What’s Your Big Idea?

Rent2Buy Goes Upstream to the Extreme

Bryson Hart and Moti Kahana, Rent2Buy

Rent2Buy is an upstream remarketing tool that sells rental units direct to consumers while still in fleet. The units can be sold simultaneously through a Web site developed for the rental company, referred to as "Rent2Buy Private Label" and through www.Rent2Buy.com, which has more than 100,000 monthly unique visitors.

Rent2Buy provides customers with the opportunity to test the vehicle for three days as a rental. The rental fee is waived if the car is purchased. If the car is not sold, the customer simply returns the car and pays the three-day rental fee.

The Rent2Buy model keeps the sales process completely in-house and saves the rental operation time and money related to de-fleeting and remarketing, including prepping, shipping, auction, advertising and other costs.

"I call it 'extreme' upstream remarketing," says Moti Kahana, CEO of Rent2Buy. "You can't sell the car any sooner than when it is still on rent. And the middleman, such as a broker, auction or online auction, is cut out of the process."

Customers access a list of cars for sale online, which informs the customer of when and where the car will be available. The customer then makes a reservation to pick up the car the day it comes off rent.

Rent2Buy is only available currently to consumers through Hertz Rent2Buy. "Hertz has been using the model, and we view this as a proven business model," Kahana says.

This non-compete agreement expires at the end of 2010, at which time any other car rental company can set up a similar sales structure using the new Rent2Buy engine.

How Rent2Buy Works

Traditional auction sale (two weeks average to sell)

Wholesale auction value - $13,500

Cost to sell, ship, clean - $500

RAC net proceeds - $13,000

Via RAC sales lot (four weeks to sell)

Wholesale value - $13,500

Retail value - $16,500

Cost to sell:

Marketing/advertising - $650

Salesperson salary per car - $350

Other brick-and-mortar costs - $400

Sales price after overhead, before profit - $14,900

Used car sales division profit  - $1,500

Sales price to make a profit - $16,400

Rent2Buy: direct to consumer (car sold directly off rent)

Sales price direct to consumer - $15,000

Cost of service, only on success - $250

Consumer savings over retail book value - $1,500

RAC net over traditional auction - $2,000

RAC net over car sales lot - $500

CONTINUED:  What’s Your Big Idea?
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