Using a Vehicle Rental Broker:
Another way you accomplish the goal of increased vehicle utilization is to align yourself with a car rental organization that will broker renting out your vehicle for you. Of course, they will be extracting a fee for that service. One of the better known such rental services is Turo (Turo.com). Established in 2010 as RelayRides, the company changed its name to Turo in late 2015.
Turo is a car rental agency that allows you to either list your personal vehicle with them as available for rental by any qualified individual, or on the other side of the coin, where a qualified person can rent a vehicle of their choice from Turo’s pool of some twenty or more makes and a variety of models ranging from sub-compact cars to CUVs and SUVs, sports cars, pickup trucks, vans, exotic and luxury cars, etc.. Turo offers mostly ICE-powered vehicles, although they do offer Teslas in some markets. Currently Turo operates in 22 US cities, as well as Canada and the UK.
Naturally, Turo qualifies its renters and vehicle “donaters” — known as the “hosts” — very carefully. It’s easier on the renting side – really a pretty straightforward transaction for a “guest”. However, for the vehicle host — the one that is in the game to make some money, things are a bit more complicated. The vehicle host has to prove that his/her car is covered by adequate insurance and is completely in compliance with local state and city ordinances such as title, tags, and inspections.
After setting the desired rental price for his/her vehicle the host has a choice of three different levels of insurance from Turo that determine Turo’s “take” and the resulting net amount the renter will make per rental. Each of these options is in addition to $1 Million of liability protection Turo provides through Liberty Mutual insurance company if for some reason the vehicle owner was to be found liable in the case of an accident. Physical damage to the host’s vehicle is also covered up to $125,000, but with a deductible on Turo’s lowest (Basic) pay level.
The renting guest can elect to buy special rental insurance coverage for fees ranging from 15% to 60% of the rental price. Guests are carefully screened by their “credit-based insurance score” as to their character and credit rating.
The money the host earns out of the vehicle’s rental price depends on the amount of insurance selected by the host. Turo’s take is 15% of the rental fee for their “Basic” service, 25% for “Standard”, and 35% for “Premium”. So 15% is Turo’s minimum take that covers all “platform” use — their listing of your vehicle and matching a host up with a guest, providing two-way host/guest ratings, arranging insurance, etc.. Note that Turo has a clause in its contract with a host that the host cannot list their vehicle with any other such vehicle rental company. If a host were to buy commercial vehicle insurance for his/her rental vehicle(s), Turo reduces its take to 10%.
Note that it is highly unlikely a host’s vehicle insurance company will – if asked – like or allow one to rent his/her vehicle out to a complete stranger for who-knows-what purpose. So the insurance issue really comes to dominate a host’s decision to use Turo or similar agencies. In addition, a host has to do all the work after Turo connects him/her with a guest – arrange for two transfer meetings, clean the vehicle before the rental, train the guest on how to operate the vehicle (especially if it’s a Tesla, or another brand of electric vehicle), meet again to reclaim the vehicle, and clean up the vehicle after a guest’s use. Furthermore, the host has the job of remedying any incidental problems that arise during a rental such as vehicle dings and scratches, torn upholstery, and the like.
Despite all these considerations, Turo has a going business with many satisfied hosts and guests. Some hosts have rented out their vehicles over one hundred times! Hosts can average (net) earnings of about $28 a day for a vehicle such as a Fiat 500 to $47 to $50 a day for a Mustang or Camaro to $42 to $46 a day for an Audi A3 or BMW 3 series, to $61 a day for a Jeep Wrangler truck (their most popular rental!), and from $37 to $44 for popular minivans. For hosts, this is a way to increase the utilization of their vehicle and generate cash that can be used to pay for the vehicle as well.
The vehicle renter must bear in mind that by renting out their vehicle they are rapidly increasing the mileage on it which leads to decreased vehicle resale value and an increase – especially for ICE-powered cars – in maintenance costs. Another consideration as to whether or not this is an attractive play for you also depends on your primary job and how much free time you have to devote to your rental efforts.
Be aware that the host supplying his/her vehicle to any of these rental companies such as Turo is responsible for deciding what to do about the income they earn – – to declare it to the IRS or not. Since Turo deposits your vehicle rental income directly in your bank account, it would be prudent to declare the income to the IRS, thus reducing your net rental income a bit but avoiding any unnecessary trouble with the IRS.
If you rented your vehicle out for two days a week at a net average earning of $45 a day before tax, that’s 2 X 4.3 X $45 = $430 a month. That amount will cover at least half of most car payments for an average priced vehicle. Of course, you must allow for maintenance and vehicle depreciation (in a mileage sense, not a financial sense, unless you declare a business). The more miles on your car when you trade or sell it, the less it is worth.
The renter pays for his/her gas used during the rental. Assume you rent your vehicle out twice a week for 48 weeks a year and the vehicle is driven on rentals an average of 60 miles per day. So 2 X 48 X 60 equals 5,760 rental miles driven annually. Then you should add the extra mileage you will drive your vehicle to deliver it and pick it up from the renter. Maintenance and tires on an ICE-powered car (below 100,000 miles!) generally runs about $0.06 cents a mile, so out of your annual rental earnings should come about $346 for maintenance. If the host had paid the gas, assuming a 20 mpg average and a cost of $2.25 a gallon, that would have amounted to about 11.3 cents a mile or about $645. So in this case, just the gas cost, maintenance, and tires on a less-than-seven year-old car totals about $0.20 to $0.24 a mile. Insurance might add another $0.06 to $0.08 in cost per mile.
Tesla Robotaxi Fleet:
On April 23, 2019 Elon Musk announced Tesla’s forthcoming Robotaxi “Ride Sharing App”, calling it a cross between Uber and Airbnb. Any Tesla owner will be able to download the Tesla phone app to join Tesla’s fleet and allow their vehicle to be used as an autonomous driving Robotaxi. The owner can share his/her vehicle either at particular times of the day, or with just a certain number of friends, or with anyone with the usual qualifications. Tesla’s take for this service would be 25% to 30% of the vehicle’s rental fee.
Musk then made some broad projections for a future pure Tesla Robotaxi (less than $38,000 cost, no driver controls) of $0.65 a mile gross profit based on a 90,000 miles annually (16 mph for 16 hours a day) at 50% utilization over an eleven [sic] year time horizon where each such Robotaxi would gross approximately $30,000 in annual profit. And it turns out that initially, at least, Musk’s one million vehicle Robotaxi fleet consists of all of Tesla’s customer-owned vehicles. In the future (when Tesla has sufficient battery and vehicle production capacity, Musk intends to produce pure (no driver controls) Tesla Robotaxis for his company-owned Robotaxi fleet.
There are many remaining details and issues to be solved in Musk’s vision, not the least if which is the issue of insurance coverage while the car is being driven by someone else (Tesla!) autonomously. Volvo has been the first car company to my knowledge to state that it will be liable for any accidents while their Volvos are being driven under autonomous control. I am not aware that Tesla has addressed that issue publicly yet, though Tesla has recently begun selling vehicle insurance in California.
You can come up with your own mix of numbers for renting your vehicle on a part-time basis, depending on how many hours you want your vehicle to be working for you, the urban or suburban density of where you live, whether you have a major airport nearby, etc.
Image courtesy of Pixabay
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