If you haven’t heard, Lyft is now in the business of renting cars to consumers. When the ride-hailing giant opened recently near Los Angeles International Airport (LAX), it became the duty — nay, the birthright — for the executive editor of Auto Rental News and Los Angeles resident to try the service and write about it.
So I did, this past weekend. Here’s my experience, from booking the reservation to the return:
All daily rentals start through the regular Lyft app. The process was smooth, though the reservation is not able to pull your info and credit card number from the ride-hail app to populate the rental reservation. You’ll need to do that manually for every rental, at least for now.
There are two models available at LAX: a 2019 Mazda3 sedan or 2019 Mazda CX-5 compact crossover. Interestingly, Lyft lists the Mazda3 as a full size. (Rental companies are famous for stretching smaller vehicles into larger categories; jumping from a compact over a midsize to a full size takes the cake.)
The app displayed $45 a day to rent a Mazda3, while the larger CX-5 would’ve cost $55 a day. Weekday rentals were running $10 less per day. I chose the Mazda3 for a 1pm pickup on Saturday, Sept. 7, returning on Sunday at 4pm, a two-day rental.
Taking advantage of the ride credit, I summoned a Lyft from my house and rode the 11 miles for free to the rental lot, located in an industrial area just south of the car rental lots serving LAX.
The LAX location is essentially a massive parking lot with a temporary office trailer. Upon entering the lot, I was greeted by a sea of sparkling silver 2019 Mazda3 and Mazda CX-5 models.
While the sight of so many cars filling the lot on an early Saturday afternoon would give a rental operator heartburn, keep in mind that Lyft’s rental business is still in beta.
The checkout process was seamless, in part because the place was empty. There appeared to be three employees at the location with one other customer finishing a rental.
You know when you walk into a rental location with a reservation and you hand over your license and credit card, and the agent seems to tap endlessly into the computer, even though they have your information already? There was none of that here.
(While the major car rental companies’ loyalty programs have seamless checkouts too, it still amazes me that a checkout for a regular rental could take five minutes at the counter.)
Upon showing my credentials to the Lyft associate, she asked if I’d like the collision damage waiver, which I declined. There was no hard sell. A few swipes on a tablet and I was on my way. My rental car was already lined up in front with a card with my name on it.
I took full advantage of the unlimited daily mileage; my I traveled a total of 280 total miles. On Sunday, I blew past the 4pm return time. At 5pm I received an automated text from Lyft saying that if I needed more time on the rental that I should update the reservation in the app. The message said doing so may adjust my rental charges.
I didn’t tinker with the app and made it to the lot about an hour and half late. Logic told me that Lyft wouldn’t adjust the rate upward, as I was well within a two-day period. The agent checked in the car and confirmed that there would be no new charges.
I decided to take advantage of another Lyft rental perk, the ability to return the car without a full tank of gas. Lyft charges the renter a market rate to fill the tank. When I left the lot on Saturday, a sign listed the rate as $3.80 a gallon, which a bit high, but fair around LAX.
After eyeballing the fuel gauge, the agent told me my fuel total would be about 10 gallons or $39. From a customer service standpoint, this allowed me to leave the lot understanding my total charges, as opposed to waiting until Lyft filled up the vehicle to send me a bill with the exact price. I told him to email me the bill.
The on-the-fly fuel charge assessment was intriguing. With only two models in the rental fleet, after enough transactions the agents should be able to understand a fairly accurate fuel charge based on the fuel gauge reading. That said, without telematics to monitor the tank, it’s an inexact science.
When I did review the bill, I found a few problems: I was charged twice for fuel, and the per-gallon charge was listed at $4.00.
After an email, it took a little less than 24 hours to receive a response. The responder apologized for the mistake and as a courtesy backed out the fuel charge entirely. This was a pretty substantial make-good that certainly ate into Lyft’s profit on my rental.
Overall, and backing out the glitches that I’ll chalk up to “beta,” the rental was a pleasant, seamless experience. Later I collected my thoughts on the larger issue of the business model.
Will the Model Work?
Regarding the rental fleet, Lyft took a page from Silvercar’s playbook of streamlining the choices. Having two models, a sedan and a crossover, will most likely cover 90% of daily rentals and provide operational advantages as well as some buying power with the manufacturer.
Regarding pricing, I decided to check rates for Lyft’s rental locations in the Bay Area and against other car rental companies on Expedia.
In San Francisco, renting a VW Passat on Thursday, Sept. 12 for one night will run $35 a day. That rate jumps to $89 for a Saturday pickup. In Oakland, the same dates run $35 and $79 per day.
Prices for the major car rental companies on Expedia for Los Angeles, San Francisco, and Oakland on those dates return rates at least 30% cheaper.
I’m sure Lyft doesn’t want to get into the major car rental game of hourly rate scrubbing and supply and demand monitoring that can move rental prices a few times a day. A set rate is cleaner from a customer perspective, though I’ll be curious to see if they adjust rates higher when they’re close to selling out, or lower with light demand.
Of course, those other rentals do not include the $40 credit toward Lyft rides to and from the Lyft Car Rental lot.
The ride credit is a great perk and the new rental service’s best marketing tool — but is it a profit killer? Keep in mind that Lyft’s bottom-line costs are nowhere near $40 per rental, since not everyone will take advantage of it, not every ride reaches $20 one way, and the cost to Lyft is only what they pay the driver, not the markup to the rider.
While the major car rental companies do use employees to pick up and return customers, it’s not a substantial cost. On the flipside, the majors occur a different cost not tied to customer “surprise and delight” — online travel agency (OTA) fees.
Lyft doesn’t pay upwards of 25% per rental that OTAs such as Expedia and Orbitz charge car rental companies for reservations made on their platforms. Lyft’s brand equity should allow it to steer clear of the OTAs, as well as avoid other costly customer acquisition strategies, including traditional advertising, that car rental companies must use. Lyft’s brand presence alone should allow for great exposure for little cost.
Here’s another area of enquiry: Does Lyft pay any airport concession fees? An inbound passenger being able to hail a Lyft — not a rental car shuttle — to access a Lyft rental lot a half mile from the airport is a huge convenience. I have no idea if Lyft pays LAX a concession fee, though it sure seems like this service is operating like an airport rental with a premium perk.
The gas fill-up at market rate is another great customer perk, though as the service gets busier Lyft may rethink the model when they realize how inefficient and costly it is to have lot employees constantly rotate cars offsite to fuel.
Incumbent car rental is an asset-heavy business, which seems antithetical to the asset-light model of the platforms operated by Transportation Network Companies (TNCs). Uber famously lost $9,000 per car through mismanagement of Xchange Leasing program to drivers.
We’re all smarter now, and Lyft no doubt understands the evolution of the TNC model itself. As car ownership erodes, the pool of TNC drivers with their own wheels shrinks.
In that vein, owning a new car fleet has more immediate benefits for Lyft — when those cars reach the end of traditional rental fleet mileage, they can be flipped to Lyft’s ExpressDrive program, which puts higher mileage cars in the hands of Lyft drivers. Hertz and Avis like this business and are growing it.
Lyft’s car rental service doesn’t yet have the big-volume problems that airport car rental companies experience. That’s fine; they’re working out the kinks and Lyft can carry those losses for a couple of years if they want. When Lyft decides to put some budget into marketing beyond direct emails to users, that lot will empty out.
We’ll be watching to see how this plays out.
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