7 ms·

Subscriptions make sense for things that you get a regular recurring supply of, like milk and newspapers. They might make sense for things that you can get regu

by pdonis 5y ago

Subscriptions make sense for things that you get a regular recurring supply of, like milk and newspapers. They might make sense for things that you can get regular upgrades for, like software (although often the "upgrades" aren't really worth much). But they make no sense at all for durable goods that can last for years without significant upgrades, like cars. The whole point with such goods is that you pay once and you own them for their entire useful life. (Actually, there is a subscription-type business model for cars; it's called "leasing". And the only people who do it are people who can afford to be fleeced. It makes no sense at all for an ordinary car owner. I once had a car dealer try to sell me a lease deal when I was there to pick up a new car. His deal had a larger monthly payment than the loan I already had pre-approved from my credit union, and the residual after 3 years--what I would have to pay then to own the car outright--was more than the balance on the loan would be at that point. I asked the dealer how it could possibly make financial sense for me to take such a deal. He had no answer.)

onion2k 5y ago
How it makes sense is simple - people who lease cars don't pay the final payment. They give the car back and lease a new one. That way they pay a bit more for a few years, but they avoid most of the cost of deprecation that they'd lose if they owned the car at that point. If you plan to buy a car and own it for a long time then leasing is silly. If you plan to keep a car for no more than a few years then leasing is a pretty good option.
- pdonis 5y ago
  > How it makes sense is simple - people who lease cars don't pay the final payment. They give the car back and lease a new one. That way they pay a bit more for a few years, but they avoid most of the cost of deprecation that they'd lose if they owned the car at that point. If you don't plan to keep the car more than the few years you can get with a lease term, then yes, the comparison is different than the one I made, but what might tip the scales in favor of leasing isn't the depreciation cost but what options are (or aren't) available to you for terminating your old loan (which probably won't be paid off at that point) and getting a new one when you either trade in or sell your old car and buy a new one. Another downside of leasing is that, since you don't own the car, there are probably going to be restrictions on how you can treat it and what you can do with it (for example, mileage restrictions). That gets back to the more general issue of the pros and cons of ownership vs. renting, which is relevant for subscription business models more generally.
- sandworm101 5y ago
  >> but they avoid most of the cost of deprecation Except that they don't. The dealer is taking the depreciated car back at the end of the lease. The dealer isn't giving customers a gift by taking the vehicle back at a loss. The lease price covers the entire cost of depreciation over the term of the lease. The customer may avoid seeing the depreciation but they are most definitely paying for it. Worse still, they are coving the most expensive part of total depreciation: the time between new to slightly-used. The people getting the real deal are those buying post-lease vehicles. By buying a slightly used vehicle they avoid the initial depreciation covered by the from-new lease.
kristiandupont 5y ago
Here in Denmark at least, there are quite a few car-on-demand services and apps by now. Cars are very (very!) heavily taxed in this country so that makes it hard to say that it indicates a global trend but there is definitely a trend.
Cloudef 5y ago
Tesla also is kind of subscription based
philipov 5y ago
> But they make no sense at all for durable goods that can last for years without significant upgrades, like cars. Which is why there is a war on durable goods, such as trying to develop viable cloud gaming to replace people's gaming computers with subscription services.
- pdonis 5y ago
  > Which is why there is a war on durable goods Yes, and that war is not being fought to protect the interests of people generally. It's being fought to protect the interests of businesses that don't want to adapt to changing technology and market conditions. They would rather have planned obsolescence than recognize that some goods really don't need to be "upgraded" very frequently and see those resources allocated into new goods and services that would create more wealth. It would be better in the long run for everyone if that trend were reversed.
- shreddit 5y ago
  I like these services a lot. I only need a laptop for my daily stuff, but once in a while (once a month?) i want to play a AAA Game. A gaming PC would be a waste of money.
  - pdonis 5y ago
    That doesn't mean you don't want a durable good at all. It means you want a durable good (the daily stuff laptop) plus occasional access to a particular service (playing a game). But many businesses would prefer that you give up the durable good altogether--that instead of your laptop for daily stuff, you entrust all your data and computing capacity to "the cloud" and just access it from your smartphone, which in their model you are basically renting from your phone provider.
- sofixa 5y ago
  Maybe not everyone wants or can afford a gaming computer? Being able to play any game from a tablet, phone, laptop or TV is very useful. And at the current costs of hardware, and the evolution of hardware requirements, even 2-3 subscription services come out cheaper than building an equivalent gaming rig.
the-dude 5y ago
In NL we have subscription based bicycles ( Swapfiets ). Very popular with the youngest generation.
PicassoCTs 5y ago
They also make sense for brittle industries, that would disassemble once the market is supplied and then fall apart, loosing all the expertise and would have to reassemble after what is essentially a extended pig cycle. Its also a incredible resilient business model, as proven by the mobs various protection rackets. https://wiki.lspace.org/mediawiki/Firefighters%27_Guild https://wiki.lspace.org/mediawiki/Firefighters%27_Guild
nickez 5y ago
I would never own a car. But I suppose I don't want to drive a car that is older than 3 years and I don't enjoy selling used cars. I prefer the freedom I get to just hand the car back after 3 years and don't have to think about it anymore. Also no unexpected service costs and so on.
- garmaine 5y ago
  That’s exactly how trade-in works at a dealership though.
  - tennisflyi 5y ago
    Then they're both pretty similar then or what?
starfallg 5y ago
Leasing can be a very cost effective way to having use of a new car. The trick is to find lease deals when manufacturers are offering heavy discounts to shift volume. This discount is then almost entirely used in the amortisation of your 18,24,36,48 month lease. The residual values are often pretty high compared with the original price minus the discount. This makes the lease payments super low. This may be market specific (I live in the UK) but I have leased Mercs and other premium vehicles paying less than 20% of the vehicles price at new for a 24 month lease. That's unbeatable value no matter how you look at it. The advantage in this case over buying the car with the discount is you don't have to take on any risk on whether the car would sell 2 or 3 years later, nor have the money held up in the car. As interest rates are super low, it makes sense to use that money to invest in something else with higher returns.
asplake 5y ago
> But they make no sense at all for durable goods that can last for years without significant upgrades, like cars. It makes complete sense if you see the downsides of ownership outweighing the upsides. You just have to separate the thing, ownership of the thing, and the job that it does. If you derive some value just from owning a car that’s fine, but if its job is to get you from A to B, renting and Uber can both be valid options over buying. The three options aren’t even mutually exclusive!
- pdonis 5y ago
  > if its job is to get you from A to B, renting and Uber can both be valid options over buying For some people, perhaps. But you give up a lot of flexibility when you give up ownership. It's not just a matter of "the job" the thing does; transportation is not a single "job", it's an enabler for many, many different "jobs". And if you don't own any means of transportation, your ability to do all those things is dependent on some other entity, probably a faceless corporation that does not care whether you can get from A to B or not, it only cares about whether it can make money. Or, in the case of public transportation, a government in which your personal interest is rounding error compared to the powerful interests that influence what the government does. It may seem to you that in your personal situation, services like renting and Uber, or public transportation, are there whenever you need them and trusting that that will always be the case seems like a good deal. But historically, deals like that have a way of going sideways when you least expect it and can least afford it. At the very least, it's a good idea to always have a plan B in mind.
vivferrari 5y ago
Subscription will be enabled in all goods because all of them have a software layer today. Like the OS on the phone is updated and adds features to existing hardware the same is possible with all consumer goods. The same is happening with cars and I suppose will happen with your TV and other devices as well. It is a fiscal imperative.
deleted 5y ago
[deleted]
maximus-decimus 5y ago
I would argue it makes sense in that it creates an incentive to make the product good and durable. If you pay a one time fee and the product is just not great quality but does technically work, well you're stuck with it until you buy a new one. If you only pay when you buy something new, the seller has an incentive to make the object not last long because then you'll need to buy a new one. If you keep paying to rent it, they lose money every time they need to give you a new one because the old one breaks. About the car lease, you're missing the point that you don't pay taxes on the amount of car you're not buying either. It's also offering you a service : you don't have to bother trying to sell the car yourself. Also I would argue the biggest point is a ton of people live paycheck to paycheck and a small fee every month is a lot easier to do for them than a huge amount of money now.

by pdonis 5y ago

onion2k 5y ago

How it makes sense is simple - people who lease cars don't pay the final payment. They give the car back and lease a new one. That way they pay a bit more for a few years, but they avoid most of the cost of deprecation that they'd lose if they owned the car at that point. If you plan to buy a car and own it for a long time then leasing is silly. If you plan to keep a car for no more than a few years then leasing is a pretty good option.

pdonis 5y ago
> How it makes sense is simple - people who lease cars don't pay the final payment. They give the car back and lease a new one. That way they pay a bit more for a few years, but they avoid most of the cost of deprecation that they'd lose if they owned the car at that point. If you don't plan to keep the car more than the few years you can get with a lease term, then yes, the comparison is different than the one I made, but what might tip the scales in favor of leasing isn't the depreciation cost but what options are (or aren't) available to you for terminating your old loan (which probably won't be paid off at that point) and getting a new one when you either trade in or sell your old car and buy a new one. Another downside of leasing is that, since you don't own the car, there are probably going to be restrictions on how you can treat it and what you can do with it (for example, mileage restrictions). That gets back to the more general issue of the pros and cons of ownership vs. renting, which is relevant for subscription business models more generally.
sandworm101 5y ago
>> but they avoid most of the cost of deprecation Except that they don't. The dealer is taking the depreciated car back at the end of the lease. The dealer isn't giving customers a gift by taking the vehicle back at a loss. The lease price covers the entire cost of depreciation over the term of the lease. The customer may avoid seeing the depreciation but they are most definitely paying for it. Worse still, they are coving the most expensive part of total depreciation: the time between new to slightly-used. The people getting the real deal are those buying post-lease vehicles. By buying a slightly used vehicle they avoid the initial depreciation covered by the from-new lease.

kristiandupont 5y ago

Here in Denmark at least, there are quite a few car-on-demand services and apps by now. Cars are very (very!) heavily taxed in this country so that makes it hard to say that it indicates a global trend but there is definitely a trend.

Cloudef 5y ago

Tesla also is kind of subscription based

philipov 5y ago

> But they make no sense at all for durable goods that can last for years without significant upgrades, like cars. Which is why there is a war on durable goods, such as trying to develop viable cloud gaming to replace people's gaming computers with subscription services.

pdonis 5y ago
> Which is why there is a war on durable goods Yes, and that war is not being fought to protect the interests of people generally. It's being fought to protect the interests of businesses that don't want to adapt to changing technology and market conditions. They would rather have planned obsolescence than recognize that some goods really don't need to be "upgraded" very frequently and see those resources allocated into new goods and services that would create more wealth. It would be better in the long run for everyone if that trend were reversed.
shreddit 5y ago
I like these services a lot. I only need a laptop for my daily stuff, but once in a while (once a month?) i want to play a AAA Game. A gaming PC would be a waste of money.
- pdonis 5y ago
  That doesn't mean you don't want a durable good at all. It means you want a durable good (the daily stuff laptop) plus occasional access to a particular service (playing a game). But many businesses would prefer that you give up the durable good altogether--that instead of your laptop for daily stuff, you entrust all your data and computing capacity to "the cloud" and just access it from your smartphone, which in their model you are basically renting from your phone provider.
sofixa 5y ago
Maybe not everyone wants or can afford a gaming computer? Being able to play any game from a tablet, phone, laptop or TV is very useful. And at the current costs of hardware, and the evolution of hardware requirements, even 2-3 subscription services come out cheaper than building an equivalent gaming rig.

the-dude 5y ago

In NL we have subscription based bicycles ( Swapfiets ). Very popular with the youngest generation.

PicassoCTs 5y ago

They also make sense for brittle industries, that would disassemble once the market is supplied and then fall apart, loosing all the expertise and would have to reassemble after what is essentially a extended pig cycle. Its also a incredible resilient business model, as proven by the mobs various protection rackets. https://wiki.lspace.org/mediawiki/Firefighters%27_Guild https://wiki.lspace.org/mediawiki/Firefighters%27_Guild

nickez 5y ago

I would never own a car. But I suppose I don't want to drive a car that is older than 3 years and I don't enjoy selling used cars. I prefer the freedom I get to just hand the car back after 3 years and don't have to think about it anymore. Also no unexpected service costs and so on.

garmaine 5y ago
That’s exactly how trade-in works at a dealership though.
- tennisflyi 5y ago
  Then they're both pretty similar then or what?

starfallg 5y ago

Leasing can be a very cost effective way to having use of a new car. The trick is to find lease deals when manufacturers are offering heavy discounts to shift volume. This discount is then almost entirely used in the amortisation of your 18,24,36,48 month lease. The residual values are often pretty high compared with the original price minus the discount. This makes the lease payments super low. This may be market specific (I live in the UK) but I have leased Mercs and other premium vehicles paying less than 20% of the vehicles price at new for a 24 month lease. That's unbeatable value no matter how you look at it. The advantage in this case over buying the car with the discount is you don't have to take on any risk on whether the car would sell 2 or 3 years later, nor have the money held up in the car. As interest rates are super low, it makes sense to use that money to invest in something else with higher returns.

asplake 5y ago

> But they make no sense at all for durable goods that can last for years without significant upgrades, like cars. It makes complete sense if you see the downsides of ownership outweighing the upsides. You just have to separate the thing, ownership of the thing, and the job that it does. If you derive some value just from owning a car that’s fine, but if its job is to get you from A to B, renting and Uber can both be valid options over buying. The three options aren’t even mutually exclusive!

pdonis 5y ago
> if its job is to get you from A to B, renting and Uber can both be valid options over buying For some people, perhaps. But you give up a lot of flexibility when you give up ownership. It's not just a matter of "the job" the thing does; transportation is not a single "job", it's an enabler for many, many different "jobs". And if you don't own any means of transportation, your ability to do all those things is dependent on some other entity, probably a faceless corporation that does not care whether you can get from A to B or not, it only cares about whether it can make money. Or, in the case of public transportation, a government in which your personal interest is rounding error compared to the powerful interests that influence what the government does. It may seem to you that in your personal situation, services like renting and Uber, or public transportation, are there whenever you need them and trusting that that will always be the case seems like a good deal. But historically, deals like that have a way of going sideways when you least expect it and can least afford it. At the very least, it's a good idea to always have a plan B in mind.

vivferrari 5y ago

Subscription will be enabled in all goods because all of them have a software layer today. Like the OS on the phone is updated and adds features to existing hardware the same is possible with all consumer goods. The same is happening with cars and I suppose will happen with your TV and other devices as well. It is a fiscal imperative.

deleted 5y ago

[deleted]

maximus-decimus 5y ago

I would argue it makes sense in that it creates an incentive to make the product good and durable. If you pay a one time fee and the product is just not great quality but does technically work, well you're stuck with it until you buy a new one. If you only pay when you buy something new, the seller has an incentive to make the object not last long because then you'll need to buy a new one. If you keep paying to rent it, they lose money every time they need to give you a new one because the old one breaks. About the car lease, you're missing the point that you don't pay taxes on the amount of car you're not buying either. It's also offering you a service : you don't have to bother trying to sell the car yourself. Also I would argue the biggest point is a ton of people live paycheck to paycheck and a small fee every month is a lot easier to do for them than a huge amount of money now.