Startup Idea: Used Car Leasing

A local company comes to mind, Lej et Lig (translated from Danish): http://translate.google.dk/translate?sl=auto&tl=en&js=n&prev...

Literal translation: rent-a-corpse. You pay about $50 a day, choose your type (van, personal, etc.).

They're mainly used when people move by themselves, have to take stuff to the junkyard and such.

The down-side is, typically, that you can get a lousy car (playground for lemons).

On the plus side, they have a thriving business, and been in business since 1995, so it's not a dead-end idea.

I would love this. I always lease my cars. It's extremely convenient, but there are also huge price benefits. Manufacturers often have great lease incentives, and spending ~$35k on a car I'll likely get sick of in a few years seems crazy to me.

But I don't particularly care about new cars, I just want them to be "new enough". If someone can deliver a good used car leasing service, I would be all over that.

IIRC (at least in California) it is illegal to lease a used vehicle - it must be purchased. I don't know what the reason for this is, or if I even remember that correctly but I'm pretty sure its a law because when I purchased my car I checked into this. You can transfer your lease (i.e. swapalease.com), but in order to do it legally the swapper typically has to have their credit approved and fill out paperwork for the dealership. Another factor is that most sellers won't be interested in leasing a used vehicle because there is so little financial incentive -- leasing distributes that value of the car over a period of time and based on mileage used -- if a used car is only worth (say) $5-10k, it couldn't be leased for very much.

I think this ignores the fact that used car sales are one of (if not the) largest revenue source for dealerships. With current interest rates a lease would probably end up bringing in less revenue than a sale, new cars move at low prices because dealerships get volume bonuses. Those same bonuses don't apply to used cars so you're eating away at your bonuses if people are now tempted to lease a 2012 for less than a new car. This wouldn't make financial sense for them to do, even with MB-USA while they offer this service it's not exactly what they push hard to get you to do.

Without the infrastructure and support of an auto manufacturer this would be hard to get a profit, and no dealership would find this to be the best business model.

I like this a lot - if you can regulate the market and ensure a high quality experience this would fit perfectly in the space between owning a car (big commitment) and renting (obscenely expensive). I'd use it!

Duh, Mercedes Finance will happily lease you a nice, clean used Mercedes. Especially if it meets their Star Certified criteria. My first MB was leased from new for three 3-year lease terms; obviously terms 2 and 3 were a used car. My next MB was used and leased for three years. In all cases the lease terms were clear and fair, and the interest rate very competitive. Right now my car loan is with them and under 1%.

I'm sure that other reputable brands have similar programs.

Anyone interested in exploring car sales ideas in SF/Bay-Area? I have one for which I did a bunch of market research and it looks promising. Happy to explore more.

I think there's WAY too much baggage with the word leasing. Car ownership-as-a-service or car subscription or...

For $X, you get a the use of a clean car full-time. For a $30 cleaning fee, you can swap it out for a different car (bonus-- drive different cars!). Or for a one-time fee, you can access the "specialty fleet" - trucks, vans, and the like for when you need to move stuff or when you have lots of company in town.

Upsell to insurance packages, white-glove maintenance packages, etc.

This also disrupts long-term car rental (which is annoying) for relocation, long-term biz trips, etc.

Huge savings in time dodging registration, buying/selling, etc.

The big question is: can you make the numbers work... And, of course, the elephant in the room is that you need a TON of money to give this a proper try (though there are interesting hacks to test an MVP).

For such a business, the real competition is the same customer using a loan to buy a used-car, approximating the same up-front, monthly, and end-of-term costs.

So, to succeed, can the business acquire its fleet more cheaply than others? Tricky, especially if trying to keep a uniform fleet of desirable used-cars like the example Honda Civics (which already command a resale premium).

Or, can the business better assess credit/damage risks than established used-car financers? My hunch is those people wanting to lease, rather than buy, a used-car could be uniquely risky.

So it feels double-sided in the adverse-selection dimension: both your fleet and your customers will be rejects from other fairly competitive, evolved systems.

Seems to me the real obstacle would be financing the operation. Finance shies away from used vehicles because they are much more difficult to accurately appraise, and without accurate appraisals you are assuming another (large) dimension of risk.

Generally what you pay for when leasing a new car is the depreciation. This is why luxury sedans like a BMW often have better lease deals than cheaper or less desirable cars--you're only paying for the depreciation, not the base cost of the car, and these cars depreciate much slower.

That said, just because that's how it works for new cars doesn't mean there isn't a market for leasing used cars. In fact, I could see myself leasing high mileage luxury cars--cars I wouldn't normally buy due to the mileage but wouldn't mind renting for a few years, so long as the price was notably less than leasing a brand new car of the same kind.

If anyone would be doing this, I figure it'd be CarMax. They have a steady supply of used cars (mostly bought at auction), a staff that is good at appraising used cars, and a well worked-out & automated sales process.

Full stack/front-end dev here.

If any folks are interested in working on this idea, I'd be up for exploring the feasibility of the project & how we could work together. Contact info in my profile.

This has actually crossed my mind lately, i looked into leasing a van for business purposes and i did "back of the napkin" calculations on hypothetically starting my own used van leasing company. I couldnt make it worth the hassle. Does anyone have any of their own basic business model calculations?

That's a good idea. I'm not the one to take it on, but could see myself being a customer.

Especially the month-to-month thing, I'd be all over that just because I don't like the commitment of owning a car although it's basically required where I live

This must be a US-only thing - I have personally leased used cars and leased them for my company's use as well. So maybe it's just your country(which I assume is US) that does not have used-car leases?

Caas car as a service would be better directly from the manufacturer.

You can already assume other people's leases and there's even a market out there for this.

www.leasetrader.com or www.swapalease.com or a boat load of other websites.

How is this any different?

Isn't this just like Getaround? Or are you suggesting that the startup buy lots of optimal used cars just for this purpose?

I look at that chart and just laugh. Why in the Hell would anyone buy a new car these days!?

I have a friend who works for a HUGE dealership! i can preseo the idea to them and see wassup? anyone wanna build a HTML/CSS prototype using bootstrap + backbone.js? do we have a name?