14 Feb 23

Car subscription models are thriving in Australia

Australia may seem relatively isolated geographically, but in terms of fleet efficiency, the needs and challenges are no different than the rest of the world. The local MaaS market is well aware and already changing the posture of car subscription services with innovation and versatility. 

According to the most recent Australian Corporate Fleet Insights report, the pandemic has brought a stalemate to fleet growth, which has increased only 2% since 2020, reaching a total of 2,494,000 vehicles. But despite the supply chain disruptions driven by the pandemic, the reports note that fleets operating with 20-49 vehicles have increased by 8% from 2020. 

Figures presented by car subscription services show the dramatic change during the pandemic towards car-ownership: 

  • A study by Carly in 2020 revealed that 38% of Australians would choose a car subscription for their next ride,
  • Loopit says as of July 2022, 24% of Australians don't own a car, while 81% would choose a car subscription

The latest Australian Corporate Fleet Insights report, released by Australian Fleet Management Association (AfMA) and Australian Counselling Association (ACA), wraps the priorities of fleets in 2022:  

  • Reducing operational costs
  • Improving delivery times,
  • Increasing fleet efficiency

Evolving car subscription models 

Carly, one of Australia's leading car subscription services since 2019, answers the demand of a wide variety of customers by offering rental cars by the hour, weeks or up to two years. On average, the period of subscriptions is five and a half months, according to The Market Herald. 

For fleets, Carly offers the "Hybrid Fleet Model", which enables fleets to switch between a fleet vehicle and a third-party vehicle, allowing fleets to optimise their costs accordingly to the market conditions they are exposed to. Thus, clients can walk away from traditional methods like finding a used vehicle with the best discount but can benefit from vehicles from OEMs, dealers and fleet management companies. 

While upgrading the car subscription models for fleets, Chris Noone, Carly's CEO, says they're "trying to educate the market." Talking to Fleet Auto News in 2021, Noone said that traditional car ownership based on fixed periods becomes costly when things need to change, while many people still need to understand the true cost of car ownership. Thankfully, the 81% appearing in recent studies is a massive positive for the market. 

The Australian market is booming

Companies providing car subscription and fleet solutions are in full flight in Australia, offering fully-fledged car subscription packages to end users, businesses and fleets, such as Interleasing, ORIX and Custom Fleet. 

ORIX and Custom Fleet, offer novated leasing, in which employees can hop in the vehicle of their choice as all the costs are covered in a salary package. Interleasing, like ORIX and Custom Fleet, offers mostly new models, while the variety is limitless among the providers. Driva, on the other hand, matches clients with over 30 lenders according to their preferences. 

Carbar has more than 600 options, while Simplr has over 1,000, including many brands. Karmo has a wide range of models in its fleet, including cars from Hyundai to Polestar. So, if you want to drive one, how it works? Which Car explains (as if in 2020): You want to rent a new Maxda CX-5 with leather seats. For an up-front fee of 169$ and a weekly cost of around 270$, you get to drive the $33,990 car (in Australian dollars). 

Huge bundle of benefits 

According to Loopit, the car subscription as an ownership model will hit a volume of $1.6 billion by 2026. Additionally, the number of car dealers willing to integrate subscriptions to their services jumped 52% during the pandemic, says Loopit. Why? Here are the reasons: 

  • Offers a huge variety of cars, applicable for any budget. 
  • One weekly payment covers all costs, from fuel to insurance.
  • Owners can easily change their cars after a very short period. 
  • No fixed contracts and long-term commitment to a vehicle.
  • Businesses have the flexibility to change vehicles whenever they need,
  • Customer and fleet-focused approach significantly helps reduce cost and improve efficiency,
  • Flexible car subscription models also support electrification through the allocation of savings. 

Higher efficiency satisfies drivers and reduces operational costs. Yes, Australia is on the right track. 

Image: Shutterstock

Authored by: Mufit Yilmaz Gokmen