Source: The Frederick News-Post
Car sharing is turning into big business in the US.
Over the past 10 years, membership in car sharing programs has grown from less than 200,000 to over 1.4 million, according to recent research from a member of UC Berkeley’s Institute of Transportation Studies. The market has attracted investments from a huge variety of companies, from auto manufacturers like Toyota and Daimler to traditional car rental companies like Avis Budget Group. Insurance companies like Liberty Mutual Group, and venture capital firms like Kleiner Perkins Caufield Byers have also gotten in on the act.
Once considered an alternative to car rental, car share is increasingly being viewed as an alternative to car ownership. Drivers who participate in car share programs get access to an entire fleet of vehicles instead of being restricted to the ones in the driveway or the garage. They can also save money by tying car payments to usage. Car owners, by contrast, have the same monthly payments whether they average 1 mile or 100 miles a day.
At a time when people are using Airbnb to cash in on unused space in their homes, it’s reasonable to wonder if you can also rent out a car that idles most of the day in a parking space. The simple answer is yes, you can.
This post will discuss how California law protects vehicle owners who participate in personal car sharing programs. It will also address risks involved in renting out your car and other questions to consider before you find yourself handing the keys to a total stranger.
What does the law say?
Seven years ago, then-California Governor Arnold Schwarzenegger signed a piece of legislation that prohibits insurance companies from canceling coverage to private passenger motor vehicles for getting involved in personal vehicle sharing.
To be covered, the amount of money a vehicle owner makes from renting out the car cannot exceed the annual expenses of owning and operating the vehicle. People can’t just declare their vehicles for rent and start collecting payments either. They have to join up with a legal entity qualified to do business in California and one that provides liability insurance while the vehicle is in use for car sharing. When the vehicle is being used for car sharing, the owner’s liability insurance does not apply.
Streetsblog, a nonprofit news source covering sustainable transportation, reported in 2010 that the State Assemblyman who authored the car sharing legislation, Dave Jones, planned to offer his own vehicle for rent. Two months after Gov. Schwarzenegger signed the bill into law, voters elected Jones to serve as California Insurance Commissioner, a post he’s held for the past seven years.
The Risks of Renting Your Car To Someone Else
Ron Lieber, a columnist who writes about personal finance for the New York Times, has been following the nascent personal car sharing market practically from the start. Five years ago, in an article called “Share a car, risk your insurance”, Lieber quoted several people in the insurance industry, including spokesmen for Allstate and USAA, who said car share participants could have difficulty renewing their insurance once the contract term ends. In another article three months ago, he wrote about the challenges for vehicle owners and car sharing companies when participants are involved in serious collisions.
If you’re thinking about participating in vehicle sharing as an owner or a driver, pay close attention to the terms of the program-issued insurance coverage. You can also refer to a previous post in our Hack Your Auto Insurance series about different types of auto insurance policies. The post includes average claims under liability insurance, physical damage insurance, and other optional insurance plans, according to data from the National Association of Insurance Commissioners.
Are people actually renting their cars to strangers?
Yes, they are. Turo, a San Francisco-based vehicle sharing company, says it has over 4 million users and over 170,000 cars in over 4,700 cities across the US, Canada, and the UK. Getaround, another San Francisco-based vehicle sharing company, says it has nearly half a million users with thousands of cars available in 13 cities across the US. Drivy, a French company, claims over 1 million drivers and 40,000 cars across France, Germany, Spain, Austria, and Belgium.
Should I rent my car?
If automotive industry leaders are correct about consumer trends in car ownership, most people who own a car today will no longer want to own one eight years from now. That was a finding in KPMG’s latest Global Automotive Executive Survey. The shift away from car ownership is a big reason why investors expect the car sharing market to grow considerably in the years ahead.
The decision to participate in car sharing as a driver is easy. You can try it out while continuing to use a private car of your own. The decision to rent your car to someone else is more complicated. People who’ve invested a lot of emotional value in their cars might not even consider it. Others ought to carefully weigh the risks and rewards.
If you are thinking about renting out your car or you’ve participated in a car sharing program, please tell us about it in a comment on our blog or on social media.