After spending over 30 years in the auto retail industry as the GM for Galpin Motors and overseeing the number one Ford Dealer in the world, our next guest has made another bold industry move. Brian Allan is now the Senior Vice President of Strategic Partnerships at HyreCar, a California-based startup where car owners can rent their vehicles to drivers that want to drive for ride-sharing services like Lyft and Uber.
Jim Fitzpatrick: Hello everyone. I’m Jim Fitzpatrick. Thanks so much for joining us on another edition of CBT News. We’re so happy to have in our studio Mr. Brian Allan, I know that you know that name and this face, he has been in the industry for 33 years. He’s the GM of the one and only Galpin Motors in California, the largest Ford dealership in the country among all the other brands that you guys had. You’re always number one right?
Brian Allan: Number one are in the top five, that’s for darn sure.
Jim Fitzpatrick: We’re so glad that you took the time out of your busy schedule. You are also, I should mention the new Senior Vice President of Strategic Partnerships at HyreCar because you just don’t know that retirement means relax, right?
Brian Allan: In fact, yes.
Jim Fitzpatrick: Talk to us about HyreCar. What is it? What’s the dealer application for the dealers that are listening to us right now? What’s it all about? And how can they make money?
Brian Allan: Very good. Well, I’ve got to start a little bit before that in this-
Jim Fitzpatrick: Sure.
Brian Allan: What I realized while still at Galpin, there were rideshare drivers that were coming in every day that either wanted to rent a car or they wanted to buy a car. And the dealers will know that you can’t knowingly rent them a car. The rental insurance won’t cover it. And most of the finance companies and OEM captives will not allow a dealer to finance.
I saw literally we’re dealing with 20, 30 in our enterprise deals we’re losing a day. I just thought, “Man, there’s got to be a way to fix this.” And after I retired, I put a little business plan together and I started looking for companies that were in this space. And I found there were a lot of companies that had rentals for peer-to-peer companies like Turo, Getaround, but they weren’t renting to rideshare customers.
Brian Allan: And I found this one company called… When I Googled rideshare rentals, this company HyreCar came up. And I actually had another friend that introduced me to the two owner… Well owners, they founded and went public already. And they said, “Yeah, we do peer-to-peer, but the dealer thing, dealers don’t want to rent cars. And dealers want nothing to do with rideshare drivers.”
Brian Allan: And I say, “Wow, I think I’ve got a story. I know from a dealer’s perspective if you can remove the liability and help me deal with depreciation, I think we can get dealers in mass.” And I was reading that vehicle supply was a huge issue, and dealers are the best source of vehicle supply you can have.
Jim Fitzpatrick: That’s right. Sometimes too many vehicles, oftentimes.
Brian Allan: Often.
Jim Fitzpatrick: That’s right.
Brian Allan: Right? What higher car does and now does is creates an online marketplace for dealers to expose either idol, aged or purpose allocated inventory for rideshare drivers.
Brian Allan: We created the technology and the marketing and we do over 30,000 applications a month now nationally. And we put the drivers into cars, whether it’s a peer to peer owner or dealer. And there’s huge demand because rideshare drivers, over 40% of them, don’t have a qualifying car or a car at all. We’re sharing this narrative now with the dealerships.
Jim Fitzpatrick: Okay. So what do you say to the dealer that says, “I hear what you’re saying but I’m going to turn my inventory over to somebody that I don’t know and then they’re going to be putting the people in the back of the car for these rideshares and it sounds like a huge liability.” That’s the first thing that comes to mind as a former dealer. Like, “Oh, oh, are they going to put stains in the carpet? Are there going to be dings on the doors?
Jim Fitzpatrick: If somebody gets in an accident, they hit a school bus, what happens?
Brian Allan: Very scary.
Jim Fitzpatrick: Right? And then you were there as a dealer. So you know.
Brian Allan: A very good question. And so let me tell you a little bit of what’s happened and what’s changed. Basically, rideshare started at about 2012. It gained traction with Uber in 2013. And when the first drivers came on board, most of them were either professional or disenfranchised taxi and limo drivers. And frankly, these people drove 5,000, 10,000 miles a month. And they weren’t really used to taking care of the cars.
Brian Allan: The industry got a bad rap of high mileage, beat the crap out of cars and not take care of him. And it was frankly well deserved. But then something happened, volume.
Brian Allan: And what happened was, and just put in perspective, Bloomberg just published this. In 2013 there were 120,000 Uber rideshare drives a day. Sounds like a lot, but accelerate only six years later, February 2019, just a few months ago was when the last stat went out. There’s now 15 million rides a day.
Jim Fitzpatrick: 15 million.
Brian Allan: 15 million from 120,000 in only a little over five years.
Jim Fitzpatrick: Oh my gosh.
Brian Allan: Now the only way that could be done, because there’s not enough full-time drivers do that, is part-time drivers came in. And the beauty of the part-time driver is they’re more like the fabric of society. These are school teachers, retired law enforcement or even current law enforcement. Actually, well to do people that just want to get out of the house.
Brian Allan: What happened is the quality of the driver went up and a beautiful side effect, they drive actually less miles because they’re only driving three or four hours a day. They either have their other gig that they’re doing, or they’re taking care of their family.
Jim Fitzpatrick: Right. And they’re not driving around from hotel to hotel looking for business as cab drivers were doing all the time.
Brian Allan: Absolutely. A huge shift has happened that very few people are really aware of. Now, fortunately, became more public when Uber and Lyft just went, they did their IPOs. They had to release something called an S-1, which is all, everything they did. It peels back the onions of all the data that everyone was dying for.
Brian Allan: And in Lyft most specifically said 91% of their drivers drive less than 20 hours a week and they’re part-time. So that validated what I believed from experience and now I could actually show to dealers. These people are now custodian value, high custodian value. And here’s the beauty, they actually want to buy a car.
Brian Allan: They rent them at first. And if you take good care of him as a renter, you’re going to sell them a car.
Jim Fitzpatrick: That’s right.
Brian Allan: And now you have peer, you have ratings. So the drivers are rated, the vehicle owners are rated. Everyone’s begging for five stars.
Jim Fitzpatrick: What inventory of the dealership do you recommend? If I was an automobile dealer and I had a couple of stores and I had loaner cars and I had a rental car agency, used car lots, obviously new car inventory, what are you recommending I use? Which of those cars are you saying, “Hey, they’re sitting there, they’re not being used?”
Brian Allan: Well, the beauty is, of course, we have the data on what that really is. But it’s pretty much the obvious. Four doors and it could be an SUV or sedan. But it’s what you would typically expect. And oddly, what’s really works for dealers is higher mileage cars work well on the platform because the drivers don’t care what the odometer says.
Brian Allan: Matter of fact, we have a phrase we call revenue is the new odometer. And that is now dealers can change their mindset when they’re appraising a car from liquidation, meaning I’m either going to wholesale it or retail it, to a revenue mindset.
Brian Allan: And this is very important because-
Jim Fitzpatrick: Yeah, that’s for sure.
Brian Allan: If you think of all the wealth that’s been created in the world, it’s three companies or three industries. What they have in common is recurring revenue. So what we know is that if a dealer can now take a trade-in with the mindset that I can make $800 or more a month and I can actually appraise a car for a little bit more to make another new car deal, new or used, and then rent this car, and then potentially sell that to the driver.
It’s a whole new ecosystem that is truly incremental revenue, and the dealer doesn’t have to invest in nickel because already has the real estate, he or she already has the people, parts and service, finance, warranty, all of it.
Jim Fitzpatrick: Right? Any vehicle that I’ve got in my used car inventory that I bring in that’s in excess of let’s say 40,000 miles. But as we know there’s still a whole lot of runway on that car.
Brian Allan: A lot of runway.
Jim Fitzpatrick: Not necessarily something we’d keep on the lot per say or showcase. But that seems to be a no brainer for me to put that vehicle into service.
Brian Allan: You need to buy a couple of dealerships right now because you figured it out. And now this is the paradigm shift that dealers are starting to see and that is what used to be a burden, mileage and depreciation, I can not only charge for it, but I can make money from it.
Brian Allan: And it’s just funny how it’s taken this long, but the parts and service departments of most dealerships is where the bills are paid. And what, what do they have in common with big money industry, it’s recurring revenue. The sales department tends to be, you’re lucky if you sell the same cart or the customer once every three or four years.
Brian Allan: Now we can accelerate that and earn revenue on a car every month. Just like other businesses that are very successful do with recurring revenue off an asset that you already own. And that is changing the game of what a high mileage car is worth. And also low mileage.
Brian Allan: Here’s something interesting you are that your audience is going to be very aware of. Often the phone call happens near the end of the month and manufacturer says, “I need you to buy 30 a model X, right? And by the way, we’ll give you a $3,000 a car. But you have to put 5,000 miles on it before you can sell it.”
Brian Allan: The dealers in that catch 22 of, “Oh I don’t even have the place to put on. I can’t get the miles fast enough. I’m going to be stuck with them for six months.”
Brian Allan: What we do is we say, “Hey, let’s put these in your rental fleet. We’ll clock the miles fast as you want and it’ll actually makes more sense to put miles on and car quicker and put them on the used car lot and sell them as certified pre-owned or used.”
Brian Allan: Now the dealers that are in our program welcome those phone calls instead of grieve over them. They increased their allocation and the OEMs are loving it and that’s why we’re working with some pilots on some OEMs because we’re creating a legitimate use for these vehicles that frankly, they’ve had to persuade dealers to take advantage of.
Jim Fitzpatrick: Yeah. So what are some of the downsides?
Brian Allan: The issues that are the downsides are getting everyone on the team in the store to believe in it initially. So what we strongly believe is on-demand transportation. What we’re doing today is going to be that third leg of the stool of regular retail sales, leasing and now on-demand. Whether-
Jim Fitzpatrick: Is it just an alternative way to-
Brian Allan: Subscription, rental, rental for rideshare. And so to validate all this Automotive News had a retailer form in NADA and they showed that in the next 10 years the SAAR is only going to go down about 12%, 14% is the forecast, not a big drop. But the retail segment of the SAAR is going to drop about 40%. And it’s going to be counterbalanced by larger fleet sales to on-demand big fleet organizations.
Jim Fitzpatrick: So you didn’t lose that driver. They’re just doing it another way.
Brian Allan: That’s right. So today’s dealer really isn’t prepared to participate in this on-demand transportation service. We’re saying dealers not only are you best prepared, I mean your best in position to prepare, but we can help you do that. And what our business does, we don’t just provide the technology, we provide the drivers.
Jim Fitzpatrick: Talk to me about your screening process. Can anybody have an app and go rent my car or what does that look like from your stance?
Brian Allan: Critical, important a question. So we do it extremely difficult, well difficult in-depth process. Matter of fact, every driver that we actually end up getting on the platform costs HyreCar about $500.
Brian Allan: So we do an in-depth criminal, multi-state background check and of course driver’s license. And now there’s something that there’s a character check and everyone might want to be aware of this if you’re not. We even check social media. If somebody is there posting pictures doing 16 shots of tequila, that actually, it can hurt you. So we’ve vet them and because part of our insurance competitive ability to do this is that we take some responsibility of the drivers.
Jim Fitzpatrick: Okay. Well, Brian Allan, I want to thank you so much for joining us and this has been very enlightening. We always want to bring new and fresh ideas to our dealer audience and managers that are out there listening, going, “Now we can take our inventory that’s sitting around and make a buck from it.” Not just on the rental side, but like you said, chances are that person’s going to end up buying a car from you, if not that particular.
Brian Allan: Correct.
Jim Fitzpatrick: Yeah. Fantastic. So Brian Allan, Senior Vice President, Strategic Partnerships at HyreCar. If you haven’t heard about it, go to Hyre… Is it hyrecar.com?
Brian Allan: It is.
Jim Fitzpatrick: Hyrecar.com, doesn’t get any easier than that.
Brian Allan: All right.
Jim Fitzpatrick: Thanks so much.
Brian Allan: Well, thank you.
Jim Fitzpatrick: We’ll do a follow up with you and see how things are going in the next few months.
Brian Allan: Thank you Jim.
Jim Fitzpatrick: Thanks.
CBT Automotive Network, the number one most-watched network in retail automotive. This has been a JBF Business Media production.