GM’s New Rent-a-Car Business Model

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Renting is a much better deal than buying . . . for the landlord. You – the renter – never own anything. But you pay for everything.

Forever.

This appears to be GM’s view of the future of cars, which it plans to rent to you rather than sell to you.

It’s actually sound policy – for GM – given the cost of new cars (not just GM’s) as well as the declining affection for cars, especially among those in the 35 and younger bracket – many of whom aren’t interested in ever owning a car but occasionally need one.

GM launched Maven – its in-house ride-sharing (renting) service last January in anticipation of a radically changing car market, one presaged by services such as Uber and Lyft. The difference here is that Maven is GM, while Uber and Lyft are simply ride-sharing services that use whatever make/model vehicle their drivers happen to own.

Maven is expressly a way to get people into – and paying to drive – GM vehicles. Without actually buying one.

This, as they say, may well be The Future. Not for everyone, but for more and more someones – who haven’t got the financial capacity to choke down a $400 per month car payment (plus all the not-optional “extras,” such as insurance, property taxes and maintenance) or just don’t want to.

But maybe they’ll go for the $6-$12 per hour Maven/GM charges to rent a car – especially since the “extras” – which one assumes are folded into the per-hour price – also only cost by the hour and so cost much less.

Or at least, seem to. Bear with, I’ll explain.

Not surprisingly, Maven pushes the least salable of GM’s inventory – the all-electric Bolt and the semi-electric Volt. Few Millennials – or anyone else – either can afford to buy one of these or is even interested in buying one of these. They cost much more than otherwise similar non-electric cars and are gimped by functional limitations (not only range but equally problematic 30-45 minute best-case recharge times, which most people will not put up with) that don’t affect conventional cars.

But political pressure continues to egg-on their manufacture, despite the lack of market demand – and that leaves the problem: What to do with them after they are manufactured?

Dealers don’t want inventory that doesn’t move. Unsold cars take up space on the lot and cost them money and besides, it just looks bad. But parent company GM wants to offload these electric Turduckens because each one built improves the corporation’s overall fleet fuel economy averages (CAFE) and also counts toward the “zero emissions” sales mandates in effect in states like California. Even if they don’t actually sell.

Something had to be done.

Credit GM for being cagey.

Maven is also very “diverse.”

Renting a Bolt or a Volt for a day is something a lot of people who would never consider buying one might just do – for the same reason that people sometimes rent an exotic car for a day.

It’ll help put miles on the odometer, anyhow – and give the impression that people are driving these things. Which to be fair they will be. But they won’t be buying them.

They will, however, be paying for them!

Talk about milking a turnip. While individual people are tapped out – and getting out of the buying market, the rental market holds the potential for quadrupling the “ROI” (return on investment) made in a given car, electrified or otherwise.

$6-$12 per hour sounds pretty cheap – and it is, if you are the individual Mavenite renting a GM whatever for a day. Cost to you for an eight-hour rental: Just under $100 (assuming the higher figure of $12 per hour) which is a deal compared with a $400 per month payment – plus the “extras.”

But if GM/Maven rents the car to a new person every day of the month, the payment (to GM) each month totals almost $3,000. The $35,000 car is paid off in a year rather than six years. And GM/Maven can continue milking that turnip for several years, potentially making triple or quadruple net profit on the same car vs. selling it to someone.

That’s ROI to write home about.

Maven’s mavens such as Julia Steyn, the former investment banker and aluminum company executive who runs the operation for GM, claim they also want to use ride-sharing/renting to get people into GM cars so they will consider buying them.

But look at those numbers. Bet your bippie Steyn and other GM honchos have, too.

Cars aren’t going to get an easier to buy. The government continues to pile on mandates that add cost and complexity, the latter driving up repair costs (including insurance costs) and people – especially those under-35s but also people across all demographics either can’t keep up with it financially or just don’t want to try.

It’s perfectly understandable. Who wants to be chained to a $400 payment (plus the “extras”) for the next six (probably soon to be seven) years? What fun is it to be broke all the time?

And when cars are no longer fun… .

The evil genius of this that like federal tax withholding (and Fed inflation) people won’t generally notice. They may even think they are better off – as inflation-ignorant people often think when they look at their pay stubs and say – I make so much more than my granddad did!

Except, of course, granddad could afford to buy a car.

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29 COMMENTS

  1. Most trucking companies are now just leasing trucks as well! This initially made no sense to me since the middleman typically adds fees in order to make a profit. Then I got to thinking about the fact that new vehicles are far less expensive to buy for dealers than for the rest of us, so perhaps they can finance the price difference and use the same tax codes to expense away the profits just as trucking companies used to do. This was probably the testing grounds that are now being used by dealerships to lease cars.
    I have been putting myself in hell by reading Breitbart News and the comments lately. This era seems to be a transformational one and more people than ever during my lifetime has waken partially up. I have been trying to plant seeds into the minds who are receptive to genuine liberty, but gosh it is painful to read the posts of the many knuckle-walkers! I sure could use more help there from those of you who have more time and are good debaters.

  2. These might be good to have when cars are no longer fun to drive. Until then, there’s the BMW Z4. I’m just happy that by the time there are no fun cars left, I’ll be too old to want to drive, too.

  3. Most rental cars aren’t that expensive ($100) per day. Granted most only rent by the day rather then the hour. Last time I rented a vehicle (reserved compact car, ended up with small SUV) it cost about $30 per day. That was for everything, taxes, airport bs fees everything (the rental company made about 10 bucks a day at most, they probably made more off renting the tollway transponder).

    Or are you thinking the price goes up once buying cars goes away for most?

  4. The one good thing: Hopefully, this scenario will be the death-knell for GM and their garbage-mobiles.

    So many companies these days are so out of touch. They’re killing themselves by taking political stands, or by investing in non-sensical unsustainable wishful paradigms in which they want to control society and shape the future, rather than merely providing what the market demands.

    Target stores had the good sense to relent on two of their social-engineering projects just before they were implemented. Sears and K-Mart, already on the verge of bankruptcy, have now stopped selling Trump-made home furnishings- which will likely be the final self-inflicted blow to them.

    It’s insanity. It’s management by wishful thinking, administered by those who do not have a clue as to how real-world business functions, but instead who are trying to make the world conform to what they were taught by some burnt-out former hippie who never even held a private-sector job in his life, but who now teaches at some college.

    It’s going to come to a head shortly- it has to. What we already have as of late is unsustainable; and what they are banking on for the near future, is beyond unsustainable- it is pure fantasy- and what we are going to see shortly, is either a complete collapse of Western society, or the replacement of these dysfunctional things with things done the old way, that actually worked- if anyone is left who can actually implement such, and if we should ever have the sanity to return to a point where we have enough freedom to actually do it.

    The loony bins of the near future are going to be full of former executives.

    • GM is on a bender… they headquartered their Chevy and Caddy press offices in… Nooooo Yoik City. A place as unfriendly to cars as imaginable. The guys running the show now are (cue Dr. Evil Voice) freakin’ imbeciles. One is a failed/hack journalist GM hired to handle its relations with journalists.

      He’s succeeded in making an enemy of me as well as three other journalists I know.

      • Haha! I didn’t even know that, Eric. It just gets better! [in terms of comedy and dysfunction].

        And when you think about this rental nonsense: How exactly would it work? How does one get to the car/get the car to them?

        To those of us in the boonies, it’s a non-option.
        In the ‘nurbs: It’d be a hassle at best- Infrequent, sparse pooblik transport…too far to walk….who would you catch a ride with if no one owns a car?
        In the cities, where one could walk, or where transit is frequent and ubiquitous…well, that’s really the only viable market….but that’s the place where ya really don’t need a car, except perhaps for an occasional long trip.

        So what they’re essentially advocating, is taking a culture where the majority of people are dependent upon their product…..and turning it into a culture where people don’t need cars/will have alternatives/will find it easier to do without.

        Yeah….nothing like building a business model which kills off the demand for your product!

        If this stuff ends up in history books one day, no one would believe it!

  5. I’m wondering how they’ll do during a recession. If you’re a person that normally rents a car for going to the supermarket and running errands for a day, faced with a $100 fee people will likely just walk instead if they’re financially strapped. Or share a rental with friends for the day. And then GM/Maven will have all these cars on their lots that previously were out earning money, but are just sitting there.

  6. The core problem is that mass transit is run by Uncle. If the free market supplied a solution we’d see interesting solutions like this that actually make sense. Long distance travel in a car, especially an electric, doesn’t scale well. We have designed automobiles for long haul travel, but we have to carry a lot of baggage with us that isn’t necessary for running around town. Short distance travel means we don’t need great high speed fuel economy, because we won’t be at high speed for much of our trip. We don’t need all the protection necessary for high speed impacts either. We don’t need all the distracting extras to keep the passengers occupied or drivers awake. When the automobile hit its stride in the 1950s it became the transportation hammer, being the basic solution to every problem. Instead of letting the market sort out mass transit the politicians panicked and took over, and cars became a necessity. Since owning a car or two is an expensive proposition manufacturers had to design for the worst case scenario instead of finding the right tool for the job. Even then, they got it wrong more often than not. I remember in high school going to visit the grandparents in Florida in a Dodge Omni with no air conditioning. My sister and I (and the dog) in the back seat, luggage taking up the whole hatchback, and windows open the whole way at 55 MPH. Almost caused a divorce. And dad eventually migrated to minivans, which are terrible vehicle for basic trips to the grocery store for a retired couple.

    So take the personal vehicle to the park-and-ride lot, hop on a bus or train or plane and off you go. Or pull the personal vehicle on to the electrified train tracks and it becomes a powered light rail car. Or pull it onto a flatcar and go have a drink in the bar car. Works like a champ except that the bus or train is run by Uncle, so therefore it is underfunded, inflexible and serves the needs of the government, not the needs of the riders. Air travel is a little better due to cutthroat price competition (due to regulation-induced similarity) between carriers servicing the same destinations, but because of antitrust laws mixed transport systems are illegal. So if you live in a town that cannot be served via high capacity airplanes you have to ride the expensive once-a-day puddle jumper to the big airport, or take your car and leave it sit in a parking lot where anything can happen. Imagine if you could take a decent train (that made several stops along the way to spread the cost out between towns and cities), with the same ticketing system. You actually might be able to get good service at a reasonable price. Might even be free to ride with a well-stocked snack bar (like Vanderbilt did on his ferry service). Then renting a car to get you to the station starts to make more sense. Downside is you have to follow a timetable, but if the price is right (and service is reasonably good) who cares?

    • Transit and passenger rail was a crony business with deals with government. As such when the automobile changed the nature of competition these businesses were stuck with political deals that could not be altered. Collapse was the only possible end.

      • Good point, and I was being a little too clover this morning. I was thinking more about Jitney Buses, gay man with a van services, and gypsy cabs more than trolley cars I guess. One has to wonder what might have happened if the mass transit systems weren’t in bed with the local government, but I know why they were. Politicians would see the next town over with a mass transit system, gin up support to get one for their towns too (but subsidized to goose the market), then watch as the subsidized company buys out the other. Eventually make it impossible to enter the market unless you create an entirely new form of machinery, then let the government take over the (now failed) business. Rinse and repeat.

        Of course the only reason the next town over could really support a trolley system was because there were enough people with enough prosperity to actually support the thing. If the politician would have left things alone of course the trolley would have eventually come to town, when either the trolley company could take the risk or the market showed there was a need.

        anyway…

  7. I’m 33 and love cars, but I know many younger that don’t. These folks also chose to stay in the city (San Francisco and Los Angeles) rather than move to a lower cost of living area. They can’t afford newer cars and companies keep them working 12-14 hour days that buying a car even just for weekend driving isn’t worth it considering what little free time they actually have. They’re doing what they can to make city living work by renting 5 room apartments with 4 roommates and moving to areas with good public transit.

    • Hi Peter,

      Yup; I have friends in that demographic and it’s exactly as you describe. Very worrisome – living in a communal hive, constantly under financial pressure… not much free time. It is a recipe for “feeling the Bern.”

      I dread what’s coming.

      • It’s a circle of hell. All these companies that move to the trendy part of the city to “attract” millennials. However the millennials can’t afford to live there. It’s unlikely most of those companies can really afford to be in those mismanaged places too, as most of those places are. At least not the ones not getting tons of tax breaks etc.

        Even McDonalds is making this mistake, leaving its beautiful leafy campus in Oak Brook to where Oprah used to have her tv studio in Chicago. It makes absolutely no sense for McDonalds HQ being in the city, by its nature its a mostly suburban and rural company. They will have brain drain as the late 30’s and up don’t want to deal with the city hassles. Face it, living in the city is a daily hassle (even if you like living there), and it drains oneself. IMHO there shouldn’t be any 20’s or early 30’s in a company HQ to begin with, younger employees should be out in the field, not the corner office.

    • I have to wonder what it would be like to live with 3 other roommates. Are they all friends? Do they ever get any peace and quiet? I had roommates in college and I hated it. Every time I wanted to be alone I had to leave the apartment. Everything was up to committee vote. Half the time no one did any of the chores so it was always either a pigsty or I was the one cleaning up someone else’s mess. Food was collectivized. Every month, someone would be late with their share of the rent, even though there was always beer money and the latest CDs. I vowed never again would I have to live with anyone I wasn’t sleeping with (and that’s a pretty rare event…).

      Later on, as soon as I had full time work I moved out of my parents house into a real shitbox of a house that should have been condemned, but I was finally able to live by myself. Haven’t lived with anyone longer than a week since. Might not be the ideal life, but I never have to sit through a crappy TV show, adjust the thermostat or the driver seat in my car.

      • It’s awful.

        No privacy, no peace.

        I debated renting a room to help ease the financial burden but realized I can’t deal with that. A van by the river is preferable, because at least it’s my van!

          • I am 35 years old, thrice divorced, and I am a FORMER motivational speaker, currently serving 3 to 5 years for non-payment of alimony. I wish to DEAR GOD that I was livin’ in a van down by the river.

            Hang on to your sense of humor young fella. It’s the one thing they can’t take away from you. Believe me, I know. I had it all: van, river, the whole kit and kaboodle. Now all I’ve got is a cot, a toilet, and a homemade tattoo of a VAN DOWN BY THE RIVER!!!

            • So they are still sending men to prison for not paying women?

              There is no other debt, even court ordered judgments, that they’ll put people in prison for.

              And yet people think men run the society.

        • Privacy is pretty much the key issue in life- and the more so for us Libertarians. Having space that is exclusively yours, or your family’s [if you choose to have one- which is really just an extension of you] is what liberty is ultimately all about, and is what puts us at the opposite end of the scale from collectivists/communists.

          That people choose to live huddled in expensive cities and willingly give up their privacy by even having to share living quarters with virtual strangers, as opposed to vacating to a place where they could afford to live alone, even on a much lower income, really says something.

          In this world, we are forced to spend time with and interact with people not of our choosing in pretty much every institution of society- and today, people’s lives revolve around these institutions- and now it’s becoming common for people to even have to do so in their homes?!

          It isw no wonder that the world is becoming less and less free.

          If instead of investing most of one’s time and resources when young into things like indoctrination (“education”) and insurance, and iPhones, they’d save a few bucks by working for a few years and living as cheaply as possible, they could easily get a few acres in the country and a used mobile home, or even a “tiny home”, and at that point, be FREE, and pursue the rest of their life from a totally different vantage point, being free, not in debt, and enjoying life on their own terms. It boggles my mind why so few do this, and instead encumber themselves with a bunch of crud which essentially keeps them enslvaed for the rest of their lives.

        • When i was in college, a couple of friends and I thought it would be awesome to share an apartment. It didn’t even last a semester. It sucked. It ended a friendship with one of them, and didn’t do wonders with the rest.

          The major problem was it was way too small (six guys in a 2 bedroom! what were we thinking!). We should have found a big old house, and to be honest, it probably wouldn’t have cost more.

          It worked out better for my brother and his friends, because they found a huge (but very outdated and ugly, so they could afford the rent). They all had their own bedrooms and bathrooms, so they only had to share the common rooms.

          Humans IMHO aren’t meant to share small spaces. If its small, only one person better be living there, or there will be conflicts.

          • richb, I only lived in one apartment and that was a two bedroom with two people. It wasn’t great since my friend didn’t clean house or cook so it was all up to me. After that we rented large houses and had only one person per bedroom which worked a bit better. 6 guys in 2 bedrooms would have been grounds for killing with my crew. Generally 6 people in one bed is either great or it ain’t happenin. I didn’t mind 3 people in a bed as long as 2 of them had plumbing to complement mine. Too bad that doesn’t happen more often.

      • I recall my last roomies quite well. Amazingly, the ones of us still living are friends but have closer friends.

        I like The Who and Jimi and Santana but it’s less than conducive to talking the pants off somebody when Jimi’s blasting one wall, Santana the other, you’re trying to hear Doug Sahm In Seguin, the downstairs party sounds like everybody walking down Main St. dropped in….and for good reason since everybody on Main St. has dropped in. Go to the fridge and of course, there’s nothing there, not a single thing you put there. At least there’s water and ice and I keep booze in my dirty clothes and that’s not always a sure fire way for it to not disappear.

        It wasn’t like we could afford hotel rooms and the girl’s living arrangements were similar even though not quite as raucous….most of the time.

        Pay rent, have a bed of your own as well as a room and end up with the big quilt in the Malibu as if you lived in a dorm. At least cars back then had suspensions with a lot of travel and driving off into the boonies was generally private.

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