Owning a Car Sharing Company ‘Ain’t Cheap’

Although car sharing company Zipcar saw revenues of $134 million for the nine months ending Sept. 30, 2010, it also spent $89.78 million operating its fleet, according to a blog on Reuters.com. That includes paying for its car leases, fixing vehicles, paying for parking spaces, paying for fuel, the cost of insurance, adding and removing vehicles to and from the fleet, covering accidents and vehicle depreciation costs. All of that has prompted blogger Katie Fehrenbacher of Earth2Tech to conclude that, "It ain't cheap to be a car sharing company."

As of September 2010, Zipcar had 8,541 cars in its fleet, most of which it leases, but 1,692 of which it owns outright. Fehrenbacher writes that Zipcar recorded a net loss of $13.1 million for the nine months ending Sept. 30, 2010. Zipcar will depend on growth and bringing in more users, but also looks to reduce its fleet operation costs by becoming more efficient.

The fact that Zipcar's fleet cars are routinely turned over means that the company must have access to capital. After keeping its cars on average of two to three years, Zipcar sells the cars to the used-car market. The company also continually removes cars and adds cars to its fleet depending on seasonality. Zipcar's aggregate principal amount of outstanding debt as of Sept. 30, 2010 was $95.8 million.

To lower costs, the company this spring established Zipcar Vehicle Financing LLC, or ZVF, which will be used to purchase vehicles. Zipcar plans to increase the amount of owned vehicles in its fleet, compared to the amount of leased vehicles. Zipcar believes this financing model will permit it to add new vehicles to its domestic fleet more cost-effectively and that it will rely less on third-party operating leases.

Zipcar in April 2010 bought London-based Streetcar for $62 million and also invested $300,000 for a minority interest in Spain's Avancar. Zipcar will decide by Dec. 31 if it wants to take a majority interest in the company.

Comments

  1. Debbie [ January 7, 2011 @ 05:34PM ]

    That is why I feel that P2P sharing will be the right way to go, as all the money companies earn can hand it off to the owners. As a women I had concerns sharing my car or even borrowing and after I got invited to join www.JustShareIt.com, they really helped me made comfortable and explained the benefits of sharing and earning lots of money instead. I usually use my car 2 days a week, so I am successfully able to share for 5 days and the earning can add up quickly. Definitely looking forward for my first (second income) paycheck.

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