A new Honda for almost nothing? Car sharing becomes a sales tool

A Honda Civic car is driven at the Honda manufacturing plant in Swindon, southwest England on Feb 19, 2019.
A Honda Civic car is driven at the Honda manufacturing plant in Swindon, southwest England on Feb 19, 2019. PHOTO: AFP

NEW YORK • The ability to rent his car to strangers for cash convinced Mr Trevor Davis, a high-school teacher in Dallas, to buy a new  Honda Civic instead of a used car.

"I was going to get something real cheap, an inexpensive second car to drive back to the Fort Hood area," said the retired army veteran, who makes the roughly 240km trip frequently. "But then I was like, 'I can get a better car and not really pay for it.'"

This is the logic behind Airbnb-like services for autos that are catching on as new-car prices soar, borrowing costs rise to the highest in a decade and consumers take out longer-term loans to keep payments down.

Start-ups like Turo and Getaround are helping car owners lower their transportation costs in ways analogous to how Airbnb enables real estate owners to defray housing expenses, using peer-to-peer rental transactions.

Car-sharing start-ups are beginning to look more like sales tools than mortal threats to traditional car ownership that automakers ought to be worried about.

Fiat Chrysler Automobiles and Volkswagen's Porsche are both experimenting with Turo to see if they can upsell customers or reach new buyers, while General Motors rolled out a service last summer to let owners of its cars rent them out.

Buying a new car is "no longer this freedom-only, sort of carefree-type of purchase that some people may have enjoyed over the last few decades," Mr Andre Haddad, Turo's chief executive officer, said in an interview. "For more and more people, this is a mathematical problem that they need to solve."

The arithmetic is working out in Mr Davis' favour. His 2019 Honda Civic costs about US$428 (S$579) a month, including insurance. In the first month he put the car on Turo, he said he earned US$437 renting it out for about three weeks.

Just 10 to 15 per cent of the roughly 350,000 cars listed on Turo are new, Mr Haddad said, and the average vehicle is three to four years old. About 60 per cent of owners who put their car on the platform use the proceeds to pay down a car loan and more than half use it to cover primary expenses or add to their savings, according to an internal survey of 3,900 Turo users last summer.

A study done last year by Dr Susan Shaheen at the University of California, Berkeley, found that most people who joined peer-to-peer car-sharing services were not replacing a vehicle and nearly half were looking for alternative transportation because they did not own a car.

Another 20 per cent joined to earn money by sharing their wheels. "We are becoming increasingly convinced that the pool of buyers who can afford new vehicles is shrinking," said Ms Michelle Krebs, a senior analyst at AutoTrader.

"It will be affordability that pushes people to consider mobility services, whether it will be peer-to-peer car sharing, or more Uber or Lyft kinds of things."

Turo, founded in 2009, has raised US$205 million from investors including Daimler, the venture capital arm of Liberty Mutual Insurance, and venture capital firm Kleiner Perkins.

The company was valued at about US$760 million at the closing of its last funding round in March last year, according to the Prime Unicorn Index, which tracks the performance of 116 private US companies valued at US$500 million or more.

Getaround, its San Francisco-based rival, counts Japanese internet giant SoftBank Group Corp and Toyota Motor Corp among its backers. The company was valued at more than US$800 million in its funding round last August, a source familiar with the discussions said at the time.

Turning your car into an extra income stream is coming in handy at a time when affordability is straining new-car sales. The annualised industry sales rate slowed to 16.6 million in February, the slowest pace in 18 months.

Auto lenders have been tightening credit, and the number of people delinquent on their loans swelled to a record of more than  seven million last year.

Mr Harley Fox, 61, who lives in Rockwood, Michigan, said he would have had to sell his three-wheeled motorcycle, a Polaris Slingshot, if he had not put it up for rent on Turo. Payments on the vehicle, which he bought new for US$27,000 in 2016, are close to US$700 a month.

Mr Fox, a military veteran, relies on social security disability cheques and his Turo rentals to help make ends meet. "I make enough that I can make the payment and still have money left over," he said, estimating he has earned about US$4,700 in three months on the app.

Car sharing is likely to be a niche activity, said Mr Mark Wakefield, head of the automotive practice at the consultancy AlixPartners, who is sceptical it will ever become a widespread way for people to stave off defaults on vehicle loans.

"If you think of the tide going in and out as the economy goes through boom and recession, this is a toothpick of an oar," he said. "It's not going to reverse the tide."

Still, carmakers are eager to experiment with the services and collect data on how people use them in case it takes off, he said.

That is the idea behind Fiat Chrysler's  three-month pilot with Turo in Boston, in which some Jeep owners are putting their sport utility vehicles on the platform to make extra cash. The average price of a new Jeep Wrangler was US$42,473 last year, up 59 per cent from a decade ago, according to market researcher Edmunds.

Mr Matt Ogden, a 25-year-old engineer in Philadelphia, used to pick up Uber and Lyft fares with his Honda Civic after work.

When he leased a 2018 Jeep Wrangler, he decided to put it up on Turo, even though he could afford the US$389 monthly payments.

"I'm able to afford a way nicer car for a lot cheaper," he said. "I'm just trying to make money from everything I buy."


A version of this article appeared in the print edition of The Straits Times on March 16, 2019, with the headline 'A new Honda for almost nothing? Car sharing becomes a sales tool'. Print Edition | Subscribe