With the growth of the sharing economy, and services like Zipcar and Portico Club, people are growing more accustomed to paying a membership fee for access to a service where you then pay a per usage fee, and save money overall compared to buying the item outright. Well, there’s a startup opportunity in the same manner to serve the supercar/exotic car market.
High end sportscars are a niche, but healthy market. These supercars and grand tourers are different from the normal car approach in two key ways: they aren’t usually the daily driver for the owner and the owner isn’t looking to have the same car for many years. Like taking a vacation and enjoying the experience of something new, the same can be said of supercars but the current economics don’t make sense. If you want to experience a car you can try to test drive one, which is a short experience and potentially not possible depending on your circumstances, or you can rent one for $500/day, which again is short and highly restrictive.
Owning a super car is very expensive and out of reach for most people. Here’s a simple break down of costs for an example $150,000 supercar:
- $3,000/year in lost investment income (assuming 2% return on investment, and the money spent on the car is fairly illiquid at that point) or $6,000/year in interest if the car is financed
- $3,000/year for car insurance
- $10,000 for sales tax, spread out over two years (assumed length of ownership), for an average of $5,000/year
- $3,000/year for service, repairs, and tires (crazy expensive!)
- $18,000/year for depreciation (new Porsches and Ferraris hold their value much better than Aston Martins and Mercedes, as an example)
- Total: $27,000/year if bought outright or $30,000/year if financed
For simple math, assume most $150,000 supercars are financed, resulting a fully loaded $2,500 monthly cost to the buyer to own and operate the vehicle. Assume the car is driven 3,000 miles per year, resulting in a cost of $10/mile, not counting gas. Surely, there’s a better way.
Imagine a Zipcar-style service where you pay an annual membership fee and then have a variety of supercars to choose from, each assigned a point value based on their current market value, and then for a per day/week/month cost, you can take the car as long as you want. The cost to have it will be less than the fully loaded cost of ownership, capital won’t be tied up in the vehicle, and you can swap it out when you’re ready to try the next one. Even if the price of the service was similar to the cost to buy (e.g. $2,500/month) it is still much better to do the service since there’s transaction costs (like shipping, finding the right car, worrying about its quality, dealer markup, etc) and peace of mind that you can enjoy it and move on.
Plus, when you buy a supercar, as opposed to leasing one, there’s the risk that you get in an accident, and even though insurance covers the repairs, the resale value of the vehicle drops by 10%-20% since it now has a blemished Carfax and there’s uncertainty as to the quality of repair, extensiveness of damage, etc. With a Zipcar-style service, that risk goes away.
There are a number of different ideas to go along with this potential startup:
- Example cost might be $5,000 to join, and then a monthly fee depending on the type of car you want (e.g. $1,500/month for a 2008 Audi R8, $2,000/month for a 2011 Porsche 911 Turbo S, and $4,000/month for a 2010 Ferrari 458 Italia, all paid on a credit card)
- Opportunity to make a membership and certain number of points as a corporate benefit (e.g. the top sales person for the quarter gets a super car for the next quarter)
- Optional: members could take a supercar that they own and let other members use it to accumulate points that they can use to rent other supercars (in general the cars would be owned by the company and not by individuals, so as to be more exclusive and not have the fate of services like HiGear, plus the $5,000 membership fee and background checks would reduce the people who joined)
- Supercars could be very loosely defined as cars with a manufacturer’s suggested retail price of at least $100,000 USD
- Certain cars could be designated track cars whereby you’d be allowed to take them to a track (like the new Atlanta Motorsports Park)
- Advertising would done through local enthusiast groups like Caffeine & Octane, Google AdWords, etc
- Free pickup and delivery of the cars to members within a 30 mile radius and service to ones further out than that at a rate of $1/mile (e.g. you live 100 miles from the local location and for an extra $100/car you can have it delivered to you and $100 to have it picked up whenever you are done)
- High end vehicles like the Ranger Rover Signature Edition could be made available (e.g. to take to the mountains for a weekend)
A Zipcar-style model for supercars holds tremendous promise, especially through franchising or multi-city expansion. The sharing economy continues to grow and shows no signs of slowing down.
What else? What are your thoughts on the startup idea for a Zipcar-style business for supercars?