This article has been reviewed by licensed insurance industry expert, Moshe Fishman.
If you’ve recently rented a car, you’ve undoubtedly seen the option to rent a car from a car-sharing service like Turo or Zipcar. Maybe you’ve already rented a car using one of these sites. For car owners who don’t use their cars often, renting your car on a car-sharing website can be an effortless way to make extra money.
Believe it or not, the idea of car sharing has been around for a while. Recently it has become more popular in part due to the pandemic and increasing demand for more flexible options when renting a car. Using a car-sharing service provides more convenience, flexibility, and accessibility than using traditional car rentals.
Car sharing is a type of rental car service where one vehicle is used by multiple people for multiple purposes. Called “peer-to-peer rentals,” these rentals between private parties are facilitated by third parties. Some popular car-sharing websites include Turo, Getaround, Zipcar, and JustShareIt although it’s estimated there are two dozen different car-sharing programs in the U.S.
The concept of car sharing is ideal for those who don’t own cars as well as for car owners who want to earn income from vehicles they don’t use often. For example, someone who telecommutes or who only needs to drive to the office a couple of times per week can earn money as they work remotely. Sharing your car becomes a side hustle to generate passive income.
Car sharing programs are different from ridesharing apps such as Uber and Lyft, as these provide rides in vehicles driven by the car owners who are paid to pick up passengers. On the other hand, car sharing is renting your car out to a stranger who will drive the vehicle themselves. You may need to deliver the car to your renter, or they may pick up and drop off the car themselves.
You’re probably wondering, how much money could I make by renting my car out? Is the additional cash flow worth the potential risks and headaches? What kind of car insurance do I need to make sure I’m covered? Read on to discover the pros and cons of renting your car out through a car-sharing service.
Unfortunately, your personal auto insurance policy will not cover your car when you rent it out to third parties. This is because car insurance policies prohibit the use of personal vehicles for commercial use or profit.
The commercial use of your vehicle is different than letting a friend or family member borrow your car. Commercial use means making a profit through the use of your personal vehicle by using your car for delivery services, car-sharing programs, or other business uses. In essence, you have become a car rental company.
However, car-sharing services provide insurance that protects not only the owner, but the person renting your car, and everyone involved in the rental process. The insurance coverage offered by the car-sharing companies typically includes:
When signing up with a car-sharing service, car owners should take the time to read the fine print and be aware of limitations to the insurance provided. For example, car-sharing companies can get out of paying claims by declaring a vehicle “not fit” if the owner hasn’t had the car properly serviced.
Prospective owners thinking of renting their cars out might not want to rely solely on the coverage provided by the car share company. Consider purchasing a commercial insurance policy to properly ensure that both you and your car will be protected in the event of theft, vandalism, or accidents.
Renting your car through a car-sharing company can be an easy way to generate income for those who don’t use their cars often. But car owners should do their due diligence before signing up to ensure they’ll be properly covered against loss.