Car Dealers Urged to Keep Some of Their Inventory

Auto retailing veteran Brian Allan offers car dealers advice that may seem counterintuitive, considering the current nationwide vehicle-stock shortage.

He urges them to retain some of their used-car inventory vehicles, not sell them despite the hot market. That seems to defy basic economics, considering today’s automotive high demand and low supply.

Yet resisting the urge to turn, turn, turn used-car stock will reap more profits, says Allan, president of HyreCar. It is a middleman company with a digital platform that allows car owners – particularly dealers and rental car agencies – to rent their vehicles to people who need them to work as ridesharing and delivery drivers.     

Allan has served as HyreCar’s president for two years after retiring from more than a 30-year run at Galpin Motors, a metro Los Angeles multi-franchise dealership group. It includes the world’s best-selling Ford store.

In a Wards Q&A, Allan (pictured below, left) explains his logic of how dealers can make more money by not being so quick to turn their inventories.

He also talks about the effects of COVID on his company and ridesharing in particular, and what type of people HyreCar caters to.

Here’s an edited version of the interview.  

WardsAuto: Where is HyreCar at right now as a relatively new business?

Allan: It is six years old. It went public in 2018. COVID has been a wild ride because ridesharing pretty much collapsed initially. It’s recovering now. It’s about 50% to 60% of what it was pre-COVID.

The delivery business is skyrocketing. We expanded to it quickly because of the demand. The initial challenge was getting rental cars at a low enough price to make it sustainable for independent delivery drivers.

In the first year of COVID, rental cars were relatively inexpensive, because there was such little leisure and business travel. But the stumble in the last five months is that rental cars became very expensive; about $100 a day. For our users, it needs to be more like $25 to $40.

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With the demand there, Uber and Lyft are paying drivers huge incentives to get them back to work. We’re starting to see that. Our applications to rent cars last month were at 33,000. Our pre-COVID high was about 38,000.

So, we’re almost back to pre-COVID levels,   

WardsAuto: Who typically wants to be a rideshare or delivery driver but turns to you because they lack a vehicle of their own?

Allan: They often don’t have the right car. They may have a two-door (Ford) Mustang or a motorcycle. It’s interesting because the delivery service grew exponentially for people who had lost their previous job through no fault of their own during COVID. They worked at places like bars and restaurants that had closed down. 

WardsAuto: If someone is doing deliveries, do they need a truck or a van?

Allan: It depends on what they are delivering. We have individuals who rent trucks and vans on our platform. It’s less than 5% of our business however.

WardsAuto: What role can dealers play in this?

Allan: Our narrative changed a bit during COVID. Pre-COVID, when inventories were aplenty, our message was, “Let us help you earn revenue on inventory that otherwise is idle.”

Now that inventory has become scarce, the narrative is: “Don’t sell the golden goose. Keep the car and earn monthly recurring revenue.” If you can’t replace a sold vehicle on the lot, a $2,000 or $3,000 gross isn’t going to cover your expenses. You are better off renting your fleet. A dealer can earn $12,000 a year on one car doing that.

WardsAuto: Would a year be about it, or do you see someone renting out the vehicle beyond that?

Allan: The wild card is you often end up with drivers saying: “Can you just sell me this car?” About 30% of our drivers do that after six months. That opportunity is the best of both worlds for dealers.  

Steve Finlay is a retired WardsAuto senior editor. He can be reached at [email protected],