Revv Open Vs Zoomcar ZAP Subscribe- Car subscription models compared - eNidhi India Travel Blog

Revv Open Vs Zoomcar ZAP Subscribe- Car subscription models compared

Concept of subscribing to a car (like leasing) instead of buying it is slowly gaining momentum in India. Revv had launched a program called Switch few years ago and Zoomcar has ZAP Subscribe, both I have already reviewed in detail.

Now towards the end of 2019, a lot has changed. People are not buying enough cars, car companies are sitting on stock of unsold cars while April 2020 BS 6 deadline fast approaching. Some car manufacturers have tied up with car rental companies to offer cars on lease/subscription model wherein you can pay a monthly rental and have a car at your disposal, instead of paying lakhs of rupees to own the same car. Revv has tied up with M&M and seem to have renamed its offering as REVV OPEN

What is a car subscription model?

  • You don't own the car- rental company owns it
  • No need to spend huge amount upfront or take a loan to pay EMI
  • You pay a monthly fee (+18% GST) and get to use the car as long as you keep paying the monthly fee
  • Fair bit of maintenance, insurance etc are usually taken care by rental company but there could be exceptions/additional liabilities on you-do check the fine print.
  • You get to stop subscription, change car model etc with certain rules applicable
  • End of subscription period, car goes back to rental company, you own nothing (some companies give you option to buy the car for an additional payment)

Revv OPEN vs ZAP Subscribe models - key aspects compared
#
Factor
Revv OPEN
ZAP Subscribe
Notes
1
Min subscription duration
12 months for new cars
2 months for old cars (unboxed)
6 months

2
Option to chose colour, accessories
Yes (new cars)
No

3
Variants offered
Mid level trims, not high end
Not disclosed, expected to be entry/mid level trims

4
Major limitations
Blackboard- 80 kmph speed limit, interstate fees, 18% GST
Blackboard- 80 kmph speed limit, interstate fees, 18% GST

5
Pre-closure
Possible, 25% unpaid subscription fee as penalty & other charges (new cars, under 12 months), subscription fee difference for longer durations
Possible, 100% unpaid rental penalty up to 6 months, 1 month rental penalty after 6 months

6
Option to buy the car
Available, settlement charge applies
Possible, 50% of ex-showroom price
+ black to white board conversion cost
7
Usage limits
25000 kms per year (2000 kms per month or 70 kms per day)
4000 kms per month (includes listing usage)
133 kms per day

8
Maintenance
Regular service is covered but not wear n tear- tyre, brake, clutch replacement cost extra
Maintenance expense of up to Rs 1/1.25 per km covered, rest you’ve to pay

9
Potential to earn by listing/renting
NO (Not specified)
Yes, can list on Zoomcar, with a guaranteed payment if listed for 20+ days
But need to keep car ready: clean, pay challans, fueled up etc
10
Subscription Price- small car
Tiago: 
XM: 
20700+18% GST= 21000 per month (12 months)

16000 per month (if booked for 4 years)
21000+ 18% GST= 24800 per month (12 months)

17000 + 18% GST
20000 INR per month (36 months commitment)
Check #9
11
Subscription Price- Sedan
Verna 
EX 1.4 VTVT
35000 per month (12 months)
27000 per month (4 years)
36000+ 18% = 42500 per month

32000 + 18% GST= 37760 per month (36 months)
Check #9
12
Major Pros
Cheaper rentals, shorter commitment duration for used cars
Ability to earn by listing when not using the car

13
Major Cons
 Can't earn by listing
Higher rentals

Disclaimer: Information from respective company websites at the time of preparing this post. Rates and rules are subject to change over time, use this post for reference only, please check official sites before making final decision.

As you see, both Zoomcar and Revv have some pros n cons- Depending on your requirement and which one you're comfortable with, you can make a decision.
Subscribing vs Owning a car in India
If you buy a Tiago with 5 lakh rupee loan for 3 years, monthly EMI will be about 16000, same as REVV’s subscription rental. This is just one hypothetical situation. Please do your own math for the car model usage, loan amount/repayment duration and other scenarios you feel applicable.
Car
Buying
Revv OPEN Subscription
Tiago XM
Approx 6.5 lakhs on road
5 lakh loan, 1.5 lakh own money= 16000 EMI for 36 months (76k in interest over 3 years)
No down payment
Monthly rental 17000 with 36 month commitment (have to spend 6.12 lakhs anyway without owning anything)

Note: You can select a shorter duration & pay more monthly or opt for used car as well.
Pros
End of 3 years, car will be yours to own
Resale value 2-3 lakhs (expected)
No speed governors, interstate entry fees, or monthly usage limit
Can select variant, negotiate with dealer directly on price, offers
Can switch to other models at regular intervals as per need

ZAP subscribe lets you earn a bit by renting out
Cons
Maintenance and insurance expense extra each year,  Approx 74k over 3 years

Have to pay interstate entry fee
Have 80 kmph speed limit
Black board
Net spend in 3 years
6.5 lakhs+76k interest + 74k maintenance & insurance = 8 lakhs – 3 lakh resale value
= 5 lakhs nett spend

460 Rs per day, fuel, toll, parking extra. 2-3 Uber/Ola rides cost the same and less headache.


6.12 lakhs + 1 lakh other potential expenses (excess km charges, interstate permit fee, tyre replacement etc) = 7.12 lakh + total spend

With zoomcar you might be able to earn a lakh or two by listing. Depending on how it works out, nett spend could be similar or even cheaper than owning- but hard to predict/ guarantee.
Naturally the numbers are not in favor of subscription if you are thinking about 3 to 5 years of usage. Subscription makes sense for short term- like 3 to 6 months – if you are not sure if you really need to buy a car or if you’re in a city for short duration and don’t want to commit to buying or if you are keen to change your car every 6 months and try different set of wheels.

Major problems with current car subscription schemes in India
1. Unable to keep subscription rental cheaper than EMIs: As illustrated above, rental companies are unable to offer a subscription fee lot cheaper than EMIs. They are kind of adding another layer of overhead in between car maker, financier and customer, for offering this flexibility of being able to switch cars/stop subscription every 6 months or so. Thus, on a long run, paying huge amount of subscription fee but not owning anything kind of discourages customers. Subscription is attractive for short term usage- but again rental agencies have minimum commitment period (6 to 12 months) and pre-closure penalties, which again kind of compromises the whole purpose that subscribing is better than renting.

Compare this with a home loan vs rent decision. A nice 3 BHK apartment worth 60-70 lakhs costs 50-60k per month in 15 years EMI but rental is one third to one fourth at 15-20k only. Would you rent a house for years if rental is more than EMI? By paying a subscription fee more than EMI, customers are effectively helping rental company pay the loan to financiers n gain eventual ownership of the car while subscribers only get to use the car and have no ownership rights.

Car subscription rental is kept high is because rental companies also need to make good profit within the short lifespan of a car (its initial 3-5 years), need to factor various overheads, scenarios that not all cars get subscribed and so on. In western countries roads are good, people drive gently and cars last longer, so leasing companies can spread their rental over a longer expected life of the car. In India cars take a lot more beating over time so rental companies need to keep bigger margins/buffer. If car makers/dealers can offer direct lease options through their dealerships at lower prices on white board cars, this car subscription/lease model can be lot more cost efficient and successful.

2. Blackboard car with Speed Governor: Spoils the driving experience having to go at 80 kmph on highway and pay interstate fees each time you cross state border (not to mention long queue at check posts- read more)

Blackboard vehicles also attract higher annual road tax compared to one time lifetime tax paid by white board cars- this is also indirectly paid by subscriber whereas their usage is purely personal and not commercial.

3. Taxi like rules but 18% GST. Since subscription cars are assigned black board number plate and taxi like speed governor rules, why tax it at 18%? Why not charge at 5% like regular taxi service? [Read more]

4. Lots of rules to cover interests of the rental company: While rental companies claim hassle free, maintenance free experience, lots of fine print is induced to protect their interests- monthly usage limits, maintenance exclusions, pre-closure penalties, late payment penalties, no mention of any compensations for mistakes on their part (like late delivery, long repair/service downtime, faulty billing and time wasted trying to reach support) and so on. Thus naturally it is not like you own it 100% and can do whatever you feel like. These fine prints and some of the limitations (like speed limit, interstate fees) are smartly underplayed during marketing efforts and a customer not fully aware ends up discovering some of these only after paying. So subscriber might end up spending a lot more than what he planned, if he hasn't read all the fine print and plays safe.

But then, this car subscription model is just evolving. Once people start showing interest, feedback emerges, the industry and model will adapt and hopefully improve over time, making the subscription model cheaper and really hassle free.

What do you think? Would you subscribe to one instead of buying or are you contempt with Uber/Ola and public transport for your needs?

July 2020 Update: Given the current pandemic situation it might make more sense to buy a used car with buyback guarantee. Check this post for details

3 comments:

  1. Can you get input credit on GST if you hire a Revv

    ReplyDelete
    Replies
    1. With any of the car rental company input credits are available only if the user is in same nature of business and car is rented for business use only. If it is used partly or completely for personal use then it is not possible to claim any kind of GST input. For further clarification you may read section 17 of CGST Act 2017.

      Delete
  2. Very Well Written Report.. Good Comparison and you have touched up on almost all major points, the only point you may have over seen , the resale hassele of the car if owned, you cant predict when u will be able to dispose the car to opt for a new version, unless the dealers offersu a buy back guurantee or exchange offer . Well otherwise quite insightful considering aspects coverd. Thank you for doing the resercha dn sharing teh same

    ReplyDelete

Appreciate your efforts and interests to comment. Comments may be moderated due to increased spam. Will ideally respond to comments within few days.Use Anonymous option if you don't wish to leave your name/ID behind- Shrinidhi

Powered by Blogger.