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Startup Idea: Used Car Leasing
- klapinat0r 13y agoA local company comes to mind, Lej et Lig (translated from Danish): http://translate.google.dk/translate?sl=auto&tl=en&js=n&prev=_t&hl=da&ie=UTF-8&u=http%3A%2F%2Fwww.lejetlig.dk%2F http://translate.google.dk/translate?sl=auto&tl=en&js=n&prev... Literal translation: rent-a-corpse. You pay about $50 a day, choose your type (van, personal, etc.). They're mainly used when people move by themselves, have to take stuff to the junkyard and such. The down-side is, typically, that you can get a lousy car (playground for lemons). On the plus side, they have a thriving business, and been in business since 1995, so it's not a dead-end idea.
- nixy 13y agoYes, the English term is rent-a-wreck, stemming from the company with the same name[1], founded in the sixties. [1] http://en.wikipedia.org/wiki/Rent-a-Wreck http://en.wikipedia.org/wiki/Rent-a-Wreck
- mutagen 13y agoUS has a similar company with correspondingly similar alliteration, Rent a Wreck (http://www.rentawreck.com/ http://www.rentawreck.com/). Despite the name, they seem to rent newer model vehicles at market rates.
- AHconsidered 13y agoAnyone interested in exploring car sales ideas in SF/Bay-Area? I have one for which I did a bunch of market research and it looks promising. Happy to explore more.
- deleted 13y ago[deleted]
- ivankirigin 13y agopost your contact info :) I know from posting these ideas that there is a lot of latent interest, but less publicly stated. I post my email all the time on HN and never get spam. Thanks gmail! See: ivan.kirigin@gmail.com
- jmatthews 13y ago20 years in the auto industry on the retail side. I'd be happy to consult for free and dig deeper if I liked the direction of the project. jmatthews005@gmail.com
- ValG 13y agoI worked through car dealerships both at a low and a high level through my early career. Would be interested in chatting. valgui@gmail.com
- conductr 13y agoThat's a good idea. I'm not the one to take it on, but could see myself being a customer. Especially the month-to-month thing, I'd be all over that just because I don't like the commitment of owning a car although it's basically required where I live
- Satoshietal 13y agoDuh, Mercedes Finance will happily lease you a nice, clean used Mercedes. Especially if it meets their Star Certified criteria. My first MB was leased from new for three 3-year lease terms; obviously terms 2 and 3 were a used car. My next MB was used and leased for three years. In all cases the lease terms were clear and fair, and the interest rate very competitive. Right now my car loan is with them and under 1%. I'm sure that other reputable brands have similar programs.
- sliverstorm 13y agoSeems to me the real obstacle would be financing the operation. Finance shies away from used vehicles because they are much more difficult to accurately appraise, and without accurate appraisals you are assuming another (large) dimension of risk.
- maxerickson 13y agoYeah, I'm not sure there is a large underutilized fleet of cheap, high value vehicles out there. (High value meaning predictable/reliable/etc, not necessarily sticker price)
- xbryanx 13y agoWhere do rental cars go after they're two or three years old? I've always wondered, but they seem like a stock of well maintained vehicles ready for leasing.
- sliverstorm 13y agothey seem like a stock of well maintained vehicles ready for leasing Please excuse my mirth, but fleet vehicles are generally not well-maintained, and the folks renting cars tend to be hard on them.
- brudgers 13y agoThe difference between a rental car and a Jeep is that you can drive a rental car anywhere.
- baddox 13y agoAccording to a friend of mine who works at one of the big US rental companies, they go to car auctions and sell for very low prices.
- calbear81 13y agoThey go to the sales lot. A lot of rental car companies have their sales divisions and dealerships to specifically get rid of old fleet cars.
- deleted 13y ago[deleted]
- gavanwoolery 13y agoIIRC (at least in California) it is illegal to lease a used vehicle - it must be purchased. I don't know what the reason for this is, or if I even remember that correctly but I'm pretty sure its a law because when I purchased my car I checked into this. You can transfer your lease (i.e. swapalease.com), but in order to do it legally the swapper typically has to have their credit approved and fill out paperwork for the dealership. Another factor is that most sellers won't be interested in leasing a used vehicle because there is so little financial incentive -- leasing distributes that value of the car over a period of time and based on mileage used -- if a used car is only worth (say) $5-10k, it couldn't be leased for very much.
- ivankirigin 13y agoIf anyone has a link, that'd be helpful. Start in a state without such regulations. Or just ignore them until you're big enough to matter to regulators.
- 001sky 13y agoIssue is lemons and adverse selection. New cars have probabilistic risk of defects. Used cars, not so much. Leasing depends (mathematically) on correct and reliable modeling of residual values. Once you get a starting pool of unknown risk [1], somebody is playing a fools game. Just a couple things to think about. https://en.wikipedia.org/wiki/Lemon_law https://en.wikipedia.org/wiki/Lemon_law https://en.wikipedia.org/wiki/Adverse_selection https://en.wikipedia.org/wiki/Adverse_selection Edit: [1] State lemon laws vary by state and may not necessarily cover used or leased cars, and other goods.
- ivankirigin 13y agoModeling failure of a used car doesn't seem that different to me than a new car. There is a distribution, probably more expensive for slightly used cars. It can be modeled and incorporated into price.
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- haldujai 13y agoI think this ignores the fact that used car sales are one of (if not the) largest revenue source for dealerships. With current interest rates a lease would probably end up bringing in less revenue than a sale, new cars move at low prices because dealerships get volume bonuses. Those same bonuses don't apply to used cars so you're eating away at your bonuses if people are now tempted to lease a 2012 for less than a new car. This wouldn't make financial sense for them to do, even with MB-USA while they offer this service it's not exactly what they push hard to get you to do. Without the infrastructure and support of an auto manufacturer this would be hard to get a profit, and no dealership would find this to be the best business model.
- ivankirigin 13y ago"your margin is my opportunity" It matters a lot more if people are interested in this than if dealerships maximize profit doing it. I think people would move away from ownership if it were easier, and considering all the parts of the process that could be improved, it seems like a good experiment.
- blhack 13y ago>I think this ignores the fact that used car sales are one of (if not the) largest revenue source for dealerships. No, they're not. New car trades are liquidated at auction houses. Source: I work in the automotive industry.
- driverdan 13y agoThe margins on used cars are many times those of new cars. Most dealerships do make more money from their used cars unless they are very high volume.
- jmatthews 13y agoMost used car models are based on retailing a high percentage of dealer trades as they are the highest margin source of inbound vehicles. Easy source checks are any research on CarMax, a light review of any of Pollacks books(Velocity, Velocity 2.0, Velocity Overdrive) Source: I am also a domain expert in the auto industry.
- jussy 13y agoCaas car as a service would be better directly from the manufacturer.
- adamqureshi 13y agoI have a friend who works for a HUGE dealership! i can preseo the idea to them and see wassup? anyone wanna build a HTML/CSS prototype using bootstrap + backbone.js? do we have a name?
- musgrove 13y agoI look at that chart and just laugh. Why in the Hell would anyone buy a new car these days!?
- wcfields 13y agoEasy: 0% APR + new car warranty + lemon law protection + 0 miles > whatever APR you get on a used car + 30 day at best warranty + 40k-60k miles
- ghaff 13y ago+ (for new car) much closer to information symmetry with the seller, especially given lemon law protection and new car warranty although those aren't directly about information symmetry. I've done both new and used and have had a variety of experiences in both cases. But I probably wouldn't be n a big hurry to buy a used car at this point. I looked around when I bought my last vehicle and the price savings associated with modest mileage used vehicles just weren't especially compelling. (And I wasn't even financing.)
- TamDenholm 13y agoThis has actually crossed my mind lately, i looked into leasing a van for business purposes and i did "back of the napkin" calculations on hypothetically starting my own used van leasing company. I couldnt make it worth the hassle. Does anyone have any of their own basic business model calculations?
- nilkn 13y agoGenerally what you pay for when leasing a new car is the depreciation. This is why luxury sedans like a BMW often have better lease deals than cheaper or less desirable cars--you're only paying for the depreciation, not the base cost of the car, and these cars depreciate much slower. That said, just because that's how it works for new cars doesn't mean there isn't a market for leasing used cars. In fact, I could see myself leasing high mileage luxury cars--cars I wouldn't normally buy due to the mileage but wouldn't mind renting for a few years, so long as the price was notably less than leasing a brand new car of the same kind.
- jmatthews 13y agoLuxury brands depreciate at a higher per-day-per-mile amount than non-luxury brands. A trivial amount of research will prove this out. No disrespect intended.
- nilkn 13y agoNo disrespect taken at all. I don't have any problem admitting I'm completely wrong on something. I'd be glad to learn more about the topic. However, a trivial amount of research has really only served to seemingly complicate the matter rather than confirm it either way. For instance, luxury brands fared well here: http://forums.motortrend.com/70/1044466/the-general-forum/consumer-reports-10-best-and-worst-cars-for-deprec/index.html http://forums.motortrend.com/70/1044466/the-general-forum/co...
- jmatthews 13y agoAhh, when determined as a percentage of msrp the field gets murky. But 10% of a $20,000 msrp is markedly different than 10% of a $70,000 msrp. In raw dollars higher msrps depreciate by a much larger whole dollar amount, which would be reflected in the depreciation component of a pre-owned lease. Also the luxury examples in your provided link trend towards "niche" luxury models. It is possible on some models at certain times to be a car new and re-sell it for a profit immediately. (Examples at current are the Range Rover and the new Corvette.) These markets are extremely fickle though. A final point having read the comments of your link. When they rank cars by the factory residual value they do not discount that manufacturers attempt to prop up resale value by inflating residuals and writing offf the loss at lease maturity. Accounts based on that should be discarded or at least fact checked by an independent source, such as ALG. https://www.alg.com/ https://www.alg.com/
- chiph 13y agoIf anyone would be doing this, I figure it'd be CarMax. They have a steady supply of used cars (mostly bought at auction), a staff that is good at appraising used cars, and a well worked-out & automated sales process.
- tylerlh 13y agoFull stack/front-end dev here. If any folks are interested in working on this idea, I'd be up for exploring the feasibility of the project & how we could work together. Contact info in my profile.
- Apofis 13y agoYou can already assume other people's leases and there's even a market out there for this. www.leasetrader.com or www.swapalease.com or a boat load of other websites. How is this any different?
- cykho 13y agoI like this a lot - if you can regulate the market and ensure a high quality experience this would fit perfectly in the space between owning a car (big commitment) and renting (obscenely expensive). I'd use it!
- coffeemug 13y agoI would love this. I always lease my cars. It's extremely convenient, but there are also huge price benefits. Manufacturers often have great lease incentives, and spending ~$35k on a car I'll likely get sick of in a few years seems crazy to me. But I don't particularly care about new cars, I just want them to be "new enough". If someone can deliver a good used car leasing service, I would be all over that.
- gojomo 13y agoFor such a business, the real competition is the same customer using a loan to buy a used-car, approximating the same up-front, monthly, and end-of-term costs. So, to succeed, can the business acquire its fleet more cheaply than others? Tricky, especially if trying to keep a uniform fleet of desirable used-cars like the example Honda Civics (which already command a resale premium). Or, can the business better assess credit/damage risks than established used-car financers? My hunch is those people wanting to lease, rather than buy, a used-car could be uniquely risky. So it feels double-sided in the adverse-selection dimension: both your fleet and your customers will be rejects from other fairly competitive, evolved systems.
- webwright 13y agoI think there's WAY too much baggage with the word leasing. Car ownership-as-a-service or car subscription or... For $X, you get a the use of a clean car full-time. For a $30 cleaning fee, you can swap it out for a different car (bonus-- drive different cars!). Or for a one-time fee, you can access the "specialty fleet" - trucks, vans, and the like for when you need to move stuff or when you have lots of company in town. Upsell to insurance packages, white-glove maintenance packages, etc. This also disrupts long-term car rental (which is annoying) for relocation, long-term biz trips, etc. Huge savings in time dodging registration, buying/selling, etc. The big question is: can you make the numbers work... And, of course, the elephant in the room is that you need a TON of money to give this a proper try (though there are interesting hacks to test an MVP).
- argumentum 13y agoIsn't this just like Getaround? Or are you suggesting that the startup buy lots of optimal used cars just for this purpose?
- gambiting 13y agoThis must be a US-only thing - I have personally leased used cars and leased them for my company's use as well. So maybe it's just your country(which I assume is US) that does not have used-car leases?