers a host of benefits like free shipping, ad-free music, and access to various channels. Country Delight offers fresh cow and buffalo milk, curd, ghee, paneer, and fresh bread and eggs under a daily subscription model. 

Myles Cars subscription model
Subscription models offered by various companies intend to meet the needs of a wide range of users. 

Shift Towards Car Subscription: Multiple Benefits Of Subscribing To A Vehicle 

In addition to the benefits mentioned previously, various other factors are crucial for an individual to decide in favour of subscription-based car rental models. 

Zero Down Payments: Whether buying a car through loan financing or out of savings, a large amount of money (depending on the chosen car) must be spent. With subscription models, consumers can get their hands on a vehicle at a low cost compared to a new car’s financial burden with zero down payment. 

Flexibility (pay as you use): A user needs to pay car loan EMI even when the vehicle remains unused (such as during lockdowns). However, the subscription model gives them the flexibility to pay only for the period of usage. Hence, if a consumer needs an SUV for six months, he pays only for that duration. Such an arrangement is quite nascent for the Indian market. However, due to their growing popularity, several automobile companies have started offering subscription-based models.

Elimination of loan-related hassles: Since the monthly subscription commitment is relatively lower, the user would not have to avail loans or credit facilities for owning a car. Hence, loan-related issues such as foreclosures, penalties on late payments, or down payments would not be applicable.

Complete transparency: The subscription model provides 100% transparency as the entire cost for a given period is decided and communicated to the user at the beginning. Most models cover general maintenance and repair costs. Hence, the issue of incurring hidden expenses does not arise. 

Summing Up

Subscription models offered by various companies intend to meet the needs of a wide range of users. Besides helping in saving a significant amount of money, these models are effective because they provide considerable freedom in choosing a car and the tenure for which it is used. 

While the market size of subscription-based ownership models is already huge in developed countries like the UK and the US, Indian consumers, too, are shifting towards subscribing to car rather than buying them. 

It is simply because the younger generation realises that they get weighed down by the associated problems in addition to the convenience of smooth mobility. Therefore, from a cost-benefit and capital budgeting perspective, subscription models are proving to be the best alternative for users.

About the Author: Sakshi Vij is the Founder of Myles Cars. Founded in 2013 by Sakshi, Myles Automotive Technologies was launched with an objective to provide an affordable, flexible and convenient alternative to vehicle ownership through subscription and sharing solutions. It is a one-stop destination for both – self-drive cars for your road trips and a car subscription for daily travels – without any commitment.

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Sakshi Vij, Myles | Making Vehicle Ownership Accessible, Affordable & Convenient

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