By Matt Carpenter, CEO, Dealerware
There are more franchise dealerships in the U.S. than Starbucks or McDonald’s locations. About two-thirds of America’s drivers live within 10 miles of their preferred dealership. Franchise dealerships have put America on wheels and kept America on wheels for over a century.
Over the last three years, more and more of America’s drivers have turned to their franchise dealerships for another market need — car rental.
We commissioned a J.D. Power survey earlier this year that showed that 15% of drivers rented a car from a franchise dealership in the last three years; 50% said they were likely to rent from a dealership location in the future.
“Now really is the time to experiment with renting vehicles,” said Lisa Diskin, the GM and owner of Team Toyota of Glen Mills in Pennsylvania, where customers can rent a vehicle as a service loaner or for their general vehicle on-demand needs.
“Customers want more choices,” Diskin said. “Renting cars is still a challenge for people who need to get around, and giving them the option to rent from the dealership brings more customers in the door.”
I understand that inventory is tight in today’s market, and choosing to spend vehicle allocations on your dealership fleet feels like an opportunity cost, potentially foregoing the strong margin potential on each car you get from the manufacturer. But let’s consider the broader context. Your service loaner vehicles continue to enable service revenue and margin and are critical to customer service retention in an increasingly competitive marketplace. Leveraging your dealership fleet also drives sales long term, as 98% of dealership customers who receive a loaner at service say they’ll probably or definitely return to that dealership for their next vehicle purchase.
As it turns out, customers who receive a loaner at a service visit are also twice as likely to say they’ll rent a vehicle on-demand from their dealership, if available. Like Diskin said, customers value choices. And most customers pay up to $125 daily for the option to rent a vehicle from a dealership when they need it.
Getting into the paid rental business may seem new and difficult, but you can mix rentals into your programs if you have fleet management software that makes it easy to adjust contract terms based on the source of business. While you need a separate contract for rentals vs. loaners, you already have the staff, facilities and vehicles ready to handle rental demand. And we know the market is there and available to dealerships across the U.S.
In 2020, the rental car industry had a crisis. Two years later, Bloomberg reported, “Analysts expect Avis to earn almost $2 billion of net income in 2022, which is more than it made in the years 2010 to 2019 combined.”
Survey data shows us that dealerships may be able to provide a vehicle on-demand service that aligns more closely with what renters actually want. The most-cited factors in a customer’s car rental decision were competitive pricing, proximity to the rental lot, a simple check-in and return process, and high-quality vehicles. These are all car rental customer requirements that franchise dealerships can deliver on.
Dealership inventories may be down, but smart fleet planning can ensure customers are getting the right combination of selection and utility. Rentals delivered by dealerships can give people a more economical way to get to work, to haul materials for those DIY projects or to just enjoy a new driving experience.
The future of automotive retail will remain with franchise dealerships. We also believe that today’s automotive retailers represent tomorrow’s mobility network, including car rental.