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How is that possible? They make money on buying new cars in bulk and then selling them as used cars? I’m struggling to understand how flipping a depreciating as

How is that possible? They make money on buying new cars in bulk and then selling them as used cars? I’m struggling to understand how flipping a depreciating asset is a profit center.

csours 3y ago
1. Negotiate lower purchase price. 2. Rent the depreciating asset to cover the cost of depreciation. 3. Insurance/financialization
Nasrudith 3y ago
A technicality perhaps? Like if say they buy $40k cars, depreciate it to $30k but earn $20k from rentals. Technically they got most of their money from selling the car used but it still ultimately works only because they are able to rent it out for more than the depreciation cost.
- deleted 3y ago
  [deleted]
alemanek 3y ago
Consider that normally rental car companies get steep discounts on their bulk buys. They didn’t with their Tesla order which further hurts them. But, here is the overly simplified normal math: (Resale Price + Rental Income - Maintenance - Purchase Price) / 2 years Trick is that they generally flip these vehicles after 2 years and upsell an auto warranty which a big profit center as well. Resale price tanks and there goes all their profit.
- bsder 3y ago
  I don't think "2 years" is valid anymore. It seems like the rental companies are hanging onto their cars for closer to 5 years, now. This would also link into their "extra damage" problem.
  - technetist 3y ago
    I mean the Hertz/Tesla deal only started end of 2021 [1] and less than half of the ordered fleet was available by end of 2022 [2]. It’s kind of disappointing if they are getting noticeably beat up after a year. [1] https://apnews.com/article/business-lifestyle-travel-car-rental-mark-fields-0da1c7ac07d45682cf101077b62988ab https://apnews.com/article/business-lifestyle-travel-car-ren... [2] https://electrek.co/2023/02/08/hertz-half-massive-tesla-order-100000-electric-cars/ https://electrek.co/2023/02/08/hertz-half-massive-tesla-orde...
m463 3y ago
Normally, they do this with sweetheart backroom deals with the manufacturer for a fleet of cars. It can be lucrative, I recall the manufacturers put terms in the contract that prevent them from selling cars with less than a certain number of miles, to prevent them from just selling the cars immediately at a profit. However with Telsa I don't think they had a negotiated price. Too bad, because EV rentals directly lead to sales. Ask any EV owner, and they will probably have dozens of conversations with non-owners who think it is impractical and would not fit in their life. But put them into an EV and many of these roadblocks evaporate.
- listenallyall 3y ago
  > Too bad, because EV rentals directly lead to sales. Yea, no. Electric cars are the cheapest option in most rental fleets because demand is tiny, compared to ICE. The rental EV experience is terrible, primarily because, unlike owners, renters don't have a home/garage charger they can rely on. Instead you have to hope that the hotel you're at has a charger, that it works, that it's compatible, that it won't take too long, that there isn't someone else using it. And if you don't return the car 80-90% charged, you pay a fee that's more expensive than filling a typical tank with gasoline! This author nails it: https://archive.ph/yFwEo https://archive.ph/yFwEo
  - Symbiote 3y ago
    Electric "floating" rental cars work very nicely. In many European cities there are fleets of rental EVs which you unlock with a smartphone. The cost is per-minute, or you can prepay a longer time, like a day. I typically use them for moving bulky stuff around the city and small day trips outside the city. There's a 20 minute free credit for ending the trip at a slow charger which is usually easy to do and means the cars are usually close to fully charged. (I still wouldn't want a surprise EV from a normal rental company.)
  - m463 3y ago
    That article talks about an unexpected EV rental experience. I would agree with the author. A person renting an EV to try it on for size would have a different mindset. Also if you rent an ev through hertz, they bombard you with FAQ emails before your rental. The article also was a chevy bolt. I think renting a tesla is a different experience than ccs/chademo because the supercharger network is well thought out with lots of locations with many many stalls, and it is well integrated into the nav system.

How is that possible? They make money on buying new cars in bulk and then selling them as used cars? I’m struggling to understand how flipping a depreciating asset is a profit center.

csours 3y ago

1. Negotiate lower purchase price. 2. Rent the depreciating asset to cover the cost of depreciation. 3. Insurance/financialization

Nasrudith 3y ago

A technicality perhaps? Like if say they buy $40k cars, depreciate it to $30k but earn $20k from rentals. Technically they got most of their money from selling the car used but it still ultimately works only because they are able to rent it out for more than the depreciation cost.

deleted 3y ago
[deleted]

alemanek 3y ago

Consider that normally rental car companies get steep discounts on their bulk buys. They didn’t with their Tesla order which further hurts them. But, here is the overly simplified normal math: (Resale Price + Rental Income - Maintenance - Purchase Price) / 2 years Trick is that they generally flip these vehicles after 2 years and upsell an auto warranty which a big profit center as well. Resale price tanks and there goes all their profit.

bsder 3y ago
I don't think "2 years" is valid anymore. It seems like the rental companies are hanging onto their cars for closer to 5 years, now. This would also link into their "extra damage" problem.
- technetist 3y ago
  I mean the Hertz/Tesla deal only started end of 2021 [1] and less than half of the ordered fleet was available by end of 2022 [2]. It’s kind of disappointing if they are getting noticeably beat up after a year. [1] https://apnews.com/article/business-lifestyle-travel-car-rental-mark-fields-0da1c7ac07d45682cf101077b62988ab https://apnews.com/article/business-lifestyle-travel-car-ren... [2] https://electrek.co/2023/02/08/hertz-half-massive-tesla-order-100000-electric-cars/ https://electrek.co/2023/02/08/hertz-half-massive-tesla-orde...

m463 3y ago

Normally, they do this with sweetheart backroom deals with the manufacturer for a fleet of cars. It can be lucrative, I recall the manufacturers put terms in the contract that prevent them from selling cars with less than a certain number of miles, to prevent them from just selling the cars immediately at a profit. However with Telsa I don't think they had a negotiated price. Too bad, because EV rentals directly lead to sales. Ask any EV owner, and they will probably have dozens of conversations with non-owners who think it is impractical and would not fit in their life. But put them into an EV and many of these roadblocks evaporate.

listenallyall 3y ago
> Too bad, because EV rentals directly lead to sales. Yea, no. Electric cars are the cheapest option in most rental fleets because demand is tiny, compared to ICE. The rental EV experience is terrible, primarily because, unlike owners, renters don't have a home/garage charger they can rely on. Instead you have to hope that the hotel you're at has a charger, that it works, that it's compatible, that it won't take too long, that there isn't someone else using it. And if you don't return the car 80-90% charged, you pay a fee that's more expensive than filling a typical tank with gasoline! This author nails it: https://archive.ph/yFwEo https://archive.ph/yFwEo
- Symbiote 3y ago
  Electric "floating" rental cars work very nicely. In many European cities there are fleets of rental EVs which you unlock with a smartphone. The cost is per-minute, or you can prepay a longer time, like a day. I typically use them for moving bulky stuff around the city and small day trips outside the city. There's a 20 minute free credit for ending the trip at a slow charger which is usually easy to do and means the cars are usually close to fully charged. (I still wouldn't want a surprise EV from a normal rental company.)
- m463 3y ago
  That article talks about an unexpected EV rental experience. I would agree with the author. A person renting an EV to try it on for size would have a different mindset. Also if you rent an ev through hertz, they bombard you with FAQ emails before your rental. The article also was a chevy bolt. I think renting a tesla is a different experience than ccs/chademo because the supercharger network is well thought out with lots of locations with many many stalls, and it is well integrated into the nav system.