New vehicle subscription services claim unrivalled flexibility

This article was first published in the July digital edition of Fleet News.

Multinational rental company Sixt is expanding its services into the car subscription market with the launch of Sixt+.

It marks the first phase in a global roll-out of services currently offered in its home German market, including car sharing, flexible leasing and ride hailing.

Sixt joins the likes of Jaguar Land Rover, Free2Move, Leasys and GB Car Leasing in entering the subscriptions market.

Stuart Donnelly, global sales director, joined the business in 2018 with a brief to develop effective and credible mobility alternatives to car ownership in the corporate market.

Development plans were knocked slightly off track by the coronavirus pandemic, but Sixt is now ready to launch its car subscription service to fleets as a “low-cost alternative to leasing”.

Donnelly said: “We are seeing behavioural changes (due to coronavirus) with people working from home and improvements in technology and equipment. The productivity gains from not travelling are exceptional.”

This lays the foundations for a new, more flexible subscription service targeting both private customers and businesses, he believes.

PUBLIC LAUNCH LATER

Sixt+ launched in Germany a year ago and is now available in the UK for corporate clients, with a full public launch later this year. Discussions are underway with a number of potential customers.

Two agreement terms are offered – six months and 12 months – although this will expand to include three and nine months in due course.

Sixt claims pricing is on a par with leasing, particularly for the 12-month term, with a flexible monthly termination option at no penalty charge. Everything is included except fuel.

“We’ve done a lot of benchmarking and we’ve ensured that our product is priced competitively compared with traditional leasing. And it’s all-inclusive,” Donnelly said.

“We are seeing demand from the younger generation, who are not driving as frequently, as well as the move towards urbanisation, the desire to reduce emissions and an increase in multimodal distribution. Covid is accelerating trends that we were already seeing.”

The service, booked and managed via the Sixt+ app, is only available on cars, although Sixt has seen huge growth in its van fleet and doesn’t rule out adding light commercials at a later stage.

“We are optimistic about growth – our expectation is very big,” Donnelly said. “If you can get a premium car that you would’ve leased for four years on a subscription that allows you to change that car on a six-monthly or annual basis so you can have the latest model with the latest technology and it costs the same as leasing, why would you lease?”

The company is also piloting MobiFlex which allows customers to swap cars mid-term for a changeover fee. Annual membership has been set initially at £200 with a daily rate based on the car category.

However, in a move likely to boost the scheme’s appeal with company car drivers, Sixt has agreed a special dispensation with HMRC for a benefit-in-kind (BIK) per day model instead of the usual rule that requires a period of 30 days of unavailability.

Donnelly explained: “In case you have no car for some days, you don’t pay the daily rental charge and, moreover, the BIK you pay is based on the car you have – so no car, no pay. If, for example, you only have a car for 10 days of the month split across different periods in any one month, you only pay a third of the normal monthly BIK.”

Sixt is piloting MobiFlex now with corporate customers to better understand the level of utilisation of users in different markets and at different times of the year. This will help it to fine-tune the pricing.

“Sixt+ could be a stepping-stone to MobiFlex if you don’t need a car every day,” Donnelly added. “We expect people to go from leasing to Sixt+ and then, when they understand the flexibility, potentially move to MobiFlex.”

Car subscription services are gathering pace among suppliers and manufacturers keen to offer businesses greater flexibility when funding vehicles.

FCA finance captive Leasys joined with Drover last year to launch a subs service to private customers, while PSA’s Free2Move is expected to bring Car on Demand to the UK later this year after a successful 12-month trial in France.

ROLLING CONTRACT

Based on a rolling contract, Car on Demand includes one vehicle change per year, plus insurance, servicing, maintenance and breakdown assistance.

While not able to confirm any details, PSA director – fleet and used vehicles Martin Gurney said: “The ambition (for Free2Move) remains to offer a range of solutions for fleet and retail customers that are either complementary or substitutional to traditional car ownership.”

Meanwhile, Jaguar Land Rover announced its Pivotal subscription service this month which, like Car on Demand, allows private and corporate customers to swap models during the year. The Land Rover Discovery and Discovery Sport, Jaguar F-Pace and I-Pace and all four Range Rover models are included, with the new Defender due to be added after its market launch together with two new plug-in hybrid electric vehicles: Discovery Sport and Evoque.

Pivotal membership costs £550. Cars are refreshed every six months, but members can swap sooner for a fee. All cars are highly specced and less than two years old.

Vehicles are placed in four categories – Blue, Indigo, Violet and Ultraviolet – with the monthly rental starting from £750 (Blue) for a Land Rover Discovery Sport, Jaguar F-Pace or Range Rover Evoque.

A Range Rover Velar or Jaguar I-Pace is available for £1,150 (Indigo) per month; a Range Rover Sport is £1,350 (Violet) and a Range Rover £1,600 (Ultraviolet). 

The monthly fee includes manufacturer warranty, roadside assistance and comprehensive insurance.

Leasing brokers are also entering the fray. Caasta is GB Car Leasing’s attempt to “disrupt the business car market” with an all-inclusive car subscription service which includes a sale and leaseback offer for existing company cars. It sits alongside a new salary sacrifice scheme for employees.

All Caasta cars are less than 12 months old and will have travelled fewer than 12,000 miles on delivery. The monthly subscription includes fully comprehensive insurance, road tax, SMR, breakdown recovery, accident cover, glass repair and replacement tyres.

Contracts are on 89-day (three-month) rolling agreements, with a penalty-free option of handing back the car after the first three months with 14 days’ notice. Members can also swap cars every three months.

ZERO FEES IN FOUR YEARS

Annual membership fees start at £700 for compact cars rising to £1,200 for large family cars. This reduces over the next two years to become zero in year four. Monthly subs start at £495 (e.g. a Mini hatchback or Renault Captur), rising to £695 for a Peugeot 3008 or BMW 3 Series. Caasta currently
operates a fleet of 50 cars.

Caasta chief executive Mike Minahan said: “Our aim is to offer businesses a realistic alternative to traditional long-term finance contracts and the big upfront payments demanded by vehicle leasing providers. In these uncertain times, the Caasta fleet solution means one less thing for business leaders to worry about – just add fuel or charge and leave the rest to us.”