HyreCar’s earn-to-own program focuses on short-term loans

HyreCar’s dealer portal has paved the way for its new earn-to-own pilot program, Brian Allan, senior vice president of strategic partnerships, told Auto Finance News. The new earn-to-own program would allow drivers who rent cars for ridesharing programs to eventually finance their vehicle.

“The portal helps dealers identify these customers that are renting [cars to use for part-time ridesharing],” Allan said. “It also helps drivers through the process of sorting through their rental receipts. We learn what the drivers are used to paying and the miles they drive and offer them a purchase option.”

“Long term, renting isn’t cheap if you’re a part-time driver,” Allan noted, adding that HyreCar learned from Uber and Lyft’s S-1s that 80% to 90% of the [rideshare] market consists of part-time drivers.

HyreCar seeks to assist this demographic of drivers in several ways. First, the start-up’s dealer partners work with drivers and give them a discounted price every month, where they can buy the vehicle they are driving or another vehicle from the dealer’s inventory, Allan said.

In addition, if the drivers are credit challenged, HyreCar has partnered with “nationally recognized credit reporting agencies” that will count the rental receipts toward payment history to improve drivers’ credit score, Allan said, although he declined to name the agencies due to current nondisclosure agreements.

“The idea is to put these people in a loan that makes sense for their driving arrangement,” Allan said. For example, if the cars average 3,000 or 4,000 miles per month, a shorter-term loan — 24 to 32 months maximum — is more appropriate, he noted.

Shorter-terms loans are in a lender’s interest as well, Allan said, because they can write the loan at a competitive rate because the risk of default is very low. Further, even though the driver is putting more miles on the car, the collateral value stays in line with the loan value due to the shorter term.

HyreCar is working with several “nationally recognized lenders” in the pilot stage to provide the shorter-term loans to drivers, Allan said, but he also was unable to name specific firms. He noted, however, that one is a captive lender under an OEM partner that HyreCar works with.

One of HyreCar’s unnamed finance partners allows for weekly payments. “They actually have a loan structured typically no longer than 36 months, where the driver is paying weekly,” Allan said, citing additional benefits. “Number one, the driver payments become timelier. I call it the Starbucks phenomenon, where [the customer] pays for their Starbucks daily yet doesn’t realize they are paying $600 per month on coffee,” he said, adding that frequent payments also make lenders more comfortable.

Shorter-term loans via HyreCar’s earn-to-own program provide “a really unique opportunity for somebody who otherwise may not be able to get a loan through the traditional banking system,” Allan added.