Flexdrive, the 'Netflix for vehicles,' revs up in Philly | Crain's Philadelphia

Flexdrive, the 'Netflix for vehicles,' revs up in Philly

It took Flexdrive subscriber Yvonne Mack 10 minutes to swap her Kia Soul for a Nissan Pathfinder at Willow Grove Audi in Philadelphia, July 14, 2017. | Photo courtesy of Flexdrive

Want to dump your car but hate the idea of going to a dealership, haggling over price and then committing yourself to a yearslong lease or loan? The answer may be Flexdrive.

Holman Enterprises, which operates 10 dealerships in Philadelphia and South Jersey, teamed up with Cox Automotive to launch the concept, providing low-mileage, still-under-warranty used cars to consumers on a monthly or weekly subscription basis that covers everything from insurance and maintenance to road service.

While Holman signed its first Flexdrive subscription contract at its Cherry Hill dealership in February, the service is really gaining momentum now, according to Bill Cariss, president and CEO of Holman Strategic Ventures. 

“We’re able to reach a wider range of people who might not want traditional car ownerships, like snowbirds and millennials,” Cariss said.

Holman spokeswoman Lauren McGuinness said the dealership has tripled the number of Flexdrive subscribers in the last month, adding 20 vehicles to its fleet, including two Ford F-150s and two Infiniti Q50s.

Unlike financing a vehicle, which requires a consumer to have good credit, all one needs to obtain a vehicle through Flexdrive are a credit card, valid driver’s license and good driving record.

Holman has 50 vehicles in the Flexdrive pipeline and currently 25 are in use, Cariss said. About 80 percent are economy models like the Ford Focus and Toyota Corolla, but Holman is adding luxury vehicles and pickup trucks to the mix. Currently, the economy models go for $99 a week while a luxury model can be had for $279. All of the cars typically are two to three years old with low mileage, and most are vehicles that have been leased through the manufacturer. Holman buys them for 60 percent of their original value as part of its used car inventory although additional vehicles are purchased from auctions.

“The economics [for Flexdrive] are at least as good as selling a car, and in some cases, better – 10 to 20 percent better from a profitability standpoint,” Cariss said.

Cariss said his salespeople are just beginning to get used to Flexdrive, seeing it as another tool for meeting customer needs. Salespeople are compensated when they sell a new subscription, and the dealership keeps the title.

Holman, the 16th largest car dealership in the United States according to Autonews, hopes to roll out the service to its other dealerships in Seattle; Denver; Kansas City; Fort Lauderdale, Fla.; Portland, Ore.; and Sacramento, Palo Alto and Irvine, Calif. Florida is likely the next platform, with plans to roll out Flexdrive there as early as the fourth quarter of this year.

“Response from subscriptions has been very strong,” Cariss said. “People download the app and they’re just now starting to take the cars. It’s been popular among ride-hailing drivers, Lyft and Uber drivers. The thought there is if you’re going to become a ride-hailing driver, if that’s going to be your livelihood, [this is a way] to try it out.”

Philadelphia is one of three markets in which Flexdrive currently operates (the others are Atlanta and Austin, Texas). Flexdrive founder and CEO Jose Puente said to think of it as “Netflix for vehicles.”

“We’re trying to solve three things for the consumer: The first is vehicle acquisition. Going to a dealership is very complicated. Ownership is a very labor-intensive process, and disposing of a vehicle can be a very painful process. You don’t have to deal with any of those things,” said Puente, who came up with the idea while working at Cox, which owns Autotrader, Kelly Blue Book, Dealertrack and Mannheim, the largest automotive auction company.

Flexdrive began operations in 2014 with its own fleet of vehicles to better understand the business from both the dealership and consumer point of view. It currently operates as a technical services and administrative platform for participating dealerships. Consumers can download the app and explore the vehicles available.

The consumer pays an average monthly subscription fee of $750, covering everything from insurance to maintenance and road service, and can suspend that subscription at any time for any length of time. In comparison, the most recent AAA estimate for the average yearly cost of owning a car is $8,558, or about $713 a month. Puente said the average Flexdrive subscriber keeps a vehicle three to six months before trading in for another.

Teresa Patrick has been commuting between Dallas and New Jersey for months and recently learned about Flexdrive with just a month to go before she returns to the Texas-Oklahoma area for good. The 54-year-old Dallas mortgage executive said the $750 monthly charge may sound steep, but it’s better than the $800 to $1,600 per month she was paying for a rental car, with the added convenience of not having to turn it in at the end of the week.

“I thought about buying a used car and then selling it, but [my] company was under strategic review and I didn’t want to commit to ownership,” she said. “They [Flexdrive] really should advertise better. I heard about Flexdrive by accident. I have a Cadillac in Texas and went into a dealer to see if I could lease one for 12 months. That’s how I heard about Flexdrive. The leases were too long, two and three years.”

Patrick called the subscription process seamless and would recommend Flexdrive to anyone commuting to Philadelphia from other cities.

Would she consider it at home?

“It wouldn’t really work for me in Dallas,” she said. “We don’t have the same kind of transit system you have in the Philadelphia area. People definitely like their cars. But it’s smart for people in Philadelphia.”

Each vehicle is equipped with integrated telematics that track performance and status during its 24 to 30 months of service or up to 90,000 miles, whichever comes first, at which point the dealership can either sell the vehicle or put it up for auction.

Puente said Flexdrive enables dealers to create a steady, dependable revenue stream, something they’ve never had, while providing a better customer experience.

“This is really the way consumers want to transact business. They hate negotiating,” Puente said. “With Flexdrive they just go into the dealer to pick up a car or drop off a car or pick up another car or have the car they’re driving serviced. They don’t have to be surprised about costs. Everything’s already been predetermined…

“Over a period of 24 months, [dealerships are] going to know what they will earn for that vehicle. They’re going to keep that customer. At the end of the program they still own the car.”

Flexdrive is headquartered in Atlanta. Puente said he hopes to have the service up and running in the 25 top U.S. metropolitan areas within three years and eventually at every reputable dealership.

Editor's note: This story was updated to correct Flexdrive's weekly pricing of economy and luxury vehicles, to correct a misspelling of Bill Cariss's name and to clarify where Holman gets vehicles for Flexdrive and how salespeople are compensated.

July 25, 2017 - 5:07pm