Can Paying for a Telematics System Save You Money? -

Can Paying for a Telematics System Save You Money?

What's the Best Value: Paying for a Telematics System or Buying Separate Services

In the current economic climate, everyone is looking for ways to save, and it's always prudent to make sure you get the most for your driving dollar. So it may be a tough time to consider shelling out for a subscription to a telematics service such as OnStar once the free trial period ends. But re-upping for such a service may actually save you money if you're currently paying for an auto-club membership so you have roadside assistance when you break down or lock your keys in your car.

OnStar also claims that its service can save car owners some cash since it indicates when service is required. This can ensure that a vehicle operates at optimal efficiency, helping save gas as well as wear and tear, so owners don't spend money on unnecessary oil changes. Plus, OnStar has recently begun offering low-mileage discounts to drivers who qualify through its corporate cousin, GMAC Insurance.

Shave a Few Dollars

This got us wondering if, even without this OnStar-specific insurance discount, telematics systems like those from BMW, Lexus, Mercedes and now Ford can shave a few dollars off yearly driving costs. And since all these systems also offer turn-by-turn navigation, we considered whether the feature could be a less expensive alternative to a portable nav system. All the systems except for Ford's also provide stolen-vehicle tracking, which may entitle a car owner to an auto insurance discount, although we didn't factor that into our final cost-savings analysis.

Of course, the primary reason most people pay for a telematics system is to get the peace of mind of knowing that if the worst happens and they're in a serious accident, help will be on the way. We didn't factor that benefit into our cost-savings analysis, but it's certainly a major factor in most people's decision to pop for a monthly telematics subscription — and it's difficult if not impossible to put a price on that sort of protection if and when you need it.

Let's start by taking a look at each telematics service that's currently available, and the related cost per year for the particular services that can potentially save car owners money.

OnStar by GM
OnStar's Safe & Sound package is $199 per year after the initial one-year free trial period, and the cost-saving features we considered include vehicle diagnostics, roadside assistance, remote door unlock and stolen-vehicle tracking. A Directions & Connections package can be added for $100 more a year for $299 total. It includes all of the above services plus navigation, so a driver can download voice-guided, turn-by-turn directions to the vehicle or send a route to the car from after plotting it online. And an OnStar operator can also send directions directly to some 2009 GM vehicles with an onboard navigation system.

BMW Assist
The BMW Assist Safety Plan is standard on 2007 and later M5, M6, 5 Series, 6 Series and 7 Series vehicles equipped with BMW Assist and Bluetooth system. It's included in the Premium package option on other vehicles, or available as a $750 stand-alone option in any BMW.

The first four years of service are included, after which it's $199 per year. The potential cost-saving features of BMW Assist include roadside assistance, remote door unlock, vehicle diagnostics and stolen-vehicle location assistance. Adding the Convenience Plan costs an additional $199 a year and includes navigation routing.

Lexus Link
Lexus Link is "free" the first year, although it requires the purchase of the pricey $900 Lexus Link option, and it costs $199 annually after the trial period. The cost-saving elements of the basic Safety Plan include roadside assistance, remote door unlock and stolen-vehicle location assistance. The Direction Plan adds navigation routing and costs $200 for the first year; to re-up for both plans costs $399 a year.

Mercedes-Benz TeleAid
Mercedes-Benz's Security & Care package is free for the first year, and after that it's $240 annually. Its cost-saving benefits include roadside assistance, remote door unlock, vehicle diagnostics, stolen-vehicle location assistance and anti-theft alarm notification. The Luxury & Convenience package can be added for $210 and includes route assistance and voice-delivered traffic. Both plans together cost $450 in subsequent years.

Ford Sync 911 Assist and Vehicle Health Reports
Ford's voice-activated Sync system has set a new standard in portable media player and Bluetooth phone integration for its ease of use, rich feature set and low cost. It either comes standard on most new Ford and Lincoln vehicles or it's available as a $395 option on others. Now the Sync system is changing the telematics paradigm by offering subscription-free emergency services and vehicle maintenance info.

With 911 Assist, when a Bluetooth phone is connected to the Sync system and an airbag deploys, 911 is automatically dialed and the car occupants have 10 seconds to cancel the call. Otherwise, Sync calls 911 and occupants can speak directly with an operator or an automated message is played. If the occupants are unconscious or can't respond, Ford claims that the vehicle's location can be pinpointed through cell-tower triangulation or the GPS receiver built into some phones.

Ford says the advantage of the system — besides low to no cost — is that vehicle occupants are connected directly to 911 operators instead of calls being first routed through a telematics call center. Potential downsides of the system are that a cell phone can be damaged in an accident and since the system isn't connected by GPS, locating a crashed car isn't guaranteed.

But the latter will change with the next generation of Sync, which adds navigation — also for free. On most 2010 models with Sync, Ford plans to include an onboard GPS receiver. And while 911 Assist could save lives, the new nav app could also save car owners money otherwise spent on a portable nav system. (Traffic and directions will be added to Sync on select 2010 Ford and Lincoln vehicles.)

The way Sync can help save a few dollars is through its Vehicle Health Reports (VHR) feature. Using the Sync Web site, car owners can set up a VHR profile for their vehicles. The Sync system automatically collects diagnostic information from the vehicle and sends it to Ford via an 800 number using the car owner's paired mobile phone.

The VHR data is analyzed and a report is sent to the car owner by e-mail or text message. Reports can also be accessed on the Sync Web site, and from there a car owner can schedule service online or e-mail and print out a report. Owners can also set up an automatic reminder of vehicle maintenance schedules.

Comparing Costs

In determining whether a telematics system can save car owners money, we considered the cost of a yearly subscription to the basic service offered by each of the five automakers and compared that against what it would cost if you paid for the same roadside assistance services by buying an auto-club membership. We also factored in what a car owner could potentially save in terms of fuel and maintenance costs when a telematics system helps keep a vehicle shipshape. For these calculations, we applied the data OnStar uses in making its case for the cost-effectiveness of its service.

The U.S. Department of Energy (DOE) contends via its Web site that a driver can get up to 7 percent better fuel economy by maintaining proper tire pressure and through engine diagnostics. OnStar declares that, "Depending on your estimated gallons per week, this could save over $200 per year," although the numbers are based on gas prices as of the end of October 2008, which were substantially higher than they are at this writing. Later on, we'll look more closely at this claim and plug the related and updated numbers into our overall analysis of whether all the current telematics systems can save drivers money.

Click here to view a chart that shows how OnStar calculated its fuel-saving claim.

Another OnStar contention is that its service can save car owners money by cutting down on the number of unnecessary oil changes since the engine diagnostic feature ensures that the automaker's recommended service schedule is followed — not that of a dealership's over-eager service manager, the local express oil change outlet or your uncle Al. OnStar claims that a car owner can "save by spending 50 percent less on oil changes" since GM vehicles average 8,500 miles between oil changes, and it bases the savings on the car owner getting an average of 2.5 oil changes per year (at $29 per oil change) rather than changing their oil five times per year — or every 3,000 miles — when driving 15,000 miles a year.

Click here to view a chart that shows how OnStar calculated its oil-change savings claim.

OnStar's biggest cost-savings claim is through low-mileage discounts with its corporate affiliate GMAC Insurance. OnStar asserts that "if you're driving less, you may be eligible for a low-mileage discount through GMAC Insurance of up to 54 percent" and that a driver can "save over $430 in GMAC Insurance discounts" under the program. We included this in our cost-savings analysis for OnStar only, but not for the other telematics systems.

Click here to view a chart that shows how OnStar calculated its insurance-premium savings claim.

Lastly, we took into account the premium services offered by each automaker that adds navigation, and compared that to what it would cost to buy a portable navigation system instead. While not an apples-to-apples comparison — and each setup has its advantages and disadvantages — it gives a general idea of which approach offers the best value.

Do the Math

Based on the cost factors detailed above, we applied this cost-savings formula to all of the telematics systems currently available. Here's how we came up with the related figures.

We calculated the average cost of an annual AAA membership by taking the national range of a primary membership ($38-$80) and the national range to add an associate member ($17-$48) and averaged the cost for a two-person membership to $90. Since Ford's Sync doesn't offer roadside assistance, we didn't include that feature in our cost-saving analysis of the system.

As mentioned, OnStar bases its fuel-saving claim on the fact that the DOE says a driver can achieve 7 percent better fuel economy by making sure that their car's tires are properly inflated and through proper engine maintenance — 3 percent for tire pressure and 4 percent for engine maintenance. To achieve a dollar figure, OnStar calculated the average number of gallons of gas consumed each week — ranging from 5 gallons to 20 — based on the price of gas at the end of October 2008. (Click here to view the data.)

To simplify things, we took the average amount of gasoline consumed in the U.S. each week: about 12 gallons per driver, according to the Federal Highway Administration. Then we multiplied that by the average price of gas — without regard to the grade or area of the country — for the week ending January 12, 2009, which was $1.83 a gallon. So if the average driver is spending roughly $21.96 on gas each week, a savings of 7 percent would equal $1.53 a week, or about $80 a year.

We also took at face value OnStar's claim that drivers can save up to $72.50 a year by changing their oil 2.5 times a year as opposed to five times, or every 3,000 miles, if a vehicle is driven 15,000 miles a year. But since GM recommends an oil change every 8,500 miles, we rounded that figure off to two oil changes in a 15,000-mile/year period, for a savings of $58 a year. Then we applied this same formula to the other telematics systems, using the respective automaker's recommended maintenance schedule.

Lastly, we took the average price of a portable navigation system ($245 according to J.D. Power and Associates' 2008 Portable Navigation Device [PND] Usage and Satisfaction Study, release in October 2008) and amortized that over three and a half years, roughly the estimated amount of time someone would own a PND, for an average annual cost of $70 per year.

The Bottom Line

Here's what we found when comparing whether it saves money to pay for a telematics system vs. purchasing similar services à la carte.

OnStar by GM
À la carte costs without OnStar $516
Annual AAA membership1 $90
Additional fuel cost2 $80
Additional insurance cost3 $288
Additional oil change cost4 $58
OnStar Safe & Sound (renewal) $199
Potential savings (or cost) $317
w/ Navigation:
À la carte costs, including $70/year for portable nav5 $586
OnStar with Directions & Connections Plan $299
Potential savings (or cost) $287

BMW Assist
À la carte costs without BMW Assist $286
Annual AAA membership $90
Additional fuel cost $80
Additional oil change cost $1166
Annualized cost of BMW Assist Safety Plan $187.50
Potential savings (or cost) $99
w/ Navigation:
À la carte costs, including $70/year for portable nav $356
Annualized cost of BMW Assist with Convenience Plan7 $386.50
Potential savings (or cost) ($30.50)

Lexus Link
À la carte costs without Lexus Link $286
Annual AAA membership $90
Additional fuel cost $80
Additional oil change cost8 $116
Lexus Link Safety Plan after first year $199
Potential savings (or cost) $87
w/ Navigation:
À la carte costs, including $70/year for portable nav $356
Lexus Link with Directions $399
Potential savings (or cost) ($43)

Mercedes TeleAid
À la carte costs without Mercedes TeleAid $271.50
Annual AAA membership $90
Additional fuel cost $80
Additional oil change cost9 $101.50
Mercedes TeleAid Security & Care package $240
Potential savings (or cost) ($31.50)
w/ Navigation:
À la carte costs, including $70/year for portable nav $341.50
Mercedes TeleAid with Luxury & Convenience package $450
Potential savings (or cost) ($108.50)

Ford Sync Vehicle Health Report
À la carte costs without Ford Sync $167
Additional fuel cost $80
Additional oil change cost10 $87
Ford Sync as a standard feature $0
Potential savings (or cost) $167
w/ Navigation:
À la carte costs, including $70/year for portable nav $237
Ford Sync with Traffic and Directions11 $0
Potential savings (or cost) $237

À la carte costs without Ford Sync $167
Additional fuel cost $80
Additional oil change cost12 $87
Ford Sync an option $395
Potential savings (or cost) ($228)
w/ Navigation:
À la carte costs, including $70/year for portable nav $237
Ford Sync as an option $395
Potential savings (or cost) ($158)


As you can see, it may be possible to save money by spending it on a telematics system, depending on which system it is. But keep in mind that, unlike AAA, a telematics system won't tow your car for free when it breaks down. Plus, you can carry a portable navigation system from car to car, unlike with those that are part of a telematics system. So consider which features are most important to you and whether you can get services such as roadside assistance from an automaker, for example, and create your own maintenance reminders (using, say, a computer program or simple calendar) to save a few dollars.

Telematics systems make life easier for some drivers who may need a helping hand with maintenance reminders and directions. And automatic crash-alert and other safety features of the systems add a significant amount of peace of mind to the package, which is difficult to put a price on when your life or a loved one's is on the line — and is the main reason these systems exist in the first place.

Plus, new telematics services from Chrysler, Lexus, Mercedes and Toyota will debut later this year (although Lexus Link will continue to be serviced through OnStar), offering even more features and services — and perhaps more bang for your buck.

  1. Based on an average two-person AAA annual membership
  2. Based on an average savings of 7 percent annually, according to OnStar
  3. If you drive 7,501-10,000 miles per year and qualify for a GMAC low-mileage discount, per OnStar
  4. If oil is changed every 3,000 miles in a 15,000 miles/year period as opposed to two times, as recommended by GM
  5. Based on JDPA average price of $245 for a PND, amortized over 3.5 years
  6. If oil is changed every 3,000 miles in a 15,000/year period as opposed to 1 time (15K miles) as recommended by BMW
  7. $750 option, amortized over four years = $187.50
  8. If oil is changed every 3,000 miles in a 15,000/year period as opposed to 1 time (15K miles) as recommended by Lexus
  9. If oil is changed every 3,000 miles in a 15,000/year period as opposed to 1.5 times (10K miles) as recommended by Mercedes
  10. If oil is changed every 3,000 miles in a 15,000/year period as opposed to 2 times (7.5K miles) as recommended by Ford
  11. Beginning with 2010 Sync-equipped vehicles
  12. If oil is changed every 3,000 miles in a 15,000/year period as opposed to 2 times (7.5K miles) as recommended by Ford

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