Comment by rainburg | Hacker News Reader

Comment by rainburg | Hacker News Reader

I worked for a startup that had a similar business model: some car dealership has a fleet of cars depreciating in value (last year’s models, loaners, trade-in cars) and they provide their inventory to the rental startup to partially cover the losses.

And it seemed like a great idea, at first. Customers had an option to either pay 2 to 3 times less for a normal boring rental car, or… to pick up something nice that had a V8 and leather heated seats in it. The other part of the equation was the customer service: in order to compete with Hertz, Avis and others, it had to be exceptional. And it was.

There was only one problem. Renting out used cars was only a temporary and partial solution for the dealerships. Eventually, all these cars had to be sold. But, as it turned out, if you’re a dealership and if you’re renting out a car for 2/3 of the month, you’re constantly losing opportunities to sell it. Unsold used cars depreciate in value for evenn longer periods of time, take up more and more space… and those rental earnings no longer make financial sense.

Hopefully it won’t be the same case here.

Super good point. I've definitely run into that objection while trying to sign on used car dealerships--i.e. that they can't sell the car if it's being rented, so putting it on our platform might mean forgoing a sale.

But that's fine, because it basically means that dealerships typically only list cars that they have more than one of. So for example, if they have three Audi A4s in inventory, they might list only two of them with us. When they sell the other one, they'll take an A4 off Carve and put it back into sales inventory. In other cases, dealers will give us cars during periods of low sales and then putting them back into inventory when sales pick back up, thus minimizing the risk of a foregone sale.

Just to play devil's advocate...

But wouldn't a car dealer try to have a variety of cars models instead of multiple cars of the same model? Wouldn't it be better for them to be able to show a potential customer a variety of cars rather than just one model? For example, if they could only have 3 cars, wouldn't it make more sense for them to have an A4, a BMW 3, and an Acura TLX (for example) rather than 3 A4s?

Or maybe used car dealers have significantly more stock than I'm giving them credit for?

It's not about selection. Used car dealers buy what they can sell, and what they can get cheap at auctions.

Not for an Audi dealership.

It seems to me that you could also rent to people who would wanna try the car before they buy it. Heck, put that in the app. "Get 10,000 airline mile on your credit reports right now of you buy this rental!"

What about mileage, wear and tear? It doesn’t take much for a depreciating new car to fall into used car status.

I said something similar downthread.

Just to put this into perspective: when these dealers bring their vehicles to auction if they want to sell them, they'll literally bring them to the auction the morning of the sale, and then leave immediately when its done. It's a really big deal to have it off of the lot. In fact lots of the innovative work being done in the remarketing space is to decrease the amount of time these vehicles have to spend off the lot (mobile check-in, mobile CRs, etc.)

I've worked pretty deeply in this industry if you guys are interested in chatting, drop me a line. Email in profile.

For traditional dealerships, the cars not being on the lot does seem like a potential problem. But I'm seeing plenty of cars on the road with Carvana license plate frames these days, so there seems to be some willingness to buy a used car sight unseen over the internet (at least for relatively new cars in good shape).

If Carve could sign up Carvana as a provider, that could be a major source of cars, and Carvana's customers don't expect to be able to bring their car home today. Right now it looks like Carvana has a nationwide inventory of ~16000 cars, although I don't know where those cars live, relative to human population centers.

On the other hand, Carvana isn't Uncle Willy's Used Car Lot ... if this is such a good idea they've probably got the talent to implement it in-house.

Do you really need to have the car physically in order to sell it? Can't you just have a comparable display model that is used for test-drives? When sale progresses, then you can show them the actual vehicle and sell it to them for a discount.

For used cars, you absolutely need them on-site. The wear and tear is a primary determinant in price.

You also have a very diverse lineup on a used car lot, so the odds that you have something legitimately comparable is very low.

If the dealership only sells new and last year’s models, it’s probably less of a problem, though there might be a situation, when there’s only one or two models with a specific level of trim (that the potential buyer is interested in) left in stock and they’re all rented out. Assuming that all of these cars have similar levels of wear, which is not always the case. And even then many potential buyers prefer to have a look a exactly the car they’re buying.

And if it’s a used car dealership or a dealership that accepts trade-ins, there’s going to be a handful of models in single quantity.

Is this for new or used cars? If I was buying from a dealer that was trying to sell me a new car with over 500 miles or so I would consider it a used car and expect used car pricing. Isn't the new car depreciation the biggest downside to buying a new car. If they are renting new cars don't they essentially take a huge 25% hit on the sale price of the car?

Also If I found out a dealer was doing this without disclosing it at the sale time my next stop would be the state attorney general office.

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