I do hope you enjoyed that new Ferrari 612 you bought a year ago. After all, it’s cost you more than £1,000 a week. That’s not what it cost to run, it’s what it cost in depreciation before you filled up, taxed and insured the beast. Still, it could have been worse — had you plumped for the Maybach 62, you would have lost £128,899 before you switched on the ignition.
We moan like mad about the cost of petrol, because we can see it. In fact, thanks to the collapse in the oil price, a litre costs much the same today as it did three years ago, despite rises in duty. We may complain that our insurance premiums are subsidising all those lunatic drivers who just wing it, but the figures above, compiled by Parker’s, a firm of car-buying advisers, reveal that the biggest cost of that rotting metal outside your house is, well, the rotting metal itself.
Petrolheads view driving as an indulgent hobby rather than a means to an end, but as you pay another servicing bill, you may wonder whether it’s really necessary to own a fast-depreciating asset which sits unused in the road for days on end, a target for the local hoodies. You’re not the first.
The idea of sharing a car is hardly new. Car hire is almost as old as car-making, and has become a cut-throat industry. Shares in Avis Europe, which cost more than 80p two years ago, stand at less than 5p now. The car-hire business model relied on big discounts and cheap debt from carmakers. Gasping for cash themselves, they can’t afford to lend money today simply to shift the metal.
Yet if you live in London, Edinburgh or Brighton, or half a dozen other cities where the fight between car and street is most intense, you must have noticed that some of those precious parking spaces are now designated ‘Car Club Only’. There are several car clubs competing for London’s depreciation-conscious and environmentally aware motorist.
Join one of them for between £25 and £50 a year, and get a car within walking distance available for between £4 and £6 an hour, or £30 to £50 a day, with the first few miles thrown in. The only extra is the fuel you use. For singletons especially, the arithmetic is compelling. Indeed, it looks so compelling that it’s tempting to ask whether car clubs will follow car hire and compete themselves to the edge of destruction. They may do, but not yet.
The market leader, claiming 80 per cent of the traffic, so to speak, is Streetcar. It was set up in 2004 by a couple of young entrepreneurs backed by Peter Smedvig, scion of a Norwegian shipping and oil services company, who was 214th in last year’s Sunday Times Rich List. Brett Acker and Andrew Valentine started with eight cars in four locations in Clapham.
The economics of car clubs are rather like those of London taxis; if you’re confident of being able to hail one when you need one, you’ll use them more, while the taxis themselves need to be similarly confident of demand to warrant cruising the streets. The more demand and supply there is, the better the system works.
This then is the fight for critical mass on the streets. Streetcar claims 800 locations and over 1,000 cars in London (which accounts for 90 per cent of its business) with 50,000 members. ‘We broke even in the first half of last year,’ says Valentine. His business plan envisages membership growth of 60 per cent a year for the next four years.
His typical customer is between 25 and 50, affluent, childless and takes public transport to work. Families with small children tend to own a car, although he points out, ‘When they’re a bit older and the son needs to go to football on Saturday while the daughter goes to ballet, we’re an attractive alternative to a second car.’
Behind Streetcar in the traffic jam is Zipcar, the British offshoot of an American parent, which has 250,000 members and which landed here eight years ago. It boasts that it is the market leader in car-sharing technology. It can’t yet detect when you’ve spilt the coffee on the seats, but it does know exactly where you are.
Technology has made car clubs commercially feasible. James Finlayson, chief executive of City Car, says it is now good enough for the glitches to be no more than a minor irritant. From a standing start in 2002, City Car has 350 cars and 9,000 members. Finlayson has neither an American parent nor a private equity fat-cat behind him, but 33 individual shareholders who put up £4.5 million to get this far and will be invited to find another £600,000 this summer. He aims for break-even next year — but admits, ‘We’re in a sector that gobbles capital.’
It’s well known that company- car drivers take less trouble to avoid scrapes than owners. But, says Valentine, this appears not to be true with club cars. ‘The level of claims is broadly in line with London owners.’ The clubs’ biggest cost is the one that unenlightened car owners are in denial about — depreciation. The clubs, though, have more flexibility. ‘If necessary, we can hold onto our cars for slightly longer. Only a few months more can make a big difference to profitability and cash flow,’ says Valentine.
A bleak economy ought to be good for a sector which promises to save its customers so much money. It is indeed growing rapidly, as clubs compete for the best parking spaces. Each London local authority has a different approach to renting out its precious road space, but as Finlayson says, ‘It’s like a mini land-grab to secure the right to the prime-location bays.’
He denies that there is anything as vulgar as a price war, but the prices have come down, even as the cost of motoring has gone up. Car clubs are surely an idea whose time has come. Feeling environmentally smug while saving a lot of money for a marginal loss of convenience is a powerful driver, so to speak. In a year or two, we might wonder why we ever did anything else.
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