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CAN Uber and Lyft ease used-car glut?

Ride-hailing services Uber & Lyft represent a new outlet for carmakers to better manage the flow of late-model used vehicles, potentially putting them to long-term use while generating extra revenue. Some carmakers see a fresh business model in vehicles that traditionally have caused them head-aches, typically sold at auction for depressed prices that ultimately harm residual values.

General Motors this spring began leasing Chevrolet Equinox crossovers and Malibu and Impala sedans to Lyft drivers in Chicago and several East Coast markets, the start of a nationwide rollout of a program called Express Drive.

The vehicles leased to Lyft drivers “are not necessarily new vehicles. We take them off rental,” GM North America CFO John Stapleton told an investment conference last month. “I’ve already booked the sale, I’ve already captured the revenue and profit. Now … they go into this car sharing. So it’s almost I get a double benefit in some ways.”

In May, Toyota said it will offer flexible leasing options to Uber drivers, although it’s unclear whether those will be new or used vehicles. A Toyota spokesman declined to comment. Volkswagen in May announced a tie-up with European ride-hailing company Gett but hasn’t detailed any lease plans.

Finding alternative uses for late-model used vehicles has become a bigger priority for automakers and rental operators amid an expected surge in inventory industrywide, which already has sapped projected resale values. Residual-values forecaster ALG predicts the supply of late-model used vehicles — five years old or less — will jump 46 percent by 2020 vs. last year, to 14.5 million.

GM North America President Alan Batey sees the company’s Lyft partnership as a way to fill untapped vehicle demand while soaking up some excess inventory of cars rolling off rental lots.

Lyft’s “biggest challenge is getting enough vehicles. So this is a win-win for us,” Batey told Automotive News in May. “These are vehicles that would have typically gone into a resale environment. We’re now able to put them into a Lyft environment and provide Lyft with more cars.”

Hertz Global Holdings Inc. last month expanded a partnership to offer rentals to Lyft drivers. The arrangement helps Hertz manage the remarketing and residual values of its fleet, CEO John Tague said during an investor presentation last month.

“Ride-sharing drivers don’t need new cars. They need lower costs, good car condition, but they don’t need low miles,” Tague said. “These cars will probably have another two or three years of life with high-mileage usage.”

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