- Buyers of premium vehicles don’t want to pay recurring subscriptions.
- According to Lincoln, those buyers would rather have the cost baked into the MSRP of the vehicle.
- Many automakers are doing exactly that, meaning that second-hand buyers of used luxury cars will often be the ones paying for recurring subscription costs.
Lincoln finally figured out something consumers have been shouting about for years: car buyers don’t want subscriptions. I know, shocker! But for some items—like cellular data connectivity—subscriptions aren’t something an automaker can just eat for the life of the car. So where’s the middle ground?
For a luxury brand like Lincoln, the answer to that question lies with Dianne Craig, the outgoing company president who is retiring at the end of the month. Craig laid it out plainly: premium buyers don’t want to be nickel-and-dimed while they own their luxury car, they’d rather pay for everything up-front. That means features like hands-free driving (BlueCruise) and remote connectivity should all be included in the sticker price, at least during the car’s warranty period.
Craig is right. Nobody wants to drive their brand new $75,000 Lincoln Nautilus hybrid only to pay $15 per month for heated seats or $100 per month for a horsepower bump. BMW learned that lesson the hard way.
Lincoln’s basic warranty covers its cars for around four years, provided you don’t go crazy on mileage. That happens to be the same length of its complimentary trials for premium connectivity and BlueCruise, offered on most of its models. The play here is clear. Lincoln isn’t promising free features forever, just while the car is under warranty.
Coincidentally, that four-year mark is also where many premium and luxury vehicles are traded in for something new. A study by Cartelligent shows that the majority of people who purchase cars from luxury brands like Audi, BMW, and Mercedes-Benz often replace their vehicles within five years. Likewise, most leased vehicles—which luxury vehicles often are—typically get turned in after three years.
That means Lincoln is betting on the long game. Offer a luxury experience to the buyer who matters most to the company’s bottom line, then collect recurring revenue from second-hand owners who are more willing to pay a subscription fee for the full luxury experience. It’s shrewd, it’s subtle, and it helps to keep the lights on.
Here’s a quick snippet from Craig’s interview with Automotive News that addresses subscription fees for new luxury car buyers:
One strategy the brand won’t use, Craig said, is charging new buyers subscription fees to use built-in features. Although Ford is counting on recurring revenue from such services to pad profit margins, Craig said that approach isn’t right for Lincoln.
“Whether it be BlueCruise, connectivity, security—they will be part of the warranty period,” she said. “Our focus is really in having that in the base vehicle price, at least for the warranty duration. Everything we’ve learned about premium customers is they don’t want subscriptions.”
Now, the bigger question is where should automakers draw the line. Volvo’s Chief Technology Officer, Anders Bell, spoke about this during a media roundtable where he acknowledged that customers hate subscriptions.
“I would have a hard time paying to unlock hardware that I know is in the car,” said Bell, acknowledging that there are certain features Volvo customers just won’t pay for. That’s where heated seats, HVAC functions, and other baked-in hardware fall. But subscriptions for features like internet connectivity for Spotify or web browsing are more digestible.
Automakers are testing the waters with driver-assist features. As mentioned, BlueCruise is free—sorry, complimentary—for four years with most models, then $50 per month (or $495 annually) after the trial. GM’s Super Cruise is an up-front cost followed by a $25 per month subscription after 3 years. Tesla’s Full Self-Driving is $8,000 for the life of the car, or $99 per month to subscribe. If consumers bite because they see value for the convenience, then they may have found exactly where that line is.
Lincoln’s approach bodes well with the buying experience that luxury car buyers already face. And, admittedly, it’s kind of clever too. By moving the revenue model downstream to the next owner, the automaker still gets a chance to have some additional cash without doing any extra work. But that’s only if the second-hand customer is willing to pay for subscription costs.
