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Wednesday, March 16, 2011

Would You Rent Your Car Out While Not Driving It? Car Sharing Explained

(photo: richardmasoner)

Since its launch in 2000, Zipcar has shaken up the car rental market and grown to include more than 550,000 members in the United States, Canada, and the United Kingdom. Its main selling points? The ability to reserve vehicles by the hour instead of by the day and the convenience of pickup locations all over major metropolitan areas. Similar services now include the nonprofits CityCarShare, I-Go Carsharing, and e-Go Carshare.
Now, new services are taking this model a step further. Instead of using a fleet of Zipcars, RelayRides, WhipCar, Spride Share, and Getaround allow car owners to rent out their vehicles to their neighbors when they’re not in use.

“Economically, it makes a ton of sense for both sides,” says Shelby Clark, the chief executive officer of RelayRides, which currently operates in Boston and San Francisco. “People underestimate how much it costs to own and maintain a vehicle.” AAA’s 2010 “Your Driving Costs” study revealed that that the owners of average-sized sedans spend more than $8,000 a year to own and operate their vehicle. Minivan owners spend more than $9,000 a year!

These sites allow car owners to offset some of these costs through rental fees. Owners get pricing guidelines based on their car’s year, condition, location, and other factors, but they ultimately set the hourly rate themselves.

For car renters, those rates can sometimes be lower than services like Zipcar. Tom Wright, cofounder of the UK-based WhipCar, says borrowers are motivated by cost and environmental factors. “Since they can use cars that are affordable and close to them, it doesn’t require extra cars and allows them to make better use of existing assets,” he says.

Many borrowers also appreciate that their money is going to a neighbor instead of a company, says Clark. Many of RelayRides’ car owners also offer special features like GPS, bike racks, CD collections, or even homemade cookies left in their vehicles.

But do the savings outweigh the safety and insurance risks?

As you can imagine, screening drivers and vehicles is a high priority for all of these sites. Wright says WhipCar conducts three-way conference calls with driving applicants and the DVLA (Driver and Vehicle Licensing Agency, the UK equivalent of the RMV) to ensure that the person has a spotless driving record. WhipCar also requires that vehicles be no older than eight years and checks if the vehicle has been stolen or involved in accident. Other sites have similar policies, and some allow the owner and the driver to rate the experience afterwards based on the caliber of the vehicle and the driver.

Like Zipcar, peer-to-peer car sharing sites bear the cost of gas and auto insurance. In the case of RelayRides, drivers over the age of 21 are insured by RelayRides’ $1 million liability insurance policy but are liable for a $500 deductible (Clark says this ensures that they treat vehicles as their own). Drivers are also responsible for paying any parking or traffic tickets issued during their rental period. Getaround has very similar insurance policies.

Though car owners are not liable for accidents that occur while their car is being rented, some auto insurance companies are squeamish about personal car sharing. But state legislatures are, in some cases, taking the side of the consumer: California recently passed a bill on car sharing that makes it illegal for auto insurance companies to void the policies of car owners who rent out their vehicles. The state of Oregon is considering a similar bill.
Car owners outside of California and Oregon would be wise to check their auto insurance policy before renting out their vehicle. However, with growing environmental and cost concerns associated with cars, other states may pass car sharing legislation in the future.

Clark sees this as just one example of the sharing economy. “Society is increasing rejecting traditional forms for ownership,” he says, pointing to Netflix as an example. “In the nineties, everyone had these giant bookcases of VHS tapes. But at the end of the day, I didn’t really want to own all these movies, I just wanted to watch them. It makes sense to access that movie whenever you need it. The global economic crisis has forced people to take a step back, and realize that ownership might not make sense.”