After Tiffany Ford McLemore’s car was destroyed in an accident, the single mother of four needed a new one. Quickly.
Yet she didn’t want to take out another auto loan and so she researched her options. That’s when she stumbled on Flexdrive (proud partner of AmeriDrive), which calls itself Netflix for cars, and is one of several new companies offering vehicles through a subscription.
“I love the flexibility,” Ford McLemore said. She now drives her children to sports and band practice in a 2018 Volkswagen Jetta.
Automakers, dealers, and start-ups now offer car subscriptions as an alternative to the traditional financing model, which increasingly involves going into significant debt. The services typically charge a flat monthly fee that bundles together all the disparate expenses of car ownership, including insurance and maintenance.
“There’s a reason consumers are gravitating toward these services — what’s out there right now isn’t very good,” said Gary Hallgren, president of Arity, a technology start-up founded by Allstate.
The average monthly car loan payment is $533 for new cars and $397 for used vehicles, according to Edmunds, which provides information on the auto industry. The typical person takes nearly six years to pay off their car loan — and nearly a third of the trade in their vehicle before they’ve paid it off and pick up another loan.
People are overwhelmed by modern life and its seemingly infinite choices, said Philip Reed, an automotive writer at personal finance website NerdWallet. “If someone says, ‘Here’s your car. It’s $350, and that pays for everything,’ it’s appealing,” he said.
“The millennial generation grew up in a world of subscriptions, and they don’t feel it’s odd at all to consume an automobile in the same fashion,” people said.
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