Is a car subscription worth it?

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By 2032, 10 per cent of all new cars on the roads worldwide will be used via a subscription, experts are saying.

What once was a futuristic concept is now very much a reality, with dozens of companies offering services from the likes of Carbar and Carly, to eCar (East Coast Subscriptions), Karmo and Loopit across most of Australia's biggest cities.

In fact, it's estimated the subscription part of the market will grow by 34 per cent each year for the next eight years, as consumer preferences pivot from owning outright to other methods of running a vehicle.

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By the same time, the industry is projected to be worth $66.7 billion globally.

And it's not just something that's aimed squarely at the young anymore either. According to a 2024 Deloitte report, one in five consumers of all ages said they'd prefer a car subscription service to owning one. Young families are increasingly taking up subscriptions, as are empty-nesters.

What is car subscription, though, and is it a good idea? How does it differ from leasing a car through finance at a dealership? We spoke to some of the people doing it to find out.

What is a subscription for a car?

A car subscription is essentially a short-term lease that bridges the gap between a temporary rental, from a company like Hertz or Europcar at the airport, for example, and longer-term contracts or loans you might take out at a dealership or through a bank.

It works the same way other subscriptions like Netflix, Spotify or even a gym membership do, where you can pay for as long as you need it – whether that be weeks or months.

The other key factor is that under car subscription, aside from the fee you pay to subscribe (each week, fortnight or month depending on your agreement terms), you are only responsible for fuel (or charge in the case of electric vehicles) and tolls.

Karmo, which started up in 2019 and recently acquired Motopool in a deal to make it Australia's largest car subscription provider, has an annual turnover of $40 million.

Its founder and CEO Nick Boucher told us, "A lot of people don’t really understand what it is. It’s still so new, but it is basically a new way to access vehicles".

"I suppose since cars have been around for over a hundred years, there’s really only been four ways that you’ve accessed cars – financing, paying for them outright, renting or leasing," he said.

"What car subscription provides is a more flexible and simple way to have that car in your driveway. It is just one payment and that covers [almost] all costs. 

"It will cover things like the depreciation of your vehicle, servicing, registration, and insurance. From a business perspective, it makes ownership of a vehicle in your fleet very simple as well."

"We think of it like a no lock-in lease that includes your maintenance, insurance, registration, roadside assist, and just offers peace of mind for a vehicle that’s completely catered for," said Des Hang, CEO of Carbar, which was a pioneer of the sector when it was founded in 2016 and is now in the process of merging with rival firm Carly in a $3.8 million deal.

"If you think about it from a consumer lens, it’s a nice and easy way where everything is all packaged in."

According to Carbar, in 2024 its most popular vehicles were the Hyundai i30, Tesla Model 3 and the Mitsubishi ASX.

Are car subscriptions a good idea?

They can be, depending on your situation and how you use your existing car. If you barely use the car you own, but have to pay for things like insurance and registration to keep it on the road, then a subscription might be worth a look.

If you're driving high kilometres, though, it might not, as many have a cap on how much you can travel in a set timeframe and charge a fee for every kilometre after that.

According to Boucher, the costs of a subscription are relatively on par with what it takes to run a vehicle each year.

For a 2024 Toyota RAV4, Australia's best-selling new SUV regularly, with Karmo you'd be looking at $305 per week based on a bond of $500, a four-month minimum term, and 385km weekly mileage cap for one driver.

Meanwhile, with Carbar, it would be $355 per week for the Hybrid, with an upfront fee of $2054 and a minimum six-month term, no mileage cap specified.

While not an exact science, the Royal Automobile Club of Western Australia calculated in 2023 that a GX FWD petrol RAV4 cost $258.99, while the GX Hybrid was $263.19 per week.

Karmo has around 120 different models on offer, with subscription terms set at four, six or nine months, with Boucher saying what you'll pay depends on the type of car you go for.

"The cost correlates to the vehicle. We have cars from the lowest end of the market, which can cost under $200 a week, up to $700 a week for the top-end vehicles," he told us.

Karmo has 3000 vehicles in its fleet, with most of those in use by customers. There is a buffer, however, so that in the event of an accident, it can provide someone with another car straight away.

Carbar meanwhile also has a few thousand vehicles on its books, and is set to add around 500 more following its merger with Carly.

"I think it’s even more prevalent in these times where cost-of-living pressures and budgeting become a lot more front of mind for people," said Hang.

"For example, if you only want to spend $1000 on your vehicle needs, you can have that confidence you will hit that range rather than having to worry about any surprises at the end if you were to buy a vehicle."

Where subscriptions can get a little more complicated is if you have an accident or damage the car.

In a similar way to traditional car insurance, if you’re found to be at fault, you pay the cost of the repair if it’s under your excess (or possibly opt not to involve the insurer) or pay the excess if the amount goes above it.

According to Hang, subscription is much the same.

"It works in much the same way as your comprehensive insurance does," he told Drive.

"For example, if the excess is $1500 then any repairs under that it would just be costed up and passed on to you if you are the driver at fault in that situation. So, it is no different from normal insurance. It’s all layered into the actual product offering.

"If it’s more than the excess, then that kicks in, and you’re covered.

"Just like if you were to lease a car, if you were at fault, obviously then your vehicle will be off the road and there will be a cost associated with that."

For more minor scrapes or damage, it’s worth looking closely at the company’s wear and tear policy to determine your liability, as you may face costs if anything you’d normally live with on a car you own is not accepted.

What is the difference between car rental, leasing and subscription?

Car rentals are different to car subscriptions in that they are typically for a shorter period, ranging anywhere from just one day to two weeks. 

Most people would use car rentals while travelling, such as for work or for a holiday, but due to higher costs they are not normally used as a longer-term option.

There is also another kind of service, which is short-term car-sharing via a company like Go Get that allows you to borrow a car by the hour or day in a less formal way.

Arseallie Bonilla, who lives in the Melbourne inner-city suburb of St Kilda, has been using Go Get for more than three years to hire cars such as a Toyota Yaris, Corolla or even a Kia Picanto to get around.

"I find the occasional car hire is more affordable than maintaining the running costs and liability of owning a car if you live within a 10-minute radius of the city," she told Drive.

"The customer service is responsive, the app is easy to use, and for short trips or occasional day hire I find it can still work out cheaper than owning a car or using Uber or even public transport. I pay $12 a month on a personal plan."

On the flip side, subscriptions can be similar in price to longer-term leases, but you don't have to be tied into an agreement for as long – with leases usually starting around the two-year mark.

Subscription terms typically allow a contract to be terminated with 30 days’ notice, although this may vary between companies.

You can swap to a different car whenever you like, subject to any change fees of course, which can be a selling point if you want to try something new or need a particular kind of vehicle for a short period.

Like a lease, you can also in many cases buy the car you've been trialling if you want to.

"We don’t have one customer; we have many customers, so we have to have the flexibility and choice for those customers. We’re finding, just like Netflix and all the other streaming services, a lot of people chop and change," Boucher said.

"They might stay with Netflix for six months and then go to Prime for the next six months or Paramount. People are staying with us, but they’re shifting makes or models. They don't want one car forever."

One of the lesser-spoken-about benefits of a subscription is that it allows someone who might be nervous about transitioning from a petrol or diesel car to an electric one to try one out without committing to buying. But in a way that gives them the real-world experience that renting for a week or two can't.

"This is really why we’ve essentially pushed a lot of our EV fleet into this subscription business, because we find that when people rent an EV, especially Teslas, in a normal car rental business they’re only renting for two days at a time," Ben Whitmore, Chief Marketing Officer at eCar Subscription, told Drive.

RELATED: Toyota launches subscription-style service for its new electric vehicle

"It just doesn’t give you the experience that you need. You need to live with it and you need to be able to connect to all of the tech and set the car up the way you want to and go about your normal life, which could be your commute to work, your family holiday, running the kids to sport, that kind of thing. 

"You need to experience all those things before you make your mind up. Subscription offers people more long-term testing, so to speak, without the commitment, and they can do that with multiple models of EV if they want to.

"It helps to test your appetite for things like charging the car – because you can do that for a week and be quite patient with it, but if you are having to do that weekly, it gives you a real-life experience of what it's going to be like to live with one."

Can you salary-sacrifice a car subscription?

Over the last decade, the focus for car subscription firms has expanded from targeting mostly Gen Z or Millennials as individuals to include fleet businesses, and there are now options available for salary-sacrifice schemes too.

"Fleets, or business-to-business, is a huge opportunity for us," said Boucher from Karmo.

"We see that there are significant benefits when it comes to costs for subscription over financing a fleet. The ATO made some changes around 2018 regarding operating leases. They have to be back on the balance sheet, but there’s the ability that if it’s under 12 months, which car subscription is, it can be off the balance sheet. 

"We’ve got an ATO ruling now that we can do salary packaging for subscription, which is going to be a tremendous thing that we’ll be able to offer into the future. We'll be announcing more on that in the next few weeks."

"We work with SMEs (small to medium enterprises) to provide a fleet-based subscription, which means we’ll take care of the vehicle needs of their particular business," said Hang.

"In a traditional business, you’ll probably take out an asset financing deal or some sort of leasing deal with leasing providers and that sits on your balance sheet, right? That’s costing you money that’s detracting from your balance sheet. 

"However, with the car subscription product, it’s a P and L (profit and loss) item; its no-lock-in nature means it doesn't sit within your balance sheet so it's beneficial from that perspective.

"From a practical sense, the business can flex up and down with regards to their vehicle needs."

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