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Ok, I'm trying very hard not to be that industry guy that scoffs at the new entrant to the space with a new business model, but I have serious concerns as to th

by nlh 16y ago

Ok, I'm trying very hard not to be that industry guy that scoffs at the new entrant to the space with a new business model, but I have serious concerns as to the viability of this model. My background: I've run a car rental company for nearly 7 years now, so I know a thing or two about the logistics. Granted, my business deals with luxury/exotic cars, so some of the issues we face are quite different, but nonethless the core issues remain. Here are my concerns: * Rental cars get treated like crap, whether it's a Buick or a Bentley. "Mystery damage" appears in a high percentage of rentals. The customer will, 9 times out of 10, say "Oh, that was there when I picked the car up." We solve that problem by having a trained staff member take photographs of the car before and after and have the customer sign a very detailed check-in and check-out report with every inch of the car covered. In the event of a dispute, we are documented up the wazoo. If these transactions are happening person-to-person, how is that documentation being done? It takes at least a few weeks of solid training to get our employees accustomed to having "the eye" for damage to our cars. I doubt P2P renters are going to train themselves. This, then, opens up every rental experience to a massive potential for liability and dispute, and in the cases where the documentation isn't up to spec, both parties will be left with a very bad taste in their mouths (and potential lawsuits). * Insurance. They claim to offer insurance, and I'm sure they've managed to find a carrier to cover them, but insurance in the car rental world is dicey at best. Often carriers will provide coverage, but if you've got too many claims (and a business like this is ripe for claims -- see above) then you'll get dropped like a hot potato. And if you get dropped, there aren't many other options. And the few options that exist cost 2x - 10x the price. I've seen this again and again - it's very easy to start and run a car rental company for the first year. Then you have an accident and it comes time for renewal and the story -- and numbers -- change dramatically. * In general, and this is my weakest argument, lots of people try to enter the car rental business because they think of cars as commodities that can be treated like any other piece of equipment. The problem is that cars are massive rolling accident and lawsuit machines. If you're renting a dress to someone (Rent The Runway) or your couch (AirBNB) or a watch or a tux or etc. etc. etc. that's one thing. But there isn't a chance that dress is going to cause a death. Or a massive accident. And if the dress gets ripped, it's a $100/$1000 problem, not a $20,000 or $50,000 problem (or in the event of an accident w/ injuries, a $20M problem). Anyway, I want to embrace new and innovative models, but this smells of disaster to me.

brc 16y ago
I'm not involved in the rental industry, but have always been interested in it (hence multiple posts), simply because I've often wondered out loud how they make money, and I've seen many different business models. Obviously people do, so there is a business model there, and it isn't freely communicated to the public. While some firms operate like yours, with detailed checkin/checkout process, others seem to care less as long as you turn up in something with the right plates on, that seems to be the right make and color. 10 minutes at one of the large rental locations in LA will show this. My thoughts are that these companies just work on volume, purchase the cars cheap, turn them over regularly and just work on pure numbers. Whether this can translate to a mixed-lot private rental remains to be seen. It is just too easy for a one-time renter to do a lot of damage to a vehicle and disappear, taking their facebook account with them. The reputation model works well in many cases (see ebay with high reputation buyers/sellers) but breaks down at the starting point. I guess it can be covered by a higher premium for first time renters but then that is going to dissuade new people from trying out the service. Perhaps the company can offer cash bonuses to people willing to rent to first-time customers or something. As for your last argument - I think - despite your valid claims, that a bog-standard rental car can be treated as a commodity, despite the mechanical complexity and insurance / liability issues. It just takes the right mix of legal protection and insurance underwriting. How you get that is the key to the puzzle, and the person that gets it right will win this battle, if it can be won.
- brc 16y ago
  Just to clarify my thinking on this one, the car isn't a commodity. What is actually the commodity is either x distance travelled. In the same way an airline seat is a commodity but a plane isn't. So what people are really selling and buying here is the ability to drive oneself a set distance at a set point in time. That's the commodity. The rest is just managing the capital cost around that commodity, like managing the ownership and use of a plane.
hajrice 16y ago
I'm not part of this webstartup but I really like what you're saying and would like to connect with you. I looked at your profile, but you don't have your email included. Would you mind sending me an email at hajrice@gmail.com ? I'd really appreciate it.

by nlh 16y ago

brc 16y ago

I'm not involved in the rental industry, but have always been interested in it (hence multiple posts), simply because I've often wondered out loud how they make money, and I've seen many different business models. Obviously people do, so there is a business model there, and it isn't freely communicated to the public. While some firms operate like yours, with detailed checkin/checkout process, others seem to care less as long as you turn up in something with the right plates on, that seems to be the right make and color. 10 minutes at one of the large rental locations in LA will show this. My thoughts are that these companies just work on volume, purchase the cars cheap, turn them over regularly and just work on pure numbers. Whether this can translate to a mixed-lot private rental remains to be seen. It is just too easy for a one-time renter to do a lot of damage to a vehicle and disappear, taking their facebook account with them. The reputation model works well in many cases (see ebay with high reputation buyers/sellers) but breaks down at the starting point. I guess it can be covered by a higher premium for first time renters but then that is going to dissuade new people from trying out the service. Perhaps the company can offer cash bonuses to people willing to rent to first-time customers or something. As for your last argument - I think - despite your valid claims, that a bog-standard rental car can be treated as a commodity, despite the mechanical complexity and insurance / liability issues. It just takes the right mix of legal protection and insurance underwriting. How you get that is the key to the puzzle, and the person that gets it right will win this battle, if it can be won.

brc 16y ago
Just to clarify my thinking on this one, the car isn't a commodity. What is actually the commodity is either x distance travelled. In the same way an airline seat is a commodity but a plane isn't. So what people are really selling and buying here is the ability to drive oneself a set distance at a set point in time. That's the commodity. The rest is just managing the capital cost around that commodity, like managing the ownership and use of a plane.

hajrice 16y ago

I'm not part of this webstartup but I really like what you're saying and would like to connect with you. I looked at your profile, but you don't have your email included. Would you mind sending me an email at hajrice@gmail.com ? I'd really appreciate it.