Upscale makes set new trend in car purchasing

Cadillac, Porsche and Volvo offer alternative to financing and leasing

Published: January 2, 2018, 4:30 PM
Updated: November 21, 2021, 3:04 PM

New car handover at the dealership

2018 is bound to be a decisive year as the world hurtles toward the industry-consistent deadline for more electrification in passenger vehicle powertrains, and autonomous vehicles.

The former is causing a shift toward countries that can build electric auto-related components more cheaply, which means that countries such as China and India will become more important for vehicle production. The two were gaining in importance in recent years, but more for the retail end of things — with their combined population, manufacturers were salivating at a chance to grow new-vehicle sales exponentially.

But the coming year will likely also see a shift in the way consumers buy vehicles, with more and more companies setting up online sites where customers can purchase their vehicles and a few offering new “financing” options, whereby consumers basically join a buyer’s club and can pay a monthly membership fee to use the vehicles they need when they need them.

Newer companies have embraced the idea of selling directly to the public, doing away with the distribution dealerships many of today’s buyers have grown up with. Tesla already sells its cars directly to the consumer and Ford has recently announced it will adopt the retail model in China, as a real-world study to see if the model can be used in other countries, though that may prove a tough sell in countries with rigid auto-distribution-channel contracts (remember the headaches when the Detroit 3 had to shutter dealerships as part of their restructuring about a decade ago?).

The “club membership” financing model may be more difficult to implement for mass-producers such as Ford, though, and to date the only companies that have adopted the practice are upscale models such as Cadillac, Porsche and Volvo, and just with limited series — Cadillac and Porsche with select models from their respective lineups, and Volvo just with its new Polestar line — and in Cadillac’s and Porsche’s cases, in limited markets (Porsche in its headquarter city of Atlanta, for example, and Cadillac in major cities such as Los Angeles, Munich and New York, among others).

Registration. insurance, maintenance and cleaning services, and all applicable taxes, are all included in the BOOK by Cadillac monthly fee, as they are in the Porsche Passport, and when a different vehicle is desired, a concierge will drop off the new hire and take away the old one.

The other difference is that Cadillac and Porsche offer the service as option to other forms of financing (purchasing and leasing), whereas that is the only way Polestars will be obtained. In this case, members sign on for a longer period of time, more in line with today’s short-term leasing and financing terms. The only thing the member does is insure it and put fuel in it (or charge it up, depending on the level of electrification).

It will be interesting to see if other, particularly upscale, car companies take up the option in the coming year.