Flat Fees for Fleet Asset Flexibility?

As drivers and fleet professionals explore the possibilities and realities of vehicle subscription models, they’re in good company. Fleet management organizations also are kicking the tires of the concept – including how it might eventually apply to utility fleets.

Under the subscription model, subscribers have access to vehicles on demand, often with insurance and maintenance included, and can switch out vehicle models, too.

Eric Schell, product manager for driver tools at Element Fleet Management (www.elementfleet.com), and Jayme Schnedeker, Element’s director of fleet products, said they are in discovery phase with the idea and looking to Element’s experience with car sharing for cues.

“For companies like us, as well as for manufacturers, the question is, where do we fit into all of this?” Schnedeker said. “How can we provide services for our core customers that make financial sense for them?” The subscription model provides flexibility in areas where there hasn’t traditionally been any, he added, and with individual consumers increasingly using services such as Uber and Lyft, those expectations of convenience are being transferred to work life.

Traditional fleet pools and micro car-sharing markets give fleets a taste of multiple drivers using one vehicle fractionally, Schell said. Even so, he believes, adoption of the subscription model in a broader sense would require “a fairly significant cultural change of how our customers are looking to do business today.”

In addition, a variety of questions are yet to be answered: How long would a fleet need to keep a vehicle before swapping it out? What if a fleet needs immediate access to a particular type of vehicle, but it’s unavailable? What type of maintenance should be included in the service fee, and who would perform it? What about insurance, mileage limitations and/or usage limitations? And could the subscription model work as well for, say, a bucket truck and a lightly upfitted pickup?

So far, subscription models on the market generally involve higher-end vehicles. Brands like Porsche, Cadillac, Volvo and BMW offer options that are more accommodating than long-term leases. Programs like these allow drivers to use, for example, a sedan during the week but switch to an SUV for a trip. Porsche lets drivers switch as often as they like; BOOK by Cadillac lets subscribers rent different vehicles as often as 18 times a year. Currently these services are not available nationwide but could be in the future.

In the meantime, when it comes to fleets, there’s still much to be figured out. Schnedeker, for example, brought up the topic of safety related to driver behavior.

“The driver has to make sure they’re driving the vehicles safely, and that they’re not distracted,” he said. “That can have big implications on the cost of insurance. As we think about these models, it’s important to think about what role the driver plays and how that might impact either the price of the subscription or the type of vehicle that is available for that driver to use.” That also brings up questions about training for drivers on specific types of vehicles and equipment.

“What would make the subscriber eligible to participate?” Schell asked. “We’re potentially looking at a world where we might be giving traditionally non-fleet drivers access to fleet vehicles. There’s a certain level of vetting we do to ensure that the driver getting a vehicle is going to be responsible with that vehicle. Do these same rules apply to this new generation of subscribers or will adjustments need to be made? That’s another item that needs to be fleshed out.”

Finally, Schell and Schnedeker said, there’s a need to ensure vehicles and equipment would always be available at a standard the subscriber would expect, especially as those assets travel from fleet to fleet. It’s one thing with a luxury car that can be detailed, but what about a work truck that typically would see harsher use?

“It’s certainly going to be a challenge with the subscription model,” Schnedeker said. “Some asset types might not fit the model as well, just because of how they’re used.”

About the Author: Fiona Soltes is a longtime freelance writer based just outside Nashville, Tennessee. Her clients have represented a variety of sectors, including fleet, engineering, technology, logistics, business services, retail, disaster preparedness and material handling. Prior to her freelance career, Soltes worked as a staff writer at newspapers in Tennessee and Texas.

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BOOK by Cadillac Shows How It’s Done
It’s easy to see why a subscription offering like BOOK by Cadillac (www.bookbycadillac.com) would be attractive to users: They can switch between a variety of vehicles without a long-term commitment, drive up to 2,000 miles per month, and have maintenance, insurance, registration and detailing included in the flat fee. Since its launch in early 2017, more than 8,000 people have expressed interest.

The service also provides benefits for the OEM. For one thing, it exposes the Cadillac product line to a wide range of potential buyers who otherwise might not have considered the brand.

“In an early pilot in New York, a number of BOOK by Cadillac members ultimately decided to buy or lease a Cadillac from a dealer,” said Melody Lee, global director of BOOK by Cadillac. “We feel strongly that the program will have a positive overall effect on Cadillac, perceptions of the brand and, ultimately, the sale and lease of Cadillac vehicles.”

So far, the majority of program users have been “a younger demographic than the typical Cadillac buyer,” Lee said.

In the U.S., BOOK by Cadillac focuses specifically on the Cadillac portfolio. “That said,” Lee added, “we are exploring how to evolve this model based on what the market and consumer demand. For example, BOOK is in a pilot stage in Munich, Germany, and under that current model, Chevrolet Camaro and Corvette performance cars are included in that fleet.”