Ford Embraces Ride-Sharing

What Consumers and Investors Need to Know

Ford Embraces Ride-Sharing
July 17, 2015

Automobile transportation options have mushroomed in recent years. No longer is it the simple choice of buying or leasing a car for long-term use or renting one for short-term use. Ride-sharing services like Uber and Lyft are providing options for those who don't want to own a car at all, Zipcar and other services are covering the very short-term rental market, and peer-to-peer car sharing services such as RelayRides and Getaround are allowing auto owners to rent out their cars when they are not being used.

These services have not collectively taken huge dents out of auto sales yet — but they are likely to in the future, and auto manufacturers are deciding how to address the issue. Susan Shaheen, a UC Berkeley engineering professor and transportation expert, suggests that every vehicle that enters into car sharing full-time replaces four to six sales of new cars and delays up to seven more.

Reading the writing on the wall, most auto manufacturers are launching pilot programs to decide how to enter these markets without cannibalizing their sales. Ford chose the route of helping car buyers rent out their cars by teaming with Getaround.

Buyers who finance their new Ford through Ford Motor Credit can participate in a pilot program that allows them to rent out their new Ford through Getaround during times when the car is not in use. The pilot program is available to 14,000 Ford buyers in six US cities (Washington, DC, Chicago, Portland, Oregon, Berkeley, Oakland, and San Francisco). Another 12,000 buyers in London, England, will be allowed to participate through easyCar Club.

The connection through Getaround provides a pre-screened driver base and other protections including a $1 million insurance policy, 24/7 customer support, and a roadside assistance program. On their website, Getaround claims that owners earn $521 per month on average, an amount that can cover most, if not all, of the new car's monthly payment. For millennials that are struggling economically and more comfortable with peer-to-peer services in general, the Ford offer is tantalizing to those who have enough transportation needs to purchase a car for themselves. In short: use a ride-sharing app to cover your car payments.

Ford is not completely ahead of the curve, but they are in a good position. David McClelland, VP of Marketing for Ford Credit, noted that "…this can help us gauge our customer's desires to pick up extra cash and keep their vehicles in use." Translation: If this service is put to significant use, we will find a way to establish this program as a combined sales tool and entry into the alternate rental market.

From an investor point of view, it is wise to monitor the results of the Ford experiment and compare it to similar ongoing efforts or other pilot programs from BMW, GM, Daimler AG, and Toyota. The first one to attach significant sales improvement to such a program, or turn the program into a separate income-bearing entity, will have a significant advantage and be rewarded in the market.

For consumers, the Ford program could be a great deal — if you live in one of the pilot areas, are comfortable with renting your car out to others, and planned to finance your car through Ford Credit. You always have the option of financing your car outside the dealership, and if Ford does not keep their rates competitive, the move is likely to backfire.

If the financing rates are tolerable, go for it, but do not take a bad financing deal from Ford (or any automaker's credit arm) just to access Getaround. You can always do that by signing yourself up.


Photo ©iStock.com/deepblue4you

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paul | 07.22.15 @ 04:39
Why call Getaround a 'ride-sharing app'? I guess it works if you call your car your 'ride' and renting it out is like 'sharing' it. But this just makes more confusion out of the whole mixed up market. Getaround is CAR sharing (peer to peer); Uber and Lyft are 'Ride Sourcing' (or just call them taxis).
$commenter.renderDisplayableName() | 12.06.16 @ 10:37
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