Idea: Feedback/help

[Tut122]

Ok, I have been working on this idea for about 2 months now and have come to a standstill. Here is the basic just...

I am interested in cars and always have been, and the more I read about entrepreneurship, the more "experts" say about following your hobbies and interests. So, I began to focus my entrepreneurial "powers" on cars and what I can do to change the industry. When thinking about this, I came up with something interesting. It can be classified as long term renting or short term leasing. Basically it is a car club. I want to start a club much like that of a golf country club, members will pay a monthly rate for the cars. I want to purchase a fleet of higher end cars in the $80,000-$100,000 range. These cars generally cost a little bit over $2,000 a month to lease for 3 years. I want to offer members of my club the opportunity to drive a car for 4 months at a time, therefore driving 3 cars per year. Basically, with 25 members I would purchase 25 cars and they would circulate among the members every 4 month period. The club would take care of all service, maintenance and cleaning of the cars as they switch hands between the members. Members would pay $2,200 per month, which is within 1-2 hundred dollars of actual 3 year leasing prices. At the end of the year, I would sell all the vehicles in the fleet and purchase brand new ones equaling the number of members I had in the club. I would partner up with dealers, therefore getting cars at wholesale. After in depth research, I found that cars generally depreciate around 13-14% per year, as long as there was no collision and not 40,000 miles in one year, so I would have to limit miles somewhat. As it works, as customers increase costs increase but at a smaller rate so with 100 customers I stand to make a considerable amount of profits in a given year.

I have a business plan and finance sheets set up, however, have proposed the idea to several potential investors in the Phiilly area, all of whom have their doubts.

OPINIONS PLEASE! I need about $3 million in capital to start the venture, so anywhere I can get that would also be great advice.

If you would like more information or are interested in helping finance the idea...please email me @ sktut@comcast.net

[teana]

Interesting idea.

I remember reading an article in entrepreneur magazine about a guy who started a high end car rental company where he rents our ferraris, lamborghinis, maseratis and the like. He started off with only 2 cars and over time developed a franchise.

The car club idea sounds interesting, but have you looked into insurance costs? Since you would have to have each car insured for any driver which is the most expensive one, as well as any maintenance costs such as oil changes and what not. I am guessing you're customers are people with disposable income or people that are highly likely to lease their own cars.

Perhaps you could make more money if you rented these cars? For instance enterprise rents cars at an average rate of $25 per day. Within 1-2 weeks of rentals they cover the cost of the cars, plus they make money when people want the optional insurance coverage.

A rental model would ensure that you would turn some sort of profit faster than a car club. Maybe do the car club as an extension of the business?

[Wuzzle]

Im not sure I completely understand who your business is aimed at. Those who wish to appear as if they had a new car every four months, or those who would enjoy driving a different high-end car every 4 months?

[insomnia]

It sounds interesting, but I'm thinking the insurance costs would pretty much kill the price. You should research the market, to see who has the resources or demand to drive different cars, etc.

[SiL]

I like the idea, and I wont harp on the insurance thing since it's been covered.

Anyway, I think you will need a bit more complex pricing strategy to pull something like this off. You mentioned that you will buy 25 high end cars, costing about $2000/month ... and charging $2200/month.

When you add in insurance and maintainence for these high end automobiles, it's likely that your profit will be cut in half, or to a third even.

I would limit the number of miles they can drive, and anything over costs $100.00 (or whatever cost you decide per x number of miles)

I would also charge a fee when the car comes back of 100.00 to wash, wax the car and so forth. Personally, If I was a high-end client I would not want to pick up a car that was all grungy from dirt and so forth.

I like your idea, I just think the pricing structure needs to change a little bit. You also have to allocate yourself near some wealthy/moderately wealthy individuals. But if that's where you live right now, great!

Good luck.

[Tut122]

Thank you all for the quick and informative replies. In response to some of your questions...

I want to purchase the cars straight for cash, the $2000 per month per car are not my costs, those are the costs for a person to go into the dealerhip and lease the car for 3 years, it was just used as a comparison. So the profit will be a little higher then it seemed in my first post...that must have been a typo on my part.

Also, the insurance. I have looked into that. It is very expensive, however, like all leasing companies, each member of the club will also be required to have their own insurance which will cut down my insurance costs.

I do live in a very affluent suburb of Philadelphia, where there is a lot of money floating around. In response to one of the other questions, my customer base would be two kinds of people: people who like cars and want to drive new ones often, and people who want seasonal cars (suv in the winter, sedan in the spring, convertible in the summer, etc.).

One other idea...I also thought about charging an initiation fee, say $50,000. I would take that 50k and use it as a membership fee, but saying that it is 85% percent refundable should you ever choose to leave the club, or something of that nature. The otehr 15% that I would make I would put toward insurance, detailing, etc.

As far as the rental, there are hundreds and hundreds of car rental companies around that rent high end cars. I have been an entrepreneur all of my life and have been involved in a fair share of money makers but I'm looking for the big one. I do not want to be just another car rental company, I want something new and innovative that will really catch on.

Please keep posting your opinions.

[mpnetwork]

An up-front fee may turn people away. Maybe a deposit equalling 1 month applied to their account after 12 months?

[waveformpc]

Sounds like a good idea... Heck, people in my area spend $2500/night for hotel rooms, probably because President Bush stayed there, and then Tiger Woods for the Buick Open... If your area is anything like mine, it would work...

[teana]

how about creating an exclusive car club where if they become a member and rent your cars, they get a chance to take part in some racing classes, like how to handle the machines and perhaps get some lap times?

I think that would be a huge plus, and it would definitely make me want to be a part of it. And then it'd be great if you could somehow get specail guests for meetings and stuff.

Have you thought about instead of just buying the cars for cash, just leasing them but getting a higher mileage out of them? Or do you plan on selling them after 2 years or so, so that you will always have the latest cars?

I would think you coudl also charge extra for the people that want a specific car in the rotation, like say the maybachs or the aston martin db9. If they pay a higher fee, then they are guaranteed to get the car on the next rotation. Maybe with a higher monthly membership fee, you can add in specials like weekly car washes where you send a detailer to their homes and wash the car and detail it. This would be an awesome add-on and it can surely keep drumming new business because of all the little extras.

Or perhaps have tiered memberships, where you have differing levels of luxury cars and sports cars, like the top tier sports car, they can get the aston martin and high end ferrari's, or in the lowest end tier, they can get a porshe 911, or bmw m5 or something like that. And just have package rotation cars? That way it will reduce your inventory needs.

[Dus10]

These are all great ideas.

To sum people's concerns: I think that what tut122 said about the customers private insurance, that should help considerably. I think an upfront membership fee is in order, but $50K sounds excessive, considering they could nearly buy one of these vehicles for that price, or lease 4 vehicles for a year at that price. Maybe something like $10K where a portion is refundable, and that portion is applied to their account after a year. I think the idea of getting the wholesale prices yourself is good... but paying cash for something like that is bad news if you are only going to hold them for one year. What if you come up with another class of club for older vehicles? Something that is a bit cheaper but it on the second and third year. Also, you may want to look into a leasing company. You find your deal, at your wholesale rate, and then the leasing company will buy the cars for you... often, there is a clause where you can forfit them after a year or so, and start a new lease. This way you are not stuck with some crazy depreciation. Of course, if you are getting them for fairly cheap, you could actually make money off of the sale, including the depreciation. Obviously, you have studied this more than I, but if there are doubts, they are usually well founded. Find out what in particular is scary about this and find a way to address it.

[WTD]

Evening gentlemen, we have something similar in the UK which you might like to look at to establish some more idea's and pricing structures.

High End Performance cars
http://www.p1international.com/html/02AboutP1.html

Classic Cars
http://www.classiccarclub.co.uk/home...on=%2Fhome.asp

Hope that this can help you out a little.

Kindest Regards,
WTD

[Tut122]

I like what all of you have had to say so far. I am in negotiations with a variety of insurance company about the specifics of the policy that I would need to take on. I am also doing a survey in my area of a few people to test market interest. I have the numbers worked out and a lot of the specifics, my question is: What is my next step? By the end of November I should have a list of possible clients who liked the idea, along with a business plan including insurance information, etc. Where do I go about getting funding? I cannot take out a loan, I have little collateral and no previous experiences. I am working closely now with a local entrepreneur who hopefully will be able to back me in our quest for funds, but does any one have any other ideas where money can be found? Keep in mind I'm 18 and I know I shouldn't look at that as a disadvantage, it can't be looked at any other way.

Thanks for your respones.