Being locked into a car contract may not be the most flexible option as lifestyle changes impact which vehicle you want and need over time. Subscription anyone?

In a recent study carried out by UK-based car subscription and insurance company, Wagonex, it was concluded that more than nine million people would consider car subscription in the future.

The study, which surveyed a sample of more than 2,000 people within the UK, also showed that 6% of respondents were familiar with car subscription with 32% saying that after learning more about subscription services they would consider using them.

Car subscription services such as the ones offered by the company offer drivers a flexible alternative to leasing, allowing them to have a vehicle on short-period rental from one month to a year. The service also allows drivers to swap or return a vehicle at any time.

We spoke to Toby Keron, CEO of Wagonex to learn more about this research and to discuss what the potential future of car leasing would look like.

Toby Keron

Just Auto (JA): Could you tell me a little bit about the background of the company?

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Toby Keron (TK): My dad’s first advice to me was to buy a house and invest in the house and don’t do anything with your money, so I went and bought a car. I’ve always loved cars, so it’s always slightly frustrated me that you are in such a long commitment to either buy or lease one.

Life changes a lot. If you’re single and then you get married and you buy something sensible and then children are around the corner – if you’re tied into a car for the long-term then it’s a very expensive business jumping in and out of different cars.

I wanted to find a way for it to be more flexible. Six years ago, the concept of subscription was way too early for the market, both automotive and insurance. Just before the pandemic, subscription started to grow significantly, and it has now been growing rapidly over the last 12 to 18 months.

If you’re tied into a car for the long-term then it’s a very expensive business jumping in and out of different cars.

What are some key insights from the recent research that the company has published?

There’s always an education around a new product and subscription is new. But we’re still seeing with some of the older legacy products, like a PCP contract customer, a large portion of customers still don’t really understand those products, too. There’s a lot of work that needs to go into explaining all forms of car finance to customers across the board.

That came up in our surveys, it’s modelled from a survey of 2,000 people but if nine million people would be interested in subscription, around half a million would choose subscription as their first choice. It’s clearly something that customers are interested in finding out more about. As we explore all other financial products, we can see that if you look at the total cost of ownership (TCO) of the vehicle on a monthly or yearly basis, subscription is not dissimilar to all other products.

If you look at PCP contracts, the customer doesn’t ever own that car until they sign or pay the bubble payment at the end of the contract. A very small proportion of people actually pay that bubble payment, so people are already used to not owning vehicles, they just don’t know it. They’re already used to subscribing to vehicles or rolling into the next one, they just don’t see it as a subscription product just yet.

I don’t think we’re a long way away from consumers beginning to understand that it’s not a million miles away from what they’re already used to.

I don’t think we’re a long way away from consumers beginning to understand that it’s not a million miles away from what they’re already used to.

What is included with a car subscription with Wagonex?

You can choose any car with any engine; petrol or diesel, EV, small, medium, large, low-, medium- and high-end. We haven’t restricted the supply of vehicles to one engine type. We know that customers still need a choice. There is a large percentage of customers that already want hybrid and EV vehicles, but over 40% of customers aren’t ready so we offer them a full range of different products to give them that choice.

From landing on the platform, you sign in with your name and an email address and choose your car. It’s an entirely digital customer journey where we can verify the customer and ability to pay for the car. I think it’s important to note that the FCA [UK’s financial regulatory authority] are supporting the growth of subscription and trying to inform the customer as much as possible using the likes of consumer duty. We as a business have to be fully transparent to customers, and we know that we need to make sure the affordability is key.

Through the customer journey we set up the first payment and all subsequent direct debits through the journey as a digital contract signature. We give you a bespoke insurance price so everything you would ever need to subscribe to a vehicle is taken care of in five minutes. Within the journey we can give you an answer or our suppliers will give you an answer very quickly.

We have a panel of suppliers, and they will liaise with you in terms of whether you would like to go and pick it up from either dealer, lease company, OEM or they will arrange delivery to you. We’re moving from more of a web-based solution to a mobile-first; we’ve seen the evolution in the platform from web-based to mobile responsive to now mobile-first, so seeing the customers changing their ways that they’re using the platform sits perfectly aligned with where we see the business going.

How do you see the subscription market in three to four years’ time?

I think we will see every single manufacturer having a subscription offering for their customers. I think that sits in line with the agency model that is coming into the space. I think there’s obviously been some discussions as to how; there are different versions of the agency model, but I think subscription supports that.

I think you’ll see lots of dealers having their own subscription model, too: The dealership branded subscription model, because it’s another financial product that they can offer their customers.

I think that the younger generations are less keen to own things and much more aligned with the European approach

I think you’ll see it as a mainstream product that will be on its way to overtaking the likes of leasing and PCP. As soon as more customers find out about it, they will realise that they don’t need to pay heavy upfront deposits for PCP contracts and leasing contracts.

I think that the younger generations are less keen to own things and much more aligned with the European approach where it’s so difficult to get on the housing market. They’re naturally more used to renting things. I think that will lend itself to cars.