How is Silvercar making money?

Old Aug 14, 19, 6:07 pm
  #1  
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How is Silvercar making money?

I'm renting a car in San Francisco Downtown for $79 for 2 days. After using the reward code, I get $25 and the reward code member will get $25, meaning essentially, Silvercar is making $29 for 2 days off my rental. In addition, I plan on driving down to San Simeon and then driving over to Yosemite National Park, which is 900 miles for the trip (I don't mind driving an Audi 7 hrs a day). Given the Audi A4 silver car uses retails for $45000 MSRP, and a 2 year old A4 with 30000 miles can be had for 25000, that $0.67/mile in depreciation alone. Edmunds rated the total cost to own in the first 2 years of an Audi A4 at $26000 for 30000 miles, meaning $.87/mile. That means me driving that much will normally cost silver car $780, so they are making a $750 loss over me.
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Old Aug 14, 19, 6:14 pm
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A few comments
1. I'd guess they aren't paying anywhere near $45k for the vehicle
2. They're getting $54 for your rental. The $25 that the next person gets counts toward their cost, not yours. I'm guessing many of these spoil before use, like airline vouchers.
3. You are the exception. Like in a casino where one person can walk away with a million, or on a flight where one person gets a $1,000 VDB voucher, it's the whole they're looking at.
4. The "cost" that Edmunds/other sites use most likely includes insurance, which is a significant cost. I'm not familiar with Silvercar, but I'm guessing they don't give you free insurance, so you can't take that into consideration.

Overall, though, sure, they are losing money on your rental and they're ok with that once in a while. However, note that Hertz and others have a policy of putting you on a DNR list if you routinely drive too much or cost them money. They're in the business of making money and can chose to "fire you" as a customer.
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Old Aug 14, 19, 6:31 pm
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You are the exception. The next 10 people will use the car to get to a few meetings in Oakland, San Jose, and Mountain View. When you average it out, the number of miles driven by the average customer is far lower than what you drove. Additionally, just like Uber, Lyft, and a number of other services, Silvercar is still in expansion mode. They are fine to lose money for now in order to grow their customer base. That's why the promos exist. They may not always exist, so enjoy it while it lasts.
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Old Aug 14, 19, 6:35 pm
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I had also planned to take a Hertz Vehicle with their $10.99 special the day before when I arrive from the airport. I plan on taking a Hyundai Tucson SUV and doing a day trip to maybe Wine country. Hertz let you drive 170 miles and fuel is included, with each additional mile costing just 0.1. I plan on driving exactly about 170 miles. Thing is, 170 miles on a gazz guzzling SUV in the Bay Area= $.15/mile, or 25.50 right their its costing gas for hertz. Depreciation of $.2/mile for a car that new = additional $34 in losses, and assuming maintenance/tires= $4 more in losses. In total, hertz makes $11 while its costing them $64 to rent the car to me. Hopefully they don't put me on the DNR list after this. In the past, I have also paid $55 for a 2 day rental on an Elantra and put 450 miles on it and $25 on a one day rental in a Toyota RAV4 and put 750 miles on it.
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Old Aug 14, 19, 8:05 pm
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In that specific case, consider how much it would cost Hertz in gas, tolls, and driver labor to have the car moved from the airport to a downtown garage in time for the weekend rush.
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Old Aug 14, 19, 9:02 pm
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Hyundai Tucson is definitely not a "gas guzzling" SUV by any stretch of the imagination.
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Old Aug 21, 19, 4:42 pm
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Silicon Valley venture capital money. They also got an investment from Audi itself. Many of these tech startups burn through millions and lose a ton of money because they got a ton of venture funding without a realistic plan for making money. Uber still hasn't ever made a profit as far as I know.

These types of companies either get bought out or shut down suddenly. In this case, my guess is that Audi is using Silvercar as a testing ground for their subscription service.
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Old Aug 21, 19, 4:50 pm
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Audi now owns 100% of Silvercar.
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Old Aug 21, 19, 4:52 pm
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I thought Audi owns Silvercar now. I didn't think it was Silicon Valley venture capital money.

So, the cost per car is much lower than retail price for Audi, and they also have a certified pre-owned pipeline they can use to sell the cars when they are done with rentals. They also use it as a benefit for new car owners AND its a great marketing technique. I now want a Q5 after renting one for a week this summer.

Off site location must save a ton on money, because I am finding Silvercar to be cheaper than on-site Avis and Hertz in some rentals.

I have a week long rental in FLL and the Audi A4 is cheaper than a 'jetta or similar' car from Avis once Avis gets done adding all their ridiculous fees that they add in Florida.
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Old Aug 21, 19, 4:53 pm
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Originally Posted by bitterproffit View Post
I thought Audi owns Silvercar now. I didn't think it was Silicon Valley venture capital money.
​​​​​​​I'd bet it was VC money at first before Audi bought a stake. You can't just buy hundreds of $30-$40k cars and develop a sophisticated pricing algorithm and IT infrastructure on a regular business loan.

Originally Posted by AutoSlash View Post
Audi now owns 100% of Silvercar.
Didn't know that. So for all we know Silvercar could be losing millions but Audi thinks it's worth it to try to turn renters into Audi buyers or to increase their control of the used market as @bitterproffit suggested. Or maybe they're reaping huge profits - who knows.
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Old Aug 21, 19, 6:04 pm
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It’s a niche play for sure. The off site rental locations alone are going to discourage significant business rentals. The big guys have done a great job in loyalty programs and convenience in a lot of airports. But I wonder if other car companies are looking at Audi’s experience here and seeing whether something similar might work for them. Definitely not the big guys (but seeing that Audi is owned by VW, maybe the big guys).

I am am not sure it’s hugely profitable, but I was thrilled when deeper pockets bought Silvercar so they could sustain and grow....at least for now.
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Old Aug 21, 19, 7:03 pm
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Audi decided to increase its stake and bought the whole company. Since it's expanding the number of locations and the types of cars offered, it must think it is throwing good money after good.
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Old Aug 22, 19, 4:46 pm
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Originally Posted by bitterproffit View Post
Itís a niche play for sure. The off site rental locations alone are going to discourage significant business rentals.
Not so sure. At O'Hare it is comparable in time, and sometimes a lot better with the ATS being such a mess.
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Old Aug 22, 19, 10:14 pm
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Not entirely. Chicago seems to be a regional one-way hub. I've seen rentals from the East Coast there, as well. Even if Silvercar services those cities, I doubt serious one-ways are more than a negligible part of their business model. Has anyone actually seen far away license plates on Silvercars in their city?
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Old Aug 23, 19, 7:48 pm
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I just got a survey for Audi owners who are also Silvercar renters. It's pretty clear they are looking to expand to non-traditional areas.
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