By Desiree Homer
When Uber first launched, no one realized how successful the ride-share market would become. Despite the publicity bumps along the way, ride-sharing is a way of life for many these days. Others like Lyft have gained market share as well. If you yourself haven’t called for a ride, you probably know someone who has, and maybe even someone who moonlights as a driver for extra cash.
As you continuously improve your lead source strategies, you may be wondering how your dealership can tap into this ride-share economy. Some dealerships have already anticipated this shift and, in turn, have launched entirely new segments of revenue to maximize on this industry boom. There is an abundance of opportunities to augment your platform to make it work for your dealership in your ride-share-driven market. There are three key strategies you could be leveraging. You could partner with a ride-share program or third-party vendor to target the drivers in this market. You could promote any ride-share friendly services offered by your manufacturing brand(s). Or, you could be launching an entirely independent revenue stream.
Ride-share Drivers Need Cars
To meet the need of ride-share drivers who need cars, several companies emerged offering leasing services specifically to these consumers. Many platforms have tried to implement leasing programs, but there have been operational struggles. Some suggest lease segment failures occur in part due to the simple economics of inventory for some of the ride-share companies. Other concerns began to surface at the driver level, too. Drivers, whose leased cars required maintenance or time in the shop, meant drivers were on the hook for lease payments even when they weren’t earning fares. These hiccups over the past few years have made it clear there is an opportunity for industry improvement. A dealership’s business model, for example, is much different than that of a rental or ride-share company. After all, your dealership is designed to manage inventory and service. It presents a unique opportunity for the creation of a revenue-generating channel at the dealership level.
The Rental Car Industry Has Adapted
The rental car industry jumped in specifically to assist these full-time ride-share drivers. Buying a car can be expensive, so renting was an avenue for a more affordable option. Glassdoor.com data indicates drivers average about $14-$16/hour. This means buying a vehicle within a $5,000-$15,000 range, is a logical benchmark for earning enough to pay for the car. Alternatively, the rental companies, including Hertz and Enterprise, partnered with Uber and Lyft early on, with average weekly rates between $165-$180 for those drivers.
Automakers Jump in with Rideshare Buying Incentives
General Motors, Toyota, and Nissan are just a few automakers that are offering incentives for ride-share buyers. Based on fuel-efficient models, usually those within more economical price ranges, buying a new vehicle through one of these programs can be beneficial for some drivers. Programs like the Express Drive Program, as part of a Lyft and GM partnership, offers rental rates to drivers as well.
Dealerships Capitalize on Solutions with HyreCar
If your dealership’s franchise brand has ride-share incentives in place, you can maximize the opportunity at the local level. We found several dealerships, with targeted marketing approaches to promote their ability to secure financing for and offer vehicles to the local ride-share driving community.
We dove into a Wards Auto interview with Brian Allan, Senior VP of HyreCar, for insights. Allan says there are plenty of people who want to drive but need a suitable car to do so. HyreCar cites that of the 50,000 plus applications each month for acceptance of new drivers, up to 40% of them don’t have a “qualifying vehicle” to participate. Imagine if your dealership could sell to that 40%. HyreCar’s idea is to partner with dealerships to rent out aged vehicles to that specific group of potential ride-share drivers. They call their platform Dealer Mobility Solutions and promote its premise to reduce inventory and wholesale losses for participating dealerships.
Operational Number Crunching
Doing the math is a critical first step for your dealership. Leasing for ride-shares isn’t going to work for everyone in every market, so consider your GROI to determine if it makes revenue sense. Evaluate the aged inventory you have in order to weigh the costs of a vehicle that isn’t selling. Then anticipate the operational costs per vehicle, associated with implementing a lease program, to discern a bottom-line revenue point should you lease that inventory.
If you have a two-year-old used car on the lot, that isn’t selling, you could be leveraging a short term, ride-share lease instead. If you could lease that car for $150-$200/week to a ride-share driver, for a three or six-month period, how lucrative would it be for you?
Using the HyreCar model, as an example and based on a company flyer, here are some numbers worth considering. Say you have a 2014 model sedan on your lot, with about 80,000 miles on the odometer. Let’s says it’s worth $7000. If you were part of the Dealer Mobility Solutions platform, you use the network to identify a ride-share driver in need and generate almost $900 each month (minus the HyreCar cut). You might think $900 won’t move the needle much, but imagine you’re able to rent out 10-15 vehicles each month at that rate. For dealerships with volume potential, a steady $10,000 each month might be a better alternative to aging vehicles on the lot occupying space for free. This HyreCar program also offers ride-share drivers the ‘Path to Ownership’ platform as well. Ride-share drivers can leverage this strategy and ultimately buy their rental vehicles over time.
Taking Notes from the Brazilian Ride-share Market
Tapping into the ride-share market of buyers is relatively new for dealerships here in the U.S., but other markets have already carved their paths with dominant rental solutions. We dove into a Reuters report about the Brazilian ride-share economy. Of the 600,000 Uber drivers in Brazil, two-thirds of those drivers are renting their cars from traditional renting services. One driver was interviewed in this report and taxis full-time, in a brand-new car. His fares for two days of the week go to pay his rental fee for the vehicle, making the remaining fares profit for him. The rental car companies in Brazil have adapted to their ride-share culture and, in turn, began purchasing their fleets accordingly, and at a discount. The Reuters report goes on to cite that 45% of all car sales, is due to the rental company movement to buy those discounted fleets. Discounts to them mean dealer profits are adversely affected.
Tips to Successfully Implementing a Ride-share Rental Service
The American ride-share economy hasn’t entirely made the shift yet to reflect the Brazilian business model. It presents U.S. dealerships with an opportunity to invent their own revenue stream and leverage the current driver need not being met. If your franchise brand is offering an Uber-friendly buying incentive, it may make sense to start there. Promote what your dealership can offer to those drivers needing a “qualifying vehicle.” It’s worth examining your numbers too. Take a look at your aged inventory and do the math on potential earnings with an in-house lease platform. You may find you can offer the same benefits and more while creating an entirely new lead source strategy for your dealership.
Develop a Marketing & Delivery Strategy to Target Your Ride-share Audience of Buyers
Identify your qualifying vehicles and potential costs versus earnings first. You can then develop a strategy for proper marketing to your targeted audience. Consider how you can attract, secure the necessary financing, and offer delivery to these buyers. Augment your website with a dedicated landing page of FAQs and messaging that speaks to the ride-share driver looking for a “qualifying vehicle.” Do the math for them, and like that driver in Brazil, demonstrate how taking advantage of your dealership’s rental program can be profitable at day three of fares. Here are some example exchanges we found other dealerships using to attract these ride-share buyers.
- A car solution designed just for you! Find a ride-share friendly, and high MPG rated vehicle today!
- Browse our ride-share friendly mobile app to find the vehicle upgrade you can finally afford! Our concierge will deliver your vehicle upon approval! It’s that easy!
- Renting a car is a short-term and often expensive option for ride-share drivers. Buying a car outright can have you committed to a vehicle for years of financing. Instead, wouldn’t you love to get into a newer model, with excellent gas mileage? Pay one low monthly rate and drive away today! No commitments necessary. Just walk away whenever you choose.
- Want to try ride-sharing as a side hustle but need a qualifying vehicle? Partner with us for a flat monthly fee and no commitment! If it works for you, keep paying to keep driving. If you change your mind, just bring the car back and walk away!
Again, offering a rental service to ride-share drivers, or buying incentives may not be lucrative for every dealership. A significant consideration is your specific market. While Uber and Lyft are popular in almost every corner of the U.S., getting your dealership rental volume up to $10,000 each month may be easier for the more urban-based franchise dealers. Definitely take advantage of any brand-specific promotional opportunities your brands may already be offering. You can use those as a potential springboard to launch a dealer-based rental option as well. Crunch the numbers and discuss with your teams for ideas that may work best in your area. Maybe partnering with a HyreCar platform makes the most sense for your model. For others, developing an internal rental program can be a huge opportunity. As a worst-case scenario, if you don’t engage any new Uber or Lyft customers, your aged inventory will still be aged inventory. If executed properly, you could find an entirely new revenue stream for your dealership.