How to Rent Out Your Car to Make Some Extra Cash
Becoming a rideshare driver isn’t the only way to make money with your car.
October 27, 2022
This information is provided for informational purposes only, and is not intended to be construed as tax, legal, or accounting advice. You should consult your own tax, legal and accounting advisors before making financial decisions.
While most people are familiar with the idea of becoming an Uber or Lyft driver, car sharing is also becoming more popular. Car-sharing services let you rent out your own car when you aren’t using it so you can make some extra cash — essentially, it’s like Airbnb for cars.
If you’re a car owner who’s interested in doing car rentals as a side hustle, you need to be aware of how these services work and the potential risks involved. Here is a closer look at how to rent out your car to make extra money.
Car sharing: How to rent out your car
The basics of car sharing are fairly simple. Similar to home rental services like Airbnb, car owners use a car-sharing company to let users rent their vehicles. Car-sharing companies — such as Turo, Hyrecar and GetAround — let owners list their vehicle information (including photos) on their car-sharing marketplaces.
Each car-sharing company has its own standards for the type of vehicle you can rent. For example, GetAround requires that cars be model year 2007 or newer and have fewer than 200,000 miles. Cars that are 10 years old or older and have over 125,000 miles must complete an inspection during onboarding.
As the car owner, you get to set the price for renting your vehicle as well as the available dates and times. So, if you are going to need your car during the week to commute to work but not at all on the weekend, you could set your vehicle to only be available for Saturday and Sunday rentals.
Unlike traditional car rentals, the rental period doesn’t have to be a full day or more. You could allow someone to rent your car for a few hours during the afternoon so they can run errands and then return it to you in the evening.
Renters use car-sharing marketplaces to search for the type of vehicle they want to use. After booking, owners will contact the renters to coordinate a hand-off time and location (usually a public place like a parking lot). Owners will usually pick up their car from renters at the end of the rental period at the same place or have the renters drop off the car at an agreed-upon location.
Car rental companies will facilitate payments and transfer money to your PayPal or bank account. These companies also provide their own liability insurance policies to protect vehicle owners should a renter get involved in an accident.
Is renting out your car right for you?
While you can certainly make a good amount of money renting out your car, this doesn’t mean that it is right for everyone. Here are a few things to consider before offering your vehicle through a car rental business.
How often you use your vehicle
One nice thing about car-sharing services is that you decide how often you want to make your car available to rent. If you only want to make it available when you’re going to be away on vacation, you can do that. Or, you might want to try to rent your car out every day to maximize your potential income.
Of course, frequently renting out your car could become a hassle. If you only have one car, you won’t be able to go anywhere while it is being rented, and you might have to use public transportation to get to and from the pick-up/drop-off location. Even if you have multiple cars, renting one out all the time might require some rearranging of your family’s schedule.
Potential wear and tear
The more you drive your car, the more wear and tear it experiences. Most vehicle maintenance tasks (from oil changes to replacing the transmission) are scheduled based on mileage, not age. As a result, rideshare drivers tend to visit the mechanic much more frequently to keep their vehicle in good operating condition. The same is going to be true if you rent out your car.
Simply put, in order to keep your car in good working condition (and to avoid a breakdown that leaves your renters stranded), you’ll likely be spending more at the mechanic each year. This is something you’ll need to keep in mind when setting your car rental prices.
Car-sharing companies want to reduce risk for everyone involved. Because of this, renters must go through a screening process before they can book your car. Those who have caused a major accident or received frequent traffic citations are typically rejected.
Of course, this doesn’t eliminate all potential risk. Unpaid toll fees, tickets and accidents are all possibilities. You may also want to consider how you exchange the car and its keys. For example, you might be more comfortable leaving the key in a lockbox, rather than meeting renters face-to-face.
How to get your vehicle ready for renting
Knowing how to rent out your car successfully will help ensure that people are willing to book your vehicle so you can make money. Here are some key things to prep your vehicle for successful renting.
Understand the tax implications
When renting your car through a car-sharing company, you’re technically operating as a self-employed individual. This means you’ll be responsible for reporting any income you earn when you file your taxes. Depending on how much money you make, you might receive a 1099 tax form from the peer-to-peer car rental company.
But even though you have to pay taxes on the money you make, you might be able to lower your costs and keep more of your car-sharing money through tax deductions. For example, you can deduct car interest payments, maintenance and repairs, insurance, and other expenses when your car is used for business purposes.
Set prices wisely
Be mindful of your underlying costs when setting your rental fees. In addition to higher maintenance expenses and the possibility of higher rates from your own insurance provider, you’ll need to account for fees from the platform you use.
For example, Turo deducts anywhere from 10% to 40% of your trip price, depending on the type of insurance coverage you choose with them. So, the rate you charge drivers doesn’t reflect the total amount that will end up in your bank account. You need to make sure that total is higher than your added expenses from using the car more so that you can turn a profit.
It can be helpful to look at rates for similar cars in your market to get an idea of what local drivers expect to pay. A competitive (but still profitable) rate will help you get more bookings.
Get your car and listing in shape
You want to make your car as appealing as possible if you want renters to book it. Clean your car, and take several high-quality pictures to go with your listing. Well-lit photos will make your vehicle look more attractive.
Fill out your listing with basic details of your car and why renters should choose you and your vehicle. Don’t be afraid to look at other listings for inspiration!
Once you start renting your car, be sure to clean it before and after each rental. Users are able to leave reviews, just like Airbnb. A clean, well-cared-for car will go a long way in helping you earn high ratings that land you even more renters.
Lastly, be sure to keep up with ongoing maintenance to prevent breakdowns and other issues.
Use your car wisely
While a car-sharing business can be a great way to generate additional income, it also comes with potential financial risks, such as pricier insurance coverage or physical damage to your vehicle. Whether or not participating in peer-to-peer car rental is right for you will depend on your own personal situation and your vehicle.
When done right, knowing how to rent out your car can provide the extra income you need to pay down debt or start saving for a major purchase.
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