I think there is some truth to the old saying that if you are around long enough, everything comes full circle.

As consumers are under more and more financial strain — record subprime delinquencies, escalating household debt and diminished consumer savings — and the uncertainties of on-again, off-again vehicle tariffs along with continuing higher prices on consumer necessities such as food, it’s clear that dealers with the foresight who diversify into ancillary revenue sources will come out clear winners ahead of those who do not investigate and act on these opportunities.

As an old automotive retail veteran, I remember decades ago when automotive dealers looked down on lower margin quick service work, oil changes, brakes, tires, and more or less “abdicated” that business to others. This subsequently fed the massive growth of the independent chains of quick lube, brake, and tire stores.

Since then, dealers recognized that the value of quick service was not just in the gross profit of the work, which, with technology and skillful management could fall as incremental revenue to the bottom line, but the fact that it kept customers coming back to the store, “in the tent,” as it were, so that vehicle sales, trade-ins, and additional service work could more likely be sold on future visits.

What about renting cars?

Now for the last decade or so, many dealers, in the same way, have downplayed or eliminated their own daily rental operations, or any rentals beyond mandatory service loaners, again, because of the overhead of maintaining such an operation combined with low margins and a lot of dealership friction (read, inconvenience).

For obvious reasons, large rental companies were more than happy to “swoop down” on the local rental opportunities dealers offered, first, in putting satellite locations right in select high volume stores, or, for most, shuttling cars back and forth to dealerships on demand.

The irony here is, not only is the dealer best equipped to provide short as well as long term rental transportation at a lower incremental cost (just as in quick service shop work), but many dealers are going to auction and paying a premium to buy the same vehicles that were rented to their own local customers that the dealership “abdicated” to the outsourced rental company who bought them at lower fleet rates, and own these units at a substantially lower cost, written down by the dealerships own clientele usage payments — explain the logic in that?

The fact is rental car technology has advanced so rapidly in the last few years that there is very little overhead in running a subscription/flexible lease/long or short term rental or loaner car fleet at any dealership — the rental itself, payment, collection, tickets and tolls, mileage and gas fees, can all be done and monitored digitally, in app, so that really the only thing the dealer has to do is keep the vehicle clean and hand over keys.

At the same time, the dealership can eliminate any transportation “outsourcing” and control its own short and long-term rental operations. It can keep those who need short-term transportation, either for a vehicle in its shop (or someone else’s) or just need an additional vehicle, “inside the tent” for a possible permanent replacement sale.

Adding rentals to your operation

Indeed, there are many benefits to a dealer for now taking back its rental operation in-house and not abdicating control to a third party that does not have the same focus on dealership residual benefits.

How about a walk-in that can’t be closed today and needs an “extended” test drive and doesn’t mind paying for the privilege? An EV prospect perhaps?

How about an easy way to generate interest and satisfy what Deloitte’s 2025 Global Automotive Study says are 44% of 18-34 year olds in the US who are somewhat or very interested in giving up vehicle ownership for a subscription model, or to create more revenue from subprime or deep subprime folks who don’t have the cash or FICO score to get “bought” today, but need transportation immediately.

How lucrative could “wring fencing” these two growing sectors be for the first enterprising dealership in an area to actively promote in-house “flexible lease/long-term rental” vehicles and rates, right on vehicle inventory pages on its website?

With current economic uncertainty and the growth of “conventional” showroom traffic buyers at risk, I’m surprised no OEM or dealership has promoted alternatives to a conventional purchase or traditional lease, especially when 18-34 year olds will pay for the privilege of driving his or her vehicle of choice in an open ended (long term rental/flexible lease) agreement, and, for those cash challenged and without great credit, who don’t have good alternatives.

It might be that the first stores in an area that open up a total “mobility center” which includes (or brings back), all forms of in-house rental – long term “subscriptions” or flexible leases, daily and weekly local rentals, as well as conventional loaners –  will have a significant competitive advantage to those who do not, both in incremental bottom line revenue and in traffic growth (by the way, I believe in this so much, we are now offering a “risk free” way dealers can start this immediately, with no financial obligation and no “overhead” with the exception keeping vehicles clean and handing over keys).

One other key benefit of bringing back in-house rental operations is inventory management. The best way to ensure a steady stream of late-model used vehicles at the mileage and age you want is to create them yourself at the store (at a cost written down through rental payments) without depending on third parties. Inventory management works on the used car side as well.

Do you have a 45 or 60-day-old unit on the used car lot that’s underwater? Rather than take a retail or wholesale loss, put it in your rental fleet as a cheaper transportation alternative, and let your own customer’s usage payments write it down until you own it at the right price (financing is now readily available for this use).

One final thought: further down the road, if at some point in time the much-touted future of autonomous vehicles becomes a reality, who best to manage this business with the help of platform management technology than car dealers?

Getting back into running a rental fleet with modern technology that reduces overhead and adds solid incremental revenue to the bottom line gives a dealer a head start in running and managing an autonomous vehicle fleet should these become reality in the future (which is another business, if it evolves, that I don’t think a dealer network would want to abdicate).

Have comments, questions, or want to hear more?  Please join me at the Auto Intel Summit on April 8 in Cary, N.C., where I’ll be speaking on the panel “New Tech Innovations for Fleet & Retail” with Elena Ciccotelli, Jimmy Douglas, and Jeremy Moskowitz.

John Possumato is the founder and CEO of DriveItAway, a turnkey subscription/flexible lease rental platform for car dealers.