Seeking new sources of cash as ride-hailing companies eat into the rental car business, Hertz Corp. on Tuesday announced a partnership with Shift, a San Francisco start-up that connects buyers and sellers of used cars online.
Shift provides a new sales channel for Hertz to unload used rental cars, usually sold after about a year in service. Most go to high bidders at auto auctions — typically used car dealers.
The start-up promises Hertz, the country's No. 2 rental car company, higher margins on its used cars.
"Obviously, when you go to auction you don't get as much money as you would as if you went straight to consumers," said George Arison, Shift's chief executive.
Rental car companies are looking for additional revenue opportunities as they find themselves squeezed by a major shift in how travelers get around. For many people, the affordability and convenience of Uber, Lyft and other ride-hailing apps have pushed rental cars aside.
Ride-hailing services overtook rental cars among American professionals for the first time in the fourth quarter of last year, according to travel and expense management software firm Certify.
Since July 1, Hertz's stock has plummeted 48%, ending the day Monday at $22.73. In June, Hertz signed a deal to provide rentals to Uber and Lyft drivers who don't have cars.
Shift, currently operating in the Los Angeles, San Francisco and Washington, D.C., metro areas, works this way: Someone with a used car to sell contacts Shift, which sends out an agent to look at the car and estimate the price. Shift takes the car, cleans it up and puts it online. Once sold, Shift takes care of the financial transactions and paperwork.
By dealing with Hertz, Shift significantly boosts its supply of vehicles that tend to carry high mileage but also are fairly new and well maintained.
"We think it's a huge deal," Arison said. Next, Shift plans to start selling cars coming off lease. This year, about 3.5 million cars will come off lease, and that number is growing as leasing becomes more popular.
As for Hertz: "We like Shift's tech-centric customer base, which will further widen our sales channels and bring Hertz Car Sales exposure to new audiences," said Jeff Adams, Hertz vice president of vehicle remarketing.
The online used-car business is in the midst of a shake-up. Beepi, based in Mountain View, Calif., said this month it was closing most of its operations and merging with another start-up called Fair.com, laying off 180 of 260 workers.
Whereas Beepi sold most of its cars online, with generous return policies, a Shift employee will bring the car to the customer's home for a test drive.