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Sunday / 16 February 2025
HomeFeaturesRise of pay-to-use car features – The good and the bad

Rise of pay-to-use car features – The good and the bad

Major automakers have recently faced serious backlash for starting to “sell” features on a prepaid basis.

In the case of BMW, the company started offering heated seats in July for its newer vehicles on a subscription basis starting from R250 per month.

Mercedes-Benz, too, will sell its flagship EQS electric vehicles later this year with abilities such as augmented reality navigation in a pay-to-use format.

A large portion of car buyers immediately reacted negatively to this news as many had the question of if they’re paying to have the hardware, why also pay to use it?

It’s not so clear-cut, however, and in the long run, the “pay-to-use” model could be more beneficial to the end user than the way vehicles have always been specced up.

The good

Vehicles with prepaid features are equipped with all those features directly from the factory at no cost to the buyer, and after taking delivery, the buyer only needs to pay a certain additional fee in order to make use of the already-installed equipment.

The main argument for pay-to-use features, therefore, is affordability, both for manufacturer and buyer.

If all the vehicles made by a particular factory need the same number of the same parts, it’s much easier to keep stock and plan ahead, eliminating many unnecessary costs including last-minute shipping or priority freight for niche components.

Ordering all the parts in bulk on a consistent basis also has the potential to bring down the price per unit, resulting in savings that can be relayed to the consumer should the manufacturer wish to do so.

Initially, the company will have to invest substantial capital into reworking its supply chain to support the new stock-keeping and production methods which could have an adverse impact on car prices.

However, once everything is running smoothly the vehicles should become more affordable and faster to produce than before as the entire process has been homogenized, leading to fewer unforeseen expenses in the long run.

For the end user, another benefit of prepaid features is that you can have access to certain abilities only when you want or need them, and when you don’t you won’t have to pay for them.

For example, if you buy a new 420d Coupe with seat heaters right now you would have to fit the heaters as an optional extra at a price of R6,100.

If the vehicle is financed, this will add over R110 per month to the finance cost over a period of five years, resulting in at least R6,600 paid extra for seat heaters at the end of the agreement.

If the heaters were already installed in every 4 Series, though, you would only have to pay for the few months out of the year when using them, which could result in noticeable savings over the course of ownership.

At current prices, if you were to only switch on your heated seats in South Africa from June through August, the three-month subscription would cost R750. Over five years this works out to R3,750.

The final pro of pay-to-use features comes in the form of residual value.

Vehicles with more optional equipment installed have historically performed better on the pre-owned market than those without. As such, the average residual value of vehicles with pay-to-use features will generally be higher than it would’ve been had the equipment not been installed.

Although in a few generations nearly all the cars on the market are expected be sold with prepaid abilities, meaning this benefit might not be worth counting on in the longer term.

The bad

While prepaid features will likely result in faster production and more affordable parts, there is a chance they will push up the average prices of new vehicles.

As all the models on a production line will start using all the parts available for that particular vehicle, manufacturers are unable to omit features to produce certain units at a lower cost than others.

While it’s highly unlikely that automakers will reveal how much of the price increases were due to features and how much due to inflation, new cars are expected to become more expensive on average with the continued roll-out of pay-to-use abilities.

Additionally, the current global microchip shortage could exacerbate the pricing and backlog issues if it continues for years to come since vehicles are now being filled to the brim with chips and processors.

Prepaid features further mean a particular car must be connected to the internet if the driver wants to make use of them, also known as being always online, opening up another channel for nefarious actors to do damage.

This has already come to fruition with, for example, Hondas and Teslas being hacked and accessed without the owner’s knowledge through a bug in the software.

Manufacturers and third parties are fervently working to prevent these issues from happening in the future, but unfortunately, it remains extremely difficult to find a software error until it is being exploited.

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