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The COVID-19 pandemic has driven up rental prices, which may not get back to normal until 2023, according to some experts. In addition, people who are still working from home may not need their car as much as they did when commuting. If you’re looking to make a little bit of a passive income and have an extra car that you don’t use very much, you may consider renting it out. “I’m ready to learn how to rent my car out,” you may say. It’s good to know that while there can be some real monetary benefits to renting out your vehicle to strangers, there are also some real risks. Here’s a closer look at how to rent out your car.
What Is Car Renting?
You are likely familiar with Airbnb as a way for private citizens to rent out their homes, apartments, or even rooms in their house. About a decade ago, that model migrated to car rentals through websites like Turo, Getaround, and HyreCar.Each site runs a little bit differently. Turo and Getaround allow users to list their vehicle and rent it out to anyone looking for a car for hire, whether they need one to run to the grocery store for the afternoon or need it for multiple days for a getaway up the coast. Meanwhile, HyreCar hooks car owners up with gig workers who need to rent a car while working for rideshare or delivery services like Uber, Lyft, or DoorDash.
Why Might You Consider Renting Out Your Car?
There are a number of reasons you might decide to rent out your car. First, if you have an extra car that you rarely use, renting it out can be a way to earn extra cash without limiting your mobility. You may also find that due to the pandemic, you are working from home more and need your car less. Making monthly payments on a vehicle you use infrequently may feel like a drain on your budget. Renting that vehicle might help offset those costs. Finally, demand for rental cars is up. As vaccination rates rose, more Americans were ready to hit the road. At the same time, supply chain issues mean that there are fewer rental cars available at commercial rental agencies, a trend likely to continue into 2023. This increased demand might mean you have an easier time renting out your own vehicle.
Steps to Rent Out Your Car
Ready to give it a try? Here are the steps for how to rent out your car:
1. List Your Vehicle
To list your vehicle, visit the website of a car-sharing service or download its mobile app. You’ll be asked for the make and model of your car as well as a description of the vehicle and how much you’d like to rent it for.
2. Find Drivers
Drivers find you through the car-sharing app. They are often able to sort vehicles through various filters, including make and model, price, delivery fee, and other features. Drivers typically go through an approval process in which age and driver’s license are verified.
3. Complete the Transaction
Drivers book your vehicle directly through the car-sharing app, which handles the monetary transaction.
4. The Pickup
Some hosts will offer vehicle delivery for pick-up and return at private locations or frequent travel hubs like airports or train stations. Otherwise, drivers will have to go to the specific pick-up location to retrieve their vehicle. At this point, there may be a handoff of keys, or drivers may be able to electronically unlock the vehicle through an app.
5. Returning the Car
Drivers will return the vehicle to the specified return location. If they need the car for longer, or they want to return the vehicle early, they may contact you to make a request.
Options for Renting Out Your Car
Now that you know the steps for how to rent your car, you will likely want to use a peer-to-peer car-sharing app. Here’s a closer look at some of your options.
Turo claims to be the world's largest car-sharing marketplace, with locations in the United States, Canada, and the UK. Most rentals require that drivers and hosts meet in person to exchange keys, as few rentals are able to be unlocked using the app. Hosts determine the rental pick-up and drop-off locations or offer a delivery service. Rental rates range from about $20 to $100, and hosts keep 60%, 75%, 85%, or 90% of the rental rate depending on the vehicle protection program they choose.
Getaround is available in the United States and Europe. Rentals can be unlocked using the app, so hosts and drivers do not need to meet in person. However, rental owners will need to install the hardware that allows this system and pay a subscription fee. Rental rates range from about $20 to $80 a day, and rental owners keep 60% of the rental cost.
HyreCar was built specifically as a service for those working in the gig economy who need a car while theirs is in the shop or want to avoid putting wear and tear on their own vehicle. Rentals require in-person key exchange. Average rates are about $35 to $45 a day, and hosts keep 75% to 85% of the rental fee.
Risks Associated With Renting Out Your Car
OK, you’re thinking, Now I know how to rent my car out. Any downsides?Whenever you allow someone else to drive your car, there is a possibility that it will get into an accident, be damaged, or be stolen. Each car-sharing app offers some sort of protection plan for its owners, often in tiers that vary by coverage and expense. The most expensive tiers offer the greatest coverage, but also take the biggest bite out of your profit. For example, at Turo, owners who accept 60% of the rental fee receive $750,000 in third-party liability insurance, Turo pays 100% of eligible damage costs, there is no deductible, there’s reimbursements for exterior wear and tear, and reimbursement for lost hosting income during repair. Carefully examine the protection plans on offer before you sign up for a car share service. You may find that when you weigh the possible risks and rewards you are uncomfortable renting to strangers.
Car Financing Options
Some people choose to make peer-to-peer car sharing a small business, buying a car or even a small fleet of cars to rent out. Unless you are able to buy the vehicle in cash, you’ll need to finance it through a bank or other lender, such as the dealership where you purchase the car. Lenders will take a look at your credit history, including your credit score, to help determine the terms and interest rates they’ll offer. The better your credit history, the more favorable the terms. If you’re renting out your car to increase cash flow, there are other options you may consider as well, including refinancing your car loan. It may be time to refinance a car if your credit score improves, or if interest rates fall. When you refinance, you pay off your old loan with a new one that has lower interest or better terms, making your payment cheaper. Before refinancing, it’s important to consider the advantages and disadvantages of auto loan refinancing. In the pros column, you may be able to achieve a lower monthly payment or lower interest rates, more favorable terms, and you may free up cash to put toward other financial goals. However, depending on your loan, you may be hit with prepayment penalties, your credit score may make a temporary dip, and it may be tough to find a lender willing to refinance. Learning how to increase the value of your car can help.It’s also important to consider the costs of auto loan refinancing, including early termination fees, transaction fees, registration, or title transfer fees. Take a look at these tips for refinancing an auto loan to make the most of the process.
The Takeaway
Renting out your car can be a good way to increase passive income, especially if you don’t need it yourself. For some people, it can even be the beginning of a small home business. Before figuring out how to rent your car out, be sure to research your options for car-sharing apps and ensure that you are protected. If you’re looking for other ways to increase your income, consider whether refinancing your vehicle could reduce the amount you pay each month or over the life of the loan. To learn more about the options for car loan refinancing, visit Lantern by SoFi.
Frequently Asked Questions
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Photo credit: iStock/kali9
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About the Author
Austin Kilham
Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
