Would You Rent Out Your Car for $15 an Hour?

Car owners are driving down expenses by renting to strangers.

FE_PR_081210onparenting_teendriving.jpg
By SHARE

Dylan Rogers drives a BMW 6-series convertible, but when he's not on the road, chances are a stranger is behind the wheel of his car.

Rogers, a Chicago resident, rents his car out to people through RelayRides, a San-Francisco based startup that launched in Boston in 2010 and expanded nationwide in March. The company is a peer-to-peer car-sharing business, meaning car owners list their vehicles on its website and rent them out to people by the hour, day, or week. Its sales pitch: When you're not using your car, why not make money off it?

That question may register with more people today, as the cost of owning a car continues to increase. According to AAA's annual Your Driving Costs study, the cost of owning and operating a sedan in the United States increased by 1.9 percent from 2011 to 2012, bumping up the average cost to $8,946 per year. For SUV drivers, the annual cost has risen to $11,360.

Before starting the company, founder Shelby Clark was using car-sharing programs like Zipcar to get around Boston, but he says car sharing had its limitations. He often had trouble finding an available car nearby. In 2008, after he was forced to bike in the harsh Boston winter to rent one, he says he had enough. "I wanted to take the benefits of car sharing and make it more accessible to more people in more areas," Clark says. "How would you do that? You don't need more cars. You need to leverage the resources the communities already have."

That's how RelayRides's peer-to-peer car-sharing model originated, and it has been gaining momentum over the past two years. Competitors such as Zimride, Getaround, and JustShareIt have joined the car-sharing platform, but RelayRides is currently the only company with a nationwide presence. Washington, D.C., Atlanta, and Los Angeles are the three markets that generate the most revenue.

Car owners who register on the website set the price for their vehicles. The average rate is around $8 an hour or $40 a day, which is approximately 40 percent cheaper than Zipcar and 20 percent cheaper than a traditional car rental like Hertz or Enterprise. While the car is rented out, RelayRides covers the insurance, providing comprehensive and collision coverage up to the actual cash value of the car, plus a $1 million liability insurance policy that protects the owner against claims for third-party injuries and property damage. For car renters, the company adds $300,000 of liability coverage to the driver's existing insurance policy.

Still, even with that safety net, owners must be comfortable with the idea of handing their keys over to a stranger. Edward Salwin, a software developer in Washington, D.C., says he had reservations about sharing his car with people he doesn't know. He expected interpersonal issues, but says the process for the first rental went much smoother than he thought it would, and he's encountered only a few problems since then. "Someone left the sunroof open one time and the inside of the car got wet, but there haven't been any major issues," he says. Car owners have the right to turn down a rental request at their own discretion.

The bigger risk for car owners is if the liability coverage doesn't provide enough protection. As The New York Times reported in April, a RelayRides renter crashed the car into another vehicle and died on impact. The injuries sustained by the four people in the other car could have exceeded $1 million—potentially putting the RelayRides car owner at financial risk.

In addition to the possibility of such an accident, Clark says the company is aware its peer-to-peer model won't be a good fit for certain car owners. "RelayRides is not for everyone," he says. "There are a lot of people who aren't comfortable renting out their cars, and that's OK."

Rogers says he makes about $1,200 a month by renting out his BMW through RelayRides. To reel in renters, he promotes the car on Facebook and Craigslist, and placed a RelayRides emblem on the car. He retains customers by offering them discounted future rentals, and is even considering buying a second car to rent out through RelayRides.