There are aggregators for just about everything these days, and loans of all types. Now we can add car leasing to the list.
According to the latest trends report from Edmunds, auto leasing has enjoyed a huge spike in popularity over the last six to seven years, with a record 4.2 million cars, trucks and SUVs under lease agreements by the end of 2016 (the last full year for which data is available). Edmunds data further indicates that the market is increasingly driven by millennial consumers, who hold 12 percent of those leases. It is a trend that is widely expected to carry forward for the next few years – particularly as more millennials graduate from college and contemplate their first ride.
Eighty percent of those leasing transactions happen at car dealerships – but as with most things that happen at those establishments, the process also includes its share of friction, despair and disappointment. In fact, 70 percent of millennials say they downright hate it.
Honcker CEO Nathan Hecht was one of those frustrated millennials – but he was also motivated to build a business to fix it.
The problem, he said, wasn’t the friction associated with finding a car to lease, but how much it could cost once he found the make and model. The system isn’t designed to provide an across-the-board look to compare the lease prices of various cars. Instead, the lease specifics were bundled with the car and presented at the dealer, by the dealer.
“I sat there a whole day but still went home without a car,” Hecht told TechCrunch, adding that getting a monthly payment required multiple credit applications only after he’d settled on a car.
Honcker is a search engine for car leasing services that connects the consumer seeking a lease to the financial services institution that wants to give them one.
The customer, for their part, gets to fill out a single application and use that single set of data to reach out to the plethora of potential lease providers on the platform.
The Three-Clicks Model
Once a consumer signs in and creates a consumer account, they then have the ability to peruse the inventory on 250 of Honcker’s partner dealer lots in eight states. Once the consumer finds their ride, their application is sent out to the leasing companies on the platform – the firms that will ultimately hold the contract. The customer then receives their offer. If they accept, digital documents are sent out and signed via DocuSign.
Three days after the transaction is completed, the customer’s new car is delivered to their front door. The entire process takes only three clicks: one click to pick a car, one click to apply and one more to accept an offer.
Cars have historically adhered to the average 36-month schedule, but an upcoming upgrade to the app will allow customers to modify the length of their leases as well as insert additional information as necessary, such as co-signers.
The firm reports that it has grown 25 percent month-over-month in terms of transactions on the platform, and has mostly netted that growth with organic word-of-mouth advertising.
Will It Work?
Honcker is not the first firm to attempt to take on the traditional car lease: Beepi, Evercar and Breeze all made a similar move, but washed out trying to get to scale. Honcker’s CEO notes that he understands the inherent risk, but that his firm is determined to operate “very lean” and stick to a specific goal without rampant expansion or over-leveraging.
It has also managed to capture some new funding – in the form of a Series A round worth $15 million announced last week, on top of a very modest $3.8 million seed round last fall. Hecht noted that the goal for the next year is to expand, but cautiously, noting that it is better to get firm footholds in core markets before running after what’s next.