Lease, don’t buy: Carmakers offer a hassle-free option

In various Indian cities, a growing trend has emerged where users opt to “subscribe” to cars instead of purchasing them outright. This subscription model involves paying a fixed monthly sum to automakers for a specified period, offering a flexible form of vehicle ownership. Maruti and Hyundai, the country’s leading automobile manufacturers, have experienced significant interest in subscription-based car ownership.

Hyundai, in collaboration with Gurgaon-based Revv, introduced monthly and yearly subscription plans across its models, witnessing increased demand in cities like Bengaluru, Hyderabad, and Mumbai. Maruti Suzuki India, on the other hand, launched a vehicle subscription scheme in Delhi-NCR and Bengaluru, allowing customers to use a new Maruti Suzuki vehicle without owning it. The subscription program is in partnership with Orix Auto Infrastructure Services India.

This alternative to traditional ownership enables users to drive a vehicle without a substantial down payment, with the monthly fee covering maintenance, insurance, and roadside assistance. While the monthly subscription cost may seem comparable to loan EMIs for outright purchases, it eliminates additional expenses like down payment, registration, and insurance costs.

For instance, the subscription for a Maruti Suzuki Swift Lxi is approximately Rs 14,500 per month. Compared to a buyer taking a loan for the car, the subscription model can be more cost-effective over a certain period. The automakers emphasize that the subscription model targets specific customer segments, such as senior executives changing cars frequently, individuals in transferable jobs, and young professionals lacking savings for a down payment.

Maruti Suzuki India’s Executive Director, Shashank Srivastava, notes that the subscription model is likely to appeal to those who prefer avoiding the hassle of buying and selling cars every few years or those who face challenges with down payments. The three main categories of subscribers include senior executives, individuals in transferable jobs, and young professionals entering the job cycle without substantial savings for down payments.

While the subscription model is currently gaining traction in major cities, automakers believe it has the potential for significant growth in the coming years. Hyundai, offering subscriptions in 20 cities, has witnessed over 4,500 subscriptions since March 2019. Despite being in its early stages, automakers anticipate the subscription model to become a substantial phenomenon over time.

The shift toward subscription models also benefits automakers facing sales pressure, providing an avenue for customers to access vehicles without the need for outright purchases. As the subscription model gains popularity, it is expected to lead to bulk orders, providing a significant business boost for both automakers and their leasing partners. The market is anticipated to mature in 2-3 years, with the possibility of a fleet of used cars becoming available for subscription at lower monthly fees.