Case Study: Car Ownership For All

Introduction

Using estimations based on the Transunion Vehicles Price Index and Wesbanks Calculator, traditional financing of an average R386,640 car would amount to R7279.77 per month (13% interest, over 6 years). According to Wesbank, it costs 39.41% more per month in 2022 compared to 2017 (including maintenance & fuel). Furthermore, as much as 90% of loan applications are rejected by banks. Planet42 aims to make owning a car more accessible to people that struggle to secure car loans from banks.

What does Planet42 do?

Planet42 is an SA-based rent-to-buy startup company on a mission to make car ownership more accessible. Planet42 buys cars from a network of over 700 nationwide dealerships on behalf of applicants and then rents out those cars on a subscription basis.

What is the value proposition?

Planet42 has a few value propositions:

• Efficient and inclusive application

• Subscription model is cheaper than traditional financing options

• Customers can buy out the car at any point. After 5 years a customer can buy the car for R5000.00

• Cost to buy out the car get cheaper after each monthly payment.

• Interest-free

How do they generate money?

Planet42 uses a subscription revenue model. Revenue is earned via customers' monthly payments.

How does Planet42 mitigate risk?

The Rent-to-Own Business Model is very risky. To mitigate risks, Planet42 implemented the following policies:

• Only licensed car dealerships are used

• Cars cannot be used for ride-hailing

• 1 month cancellation fee

• No courtesy vehicles

Marketing strategy

Planet42's marketing strategy is very good. It uses powerful storytelling consisting of data, social proof and framing to explain why a subscription model is better than traditional financing.

Conclusion

The rent-to-own business model is pretty simple compared to the previous business models we have analysed. And that means that it is easier for startups to lose competitive advantage. This leads to the following question:

How can rent-to-own startups develop competitive advantages in the industry?