It’s like AirBnB for car owners. There’s money to be made, but what are the pitfalls?
Posted:Apr 19, 2016 9:00 AM ET
Turo, a new car sharing service, is coming to Canada. It could be poised to disrupt the car rental industry. Turo
Canadians can now rent their personal vehicle to others through a U.S. company that has just launched in this country.
“We’re actually the first company to bring the benefits of peer-to-peer car rental to Canada.” says Cedric Mathieu, director at Turo Canada.
“It’s an entirely new way for you to start making money out of your car.”
Just how much money is open for debate. Car owners would also have to be comfortable allowing complete strangers to rent their vehicles. And renters would have to be comfortable renting vehicles from private individuals.
But experts say the average lifetime maintenance cost alone for a mid-size vehicle in Canada is around $10,000.
And Transport Canada says every shared vehicle would take eight cars off the road.
Cedric Mathieu, director of Turo Canada, is betting people would rather borrow a car than buy one. (CBC)
So if the idea catches on вЂ” and count Google and General Motors among those who think it will вЂ” it has the potential to take millions of vehicles off the road, and significantly disrupt both the car rental business and the auto industry as a whole.
How it works
Turo, based in San Francisco, offers a service that is similar to AirBnB, but for vehicles.
Through Turo’s app or on its website, owners can list their vehicles for rent by the day, week or month, earning money from what is often an under-utilized, depreciating asset.
“It’s very expensive to own a car these days,” says Mathieu.
“Especially in Canada where the depreciation of cars is faster than almost anywhere else on the planet, because of the weather, because of the cost of insurance and so on.”
“With Turo, you can cover the cost of ownership of your car and you can even turn a profit.”
Mathieu says the average Canadian’s car is parked more than 90 per cent of the time.
In order to list a car on Turo in Canada, vehicles must be 10 years old or newer, have fewer than 200,000 kilometres on the odometer, and can’t be worth more than $75,000.
Turo, a private company with venture capital from both Google and General Motors, among others, has been operating in the U.S. since 2009.
The company says U.S. members who list vehicles on its platform earn an average of $600 per month.
A check of Turo’s website for vehicles available in San Francisco shows many listed for less than $25 per day. A 2013 Honda Fit, for example, was priced at $20 per day.
The higher-priced vehicles range from between $200 and $400 US per day. (A Mercedes C class is listed at more than $800 US per day, but that seems an outlier. Owners can set their own price or have Turo’s dynamic pricing set the amount).
Of that, Turo takes a 25 per cent fee from the owner (and tacks on a further 10 per cent fee for the renter).
What’s in it for the renters?
Turo claims to have several advantages over traditional car rental services, chief among them price.
The company says that, on average, vehicles on its platform cost about 30 per cent less than those from traditional car rental companies.
All payments are made through the app or the website.
Turo also says its members have access to a greater variety of vehicles, as many as 800 makes and models on its platform in North America right now. In that same San Francisco vehicle search, it was possible to rent a Tesla (both a Roadster and a Model S), a Porsche, multiple BMW models, off-road capable Jeeps, and minivans.
Users can also request vehicle delivery to their home. And in more mature markets such as San Francisco, the number of members means it may be possible to rent a vehicle from someone within a few blocks of home.
Turo says it has members in more than 2,500 U.S. cities.
What about insurance?
Renters can purchase insurance from Turo when they rent a vehicle, much the same way they would from a standard car rental company.
Turo says most credit cards that would normally cover the cost of rental car insurance don’t work with Turo, because they “don’t consider Turo a rental company.”
But the company says Canadians listing their vehicles are covered for the full value of their vehicle along with $2-million liability coverage.
That insurance may not cover all eventualities, however.
In 2012, when the company was still operating as RelayRides, the New York Times reported a renter crashed a car into another vehicle, killing the renter and seriously injuring four people in the other vehicle.
The newspaper reported the claims in that case could exceed the insurance provided by Turo/RelayRides, putting the owner of the vehicle at risk.
Most insurance policies in Canada won’t cover personal vehicles that are used for commercial purposes such as peer-to-peer rentals.
Currently in Canada, only one company, Intact Financial Corporation, allows its policy holders to operate this way. So in this country, only owners with insurance through Intact Insurance and its subsidiary, Belair Direct, are eligible to list their vehicles on Turo.
That’s one reason why, at launch, the company is operating only in Alberta, Ontario and Quebec.
Safety a key
Turo says it has safeguards in place to ensure that people you rent your car to are, in fact, who they say they are.
“We are vetting every member on the Turo marketplace by verifying their identity, by evaluating their risk, and by actually making them eligible to become a member on Turo,” Mathieu said.
“Our promise to you is that as soon as you join the Turo community, you’re in a safe environment.”
But last year, a Turo member blogged that his vehicle was stolen by a renter using fake credit cards and a fake driver’s licence. He wrote that the car was eventually recovered and Turo covered all the damages.
Turo won’t reveal exactly what’s involved in the vetting process or what sort of security measures it takes, for proprietary reasons.
Just the beginning
Turo is one of several similar services operating in the U.S. At least one вЂ” Getaround вЂ” says on its website that it will also be coming to Canada soon.
Those who track the sharing economy say more will follow.
“We expect that there will be different ways of car sharing, ride sharing, car pooling, where more and more people will not just drive their own car but will share cars. And there’s definitely a lot of benefit in that in terms of lower congestion, lower carbon emissions, and people having lower costs of maintenance,” says Joeri van den Steenhoven, director of Mars Solutions lab, which recently released a report on the sharing economy.
“But, of course, we need to ensure that it’s done in a way that is legal and that, for instance, liability and insurance are being properly implemented.”