Things To Consider Before You Rent Your Car Out
People are making money renting their cars out. Here's what to know before you start.
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Article QuickTakes:
By now, you might be familiar with people making money with their cars. Companies such as Uber and Lyft let people generate some income by driving passengers and running errands.
Another part of this growing trend is the ability to rent your car out. Using a car-sharing platform, you let someone drive your vehicle for a short period for a fee. However, before you decide to rent your car out, there are a few things you may want to consider.
What's Behind the Car-Renting Trend
Along with the growth of the gig economy has come the sharing economy. You might be most familiar with this trend with companies like Airbnb, where people can host their personal space for short-term stays. The same concept relates to cars.
A car may not be necessary for people who live in more urban areas with plenty of public transportation. But there are situations when people need the convenience of a vehicle without going through the car rental process. Some short-term car rental companies, such as Zipcar, help solve this problem.
But taking it a step further, many people saw they could rent out the cars sitting unused in their driveways and bring in some income on the side. Hence, the growing popularity of renting cars out to others. Companies such as Turo and Getaround can help you start if you want to explore this.
The Benefits and Risks of Renting Your Car Out
Renting your car out may sound easy. But as with any big decision, it's never a bad idea to go through the pros and cons to help you look at everything from all sides.
Pros:
- You can earn passive income, making money while not doing any work
- With many car-sharing platforms (and if you choose to rent your car out privately), you can set your rates and the schedule
- If you rarely drive your car, having someone else drive it can help ensure it stays in good working condition
- You may qualify for tax deductions if you operate your car renting as a small business
Cons:
- There will likely be some extra wear and tear on your car the more it's used, so you may have to pay additional maintenance and gas expenses
- Even though you're not driving, you'll need to manage the process, set your calendar, and meet drivers to exchange keys
- You'll have to review the insurance policy on your car to see if you need additional coverage. If you go through an app, check if they provide coverage when you sign up
- People you don't know will drive your car, so there's a risk it may need repairs
With these benefits and potential risks in mind, you can run the numbers and see if what you'll potentially earn covers the possible expenses.
Renting the Car Out On Your Own
While car-sharing platforms are a popular option, you could also choose to rent the car out on your own. Many of the pros and cons are the same. However, doing it on your own means:
- You may have to put in extra legwork to find potential renters as opposed to them coming to you
- You'll need to review your insurance policy for the proper coverage
- You may want to consult with a lawyer to draw up a contract for renters to sign that protects you and your car
Best Practices for Renting Your Car Out
If you decide to try to rent your car out, there are a few best practices to keep in mind as you go. These may come in handy to protect you and your vehicle from damages, unforeseen expenses, and help the process run smoothly:
- If you are currently leasing your car or still paying off a car loan, check your contract to see if renting your car out is permissible by the terms of the deal
- If you decide to go through a car-sharing platform, review their rules. Turo, for example, wants to have exclusivity for your car, so you won't be able to put it on another platform
- Review the insurance coverage. Many car-sharing platforms allow you to select additional insurance coverage for damages and theft. If you're renting on your own, make sure you speak with your insurer about the coverage you'll need
- Take photos (or video) of your car before starting the process to spot any potential damage easily
- Set parameters: such as how long the rental period lasts, the number of miles driven, and whether or not you would allow a renter to smoke in the car. Those rules can help reduce wear and tear
- Determine how you're going to hand off and pick up the keys. For example, if you don't have the time to meet everyone in person, you may want to consider a lockbox with a code they can access
The Bottom Line
Renting a car out is an option that may be interesting to you. However, before you make any decision, you want to be completely sure you're allowed to do it and that you have coverage from any potential damage.
