Article written by Effective Media. The analyzes and opinions expressed in this article are those of the author only and not those of OPENLANE Europe.
Leather seats, air conditioning, electric windows, GPS, … Car options have always helped to improve the comfort of drivers and their passengers. They also tend to make the vehicle more attractive on the second-hand market. If you’re wondering as a dealer if this will still be the case in the future, this is a must read article.
When purchasing a car, options depend on the budget and the needs of the subsequent buyers, but also on the model. A premium brand car without leather seats, for example, is less easy to imagine than a low budget car.
In any case, you only have to browse through the online automotive media to see a large number of articles that list – in general terms – the essential options for increasing the residual value of a car. Air conditioning, electric windows, ESP (and security packs in general), GPS (increasingly replaced by Bluetooth connectivity), leather seats, folding rear seats—these are all elements that make a car comfortable, practical and/or safe to use, but also make it attractive on the second-hand market.
Although not all options necessarily increase the trade-in value of a car in a second life, they can often speed up the sale. For example, Car and Driver calculated that a car with a manual gearbox loses an average of $800 in resale value compared to an automatic. A larger study by AIC Analysis indicates a 3% difference in resale value for premium brands and 4% for volume brands between the smallest and most comprehensive infotainment system available. In other words, customers are looking for connectivity. That infotainment system is also the key to a quick sale, as the same study found that cars with the most comprehensive system sold four days faster on average.
But will these options continue to have more or less impact on the second-hand value of cars? Nothing is for certain.
Several manufacturers have recently launched – in certain markets – subscription formulas (monthly or annual) for certain options of their models. If this trend were to become widespread, this is how the market would work tomorrow:
Cars would leave the factory equipped with every imaginable option. These options could be unlocked by software, subject to a subscription. For example, in winter, the user would pay a subscription for a month or two to benefit from heated seats, which are not typically needed in summer. It is also possible today to take out a subscription in order to have access to the on-board camera or the smart lights.
This trend should not make us lose sight of the effect of “free video games”. You know, those free mobile games for which you have to pay 1 euro to benefit from an extra tool or 2.5 euros to unlock a level. This increases manufacturers’ margins with recurring (small) purchases over the life of the car. Such a formula brought General Motors around 2 billion euros in 2021. The American manufacturer predicts that this figure could be multiplied by at least 12 by 2030.
In addition to these margins, these subscriptions would allow manufacturers to achieve economies of scale, as they would eventually have to produce only one variant of each model. Not to mention that when the vehicle is resold, for example on the OPENLANE Europe online auction platform, all options released by the previous user will be blocked again, as the subscriptions are linked to a nominative account.
At this stage, several questions remain. Will consumers really accept this logic? What about the price of cars? Because if we can assume that certain technological equipment will cost less thanks to the volumes generated by the subscription practice, we can still say that the price of vehicles will have to rise without a subscription… A matter to follow closely, without any doubt!