It’s been six years since Toby Kernon, CEO of Wagonex, began knocking on doors extolling the virtues and the future possibilities of the subscription model of car ownership. Since then, he’s had a few doors slammed in his face, a few that were left ajar, and thankfully for him, some that were flung open wide.

Toby Kernon, CEO of Wagonex

2022 has proven to be the year when Toby’s predictions for the future of car subscription finally came to the fore when Covid changed the automotive industry forever, as Toby explains here.

I established Wagonex after being a frustrated car owner for many years. I went against my father’s advice and didn’t buy a house, but bought a car on hire purchase instead – that was the start of my journey (if you pardon the pun). I love cars and going through the process of buying and selling them over the years, I always felt that I was the one being taken advantage of and was consistently left out of pocket.

I believed there had to be an easier, more flexible, customer-centric, digital-first way of owning a car and, after some research, started to learn about the subscription model. Everyone from the music industry to companies selling razor blades were going into subscription, and I saw the move happening with cars in the US, so thought the UK would be 12 to 18 months behind. It seemed like the perfect solution, and so I took the plunge and established Wagonex.

The name came from the nick name my mates and I used to call our cars – Wagons (probably a reference from the film Dumb and Dumber) while the “ex” came from the fact that the subscription concept meant you would be able to exchange cars easily – and so Wagonex was born.

I spoke to nearly every fleet manager, vehicle leasing and car manufacturer I could find, telling them about Wagonex and the subscription model. I would be politely listened to, patted on the back and ushered out the door. Eventually I found an insurer that believed in me and the way the market was going, and partnered with them. After more door knocking, we went on to manage vehicles for PSA Finance (Peugeot, Citroën and DS) at the end of our third year in business. Attitudes were changing and bigger car manufacturers began listening to us and considering subscription.

Covid changed the industry immeasurably; there were headlines about billions of pounds being wasted on lease payments when cars were sat on driveways, pushing people to look at more flexible car ownership options.

Because of Covid, and thanks to Cinch and Cazoo coming into the market, buying a car online is now normal for many consumers, in fact, recent statistics show that now more than 60% of people considered buying a car online compared with 40% pre-pandemic. The rise of those online car retailers helped consumers realise they can buy cars online from the comfort of their own home.

E-commerce in the automotive trade is still in its early stages, but digital-first is becoming the norm in many other sectors such as property and transport, and we believe it will soon for our sector too.

That widespread innovation, and move to further consumer digitisation, is probably one of the factors that helped us secure investment from Admiral Group’s fintech investment arm Admiral Pioneer. It is the first time the company has invested in a business outside the Admiral Group and was a phenomenal endorsement for us as a business – and for the concept of subscription.

Digital transformation in the industry will continue to develop in the coming years, shifting consumer expectations for digital first and more flexible products. I believe that car ownership will be something our parents and grandparents did, as new business models are developed and the focus on usage-based models increases.

2023 will no doubt bring more changes again, with EVs being pushed by the Government, yet the costs are still prohibitive for most people – especially with a recession on the horizon and a cost-of-living crisis to contend with. That’s where subscription could corner the market, offering a flexible product with the freedom to exit a finance agreement easily and swiftly.

To try and manage these economic pressures, we envisage that by the end of 2024 most major industry players will launch subscription products, the majority of which will use a third-party provider to build a platform (such as Wagonex), instead of building their own in-house.

This will further cement car subscription’s position as a mainstream automotive product. The subscription model will continue to increase its market share from rental and leasing and I believe will overtake combined volume of both by the end of the decade.

The pressure is on for car manufacturers and dealers to diversify, competition is fierce and only those willing to change are going to excel. Jumping into subscription using an easy off-the-shelf product that dealers and manufacturers can use to diversify their revenue streams, is one way they can do that quickly and easily.

It has taken a few years to get to where we are today, where manufactures and leasing companies are now coming to us with an understanding of what subscription is and what it can do for their businesses – the tide is definitely turning.

We’ve just begun scratching the surface of the potential of subscription and I for one can’t wait for the next six years in this business.