One of the listings offered by Shift.
Online car service Shift hopes to become a major force in used car retailing thanks to a new alliance with rental giant Hertz.
The deal could be a breakthrough for both companies, giving Shift the inventory it needs to expand beyond its three current metro hubs. For Hertz, it creates a new way to connect directly with consumers and get rid of all those aging cars as it comes time to get them out of the company’s rental fleet.
“We want to be a place for fleets to sell to consumers,” said Shift CEO George Arison, adding that the alliance with Hertz is “a good fit for us, because we don’t own the cars we sell.”
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San Francisco-based Shift currently operates in its hometown, as well as in Los Angeles and Washington, D.C., but wants to take its model nationwide. Like competitors Carvana and Vroom, it is targeting consumers who want to get relatively low-mileage, late-model vehicles that have been inspected and, if necessary, repaired to bring them up to near-new levels.
On average, Hertz maintains a fleet of about 500,000 vehicles that eventually will be resold.
The start-up first teamed up with Hertz last May but the expanded relationship could eventually allow Shift to operate nationwide. According to Arison, the venture has already generated strong response among consumers, the executive claiming Shift has “sold 60% more cars” than the biggest used car dealer in the Bay Area.
For Hertz, the country’s second-largest daily rental company, the alliance could provide a profit-making outlet for the 500,000 cars it has in its rental fleet. It routinely rotates vehicles out when they reach a certain age or top a set mileage. In some cases, manufacturers buy the vehicles back, but the majority of those cars, trucks and crossovers wind up on auction lots.
“Obviously, when you go to auction you don’t get as much money as you would as if you went straight to consumers,” said Arison.
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Hammered by investors in recent months as it loses business to high-tech car- and ride-sharing services, Hertz has been looking for various alternatives to drive up revenues from used car sales. Among other things, it has set up 80 of its own retail locations in the U.S. and Canada, and also has established a program that lets potential buyers check out vehicles that they’re interested in, called Rent2Buy.
News of the Shift deal generated a strong response from Wall Street, Hertz Global Holding shares immediately surging about $1 a share, or more than 4%, in early Tuesday trading before settling back slightly..
The alliance with Shift is not likely to be monogamous. Hertz wants to“partner with innovative companies like Shift to leverage their technology and bring a seamless, hassle-free purchase experience to our car buyers,” said Jeff Adams, vice president of the rental firm’s vehicle remarketing unit.
Shift’s Arison, meanwhile, said the start-up is looking at other opportunities to expand its inventory of nearly new vehicles, suggesting, “we could also expand to manufacturers who have so many low-mileage cars coming off lease.”
That’s a big issue for automakers who have been expanding their lease operations during this decade’s automotive boom in order to give potential buyers an affordable alternative. But as those vehicles come back off of lease, carmakers have to find ways to maximize their resale price or risk major losses.
Like other online used car retailers, Shift also works with consumers. If a private owner wants to use the service, Shift will send out an inspector to estimate the vehicle’s value. It will also clean the car up before putting it up on the firm’s online sales database. Once sold, Shift will handle the paperwork and take its cut before paying off the seller.
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