Startup aims to help dealerships find profitable use for used car inventory

By Alysha Webb, Editor and Publisher

New light vehicle sales growth declined in February. The government shutdown, bad weather, and rising interest rates got the blame. The retail market is facing headwinds. To be sure, the retail dealership is still a very viable business. But there is no denying the market is also changing.

People are going to continue to buy new cars for years to come and the cars on the road will require servicing. But new forms of mobility are emerging, and dealerships are pondering how they can earn money from these new mobility options.

At NADA, I met with two executives from HyreCar Inc., a Los Angeles-based startup that thinks it has one solution – put used vehicles into the ride-sharing fleet business. That is the best use for used car inventory and can lead to more sales, they say.

“Our data proves the revenue from the vehicle being used as a ride share vehicle not only offsets depreciation, it exceeds it,” Brian Allan, HyreCar’s senior director, strategic partners, tells Automotive Buy Sell Report.

HyreCar uses a proprietary software that administers driver vetting, payment collection, insurance and marketing for selected used vehicles in a dealership’s inventory. They can be leased on a daily, weekly, or monthly basis to drivers in the on-demand vehicle space. That includes ride-sharing fleets such as Uber and Lyft. Use of the platform requires no capital investment from the dealer, says HyreCar.

The demand is there, says Mike Furnari, chief business development officer.

“Forty percent of the people who want to drive for car sharing don’t have a car, or a vehicle that qualifies” to be used for car sharing, he says.

HyreCar also has a “path to purchase” program, and over 25 percent of HyreCar drivers buy a vehicle from the dealership they rented the car from, says Furnari.

The key, says Allan, who spent 30 years with Galpin Motors as a general manager and is a HyreCar investor, is to take cars on and off the program at specific times. Some cars will be on the platform for 5,000 to 15,000 miles, others 50,000 miles.

“We don’t keep cars on the platform until the wheels fall off,” he says.

As an example, consider a three-year old Lincoln MKZ hybrid with 100,000 miles on it, says Allan. A dealer buys it for $10,000 and can earn $1,000 or more a month on an upscale ride platform. Earnings in general range from $800 to $1000 per month per car.

Though demand for upscale rides is growing, cars in the $6,000 to $10,000 range “are ideal for the HyreCar platform,” says Furnari.

Dealers can also take advantage of OEM loaner and special purchase programs and put new cars on the HyreCar platform to get qualifying miles faster to resale the vehicles as Certified Pre-Owned and hit manufacturer’s objectives, he adds.

Flood of leads

Nasdaq-listed HyreCar makes money by taking a percentage of each transaction. It expects to be cash-positive by the second quarter of 2019, says Allan.

It is currently negotiating manufacturer endorsements, says Allan, but can’t disclose names.

Up to 35,000 potential drivers a month fill out a form online indicating an interest in a car for ride sharing or personal transportation, according to HyreCar. A background check on each lead checks applicants’ criminal and driving history.

Some 2,000 vehicles rented through HyreCar are on the road now. The company, which began as a peer-to-peer service and pivoted to dealerships in the Fall of 2018, works with some 100 dealers now.

It’s competitive advantage, says Allan, is helping dealerships manage the used cars’ asset value.

“The dealer pain point is inventory that is not earning income,” he says.