By: Bruce Newton
Once it became clear that the ability to rent out houses via Airbnb was potentially lucrative, it only made sense that something similar was going to happen with cars.
Most of our cars spend a hell of a lot of time doing nothing apart from depreciating and costing us money. One survey estimates they sit idle on average 161 hours out of 168 hours per week.
So why not rent out the second-most expensive asset most of us will buy in our lives after a house and try and reclaim some of that cost?
Let’s be clear, what we’re talking about here is not traditional car-pooling where people share the expense of getting to and from work in one of their cars or renting cars from car hire companies.
What we’re referring to here is peer-to-peer car hire. That’s where an individual owner advertises that a car is available for rent through a web-based platform such as Drive Mate, Uber Carshare or Turo, all of which are now active in Western Australia.
The prospective driver logs into the website, enters the location within which they want to pick up a car and how long they need it for. The choices and prices appear and the selection is made.
Like Airbnb, the deal is done online, as is the financial transaction, the keys can even be collected remotely and the two parties involved may never meet.
Also, just like Airbnb, both sides of the deal can rate their satisfaction with the experience publicly.
Peer-to-peer car share first appeared about 10 years ago in Australia and is now gaining momentum. Uber Carshare, which was Car Next Door until it was taken over by the US ride sharing giant Uber in 2022, celebrated 10,000 cars on the platform in October.
Drive Mate, which originated in Singapore where it is known as Drive Lah, has been active in Australia for about a year and has approximately 500 vehicles on its platform and 30,000 customers signed up to its website.
Drive Mate co-founder Dirk Jan says there are two key reasons for the growth of peer-to-peer car sharing.
“Young people nowadays like to have experiences but not necessarily own things”, he said.
“The other driver for this is a push from government to reduce car ownership. They do it in all sorts of way; apartments are being built with less than one car park per apartment.”
Jan’s not alone in predicting success. Global business consultant Price Waterhouse Coopers has estimated that by 2030 one-third of all kilometres driven will be completed using some form of sharing.
He says many drivers assume they will be fine for at least two hours on the road — something reinforced by many safety campaigns — but the fastest fatigue-related crash he’s seen came just 5 minutes and 35 seconds into a journey.
Ok, so let’s drill down, ask a few questions, and see what we find.
How does car share work?
Peer-to-peer car sharing allows privately owned vehicles to be rented out by their owners on an hourly, daily, weekly or even monthly basis.
The key link in this chain are the car sharing platforms that act as an interface in the same way Airbnb allows house owners to advertise directly to prospective renters.
The platforms cover their own overheads and (theoretically) make a profit from owner subscription fees and/or by taking a share of the rental fee. The model varies.
Apart from providing the marketplace, platforms also vet potential owners and customers, provide insurance to cover the cars when being rented, emergency services if there is a breakdown and if necessary, guarantee the cost of repairs if a car is damaged on the job.
Some peer-to-peer car hire services allow advertising on multiple sites, some don’t. The US giant Turo, which launched in Australia in late 2022, insists on exclusivity.
How much work is car share for the owner?
This really depends on how committed the vehicle owner is to the process. The scenario painted by car share companies on their websites is serene; the owner of a single car without much effort at all makes a sweet, simple earn on the side to reduce the cost of running their car.
But just as people own or manage a string of rental houses on Airbnb, so the peer-to-peer car hire entrepreneur is emerging as well. Dirk Jan revealed Drive Mate had individual “power hosts” running up to 40 cars. Essentially, they have become professional car renters and that is a lot of work.
“If you have 20 cars then you can get many bookings and you need to communicate with guests etcetera,” he said. “If you’re renting out to people they want to communicate with you and ask questions so you need to be available.”
And if you’re wondering how one individual can afford 40 cars, realise that they don’t have to be brand new like the rental car you collect at the airport. For instance, Uber Carshare criteria stipulates a rental must have been built no earlier than 2001 and have a value of no more than $60,000.
That the cars are older is one reason you can rent through these organisations much cheaper upfront. Nor are they handed out from bricks and mortar offices by salaried employees.
The price is also driven down by the platforms acting as marketplaces. Owners can see what rivals in the same geographical area are charging for similar vehicles and adjust pricing to suit.
Pricing can also vary significantly over different rental periods. Peer-to-peer agreements often include a fee per km travelled – or a fee kicks in after a certain amount of kilometres.
Is car share worth the returns you get?
Figures supplied by Uber Carshare reveal cars based in Perth dedicated to sharing earn $763.23 per month on average, with the top 10 per cent of cars earning an average of $1480.66 a month.
The amounts quoted are what the owner receives after Uber Carshare’s commission, but before running costs (including applicable taxes) and other sharing plan fees.
On its website Turo reports Australian hosts can earn on average $12,960 per year per car before expenses are deducted.
So if those figures are somewhat indicative of all platforms – and no doubt they all claim to be the best financially – then you can see why people run fleets of cars and not just one.
To really understand what you might earn, it’s best to go to the websites and crunch the numbers for yourself.
Jan says there are a number of ways renters can help to maximise their returns.
“What’s important is that you have an attractive car, you need to price it right, you need to have good pictures of it and you have the right settings to make it available, be it short or long-term rental,” he says.
“You need to manage your calendar well,” he explains. “If you decline guests then it has a negative impact on how people rate you and also in our search algorithm people with a high acceptance rate and good responsiveness we put higher up and they get good demand.”
What about tax considerations?
The Australian Tax Office publishes an information sheet for people looking to get into peer-to-peer car sharing and what the tax implications are.
It’s important to fill out a logbook correctly. Keeping all receipts is also very important. Once earnings top $75,000 per year the owner will have to register for GST.
If your vehicle is subject to a lease or financing, check the agreement to ensure car sharing isn’t prohibited.
How does insurance work if your car is already insured?
The car share platforms offer comprehensive insurance coverage for the period when a vehicle is rented. It’s separate from the owner’s own insurance for private use.
Depending on the structure on offer, the platforms take responsibility for some or all the damage inflicted on a vehicle during a rental.
For instance, on Turo, the host offers various protection plans which vary the deductible from nothing to $1200 depending on how much is paid.
If there is damage, what’s the process for repairs?
Damage to the vehicle can be dealt with directly between owners and renters or settled via an insurance claim to the platform. The owner has the responsibility of obtaining quotes for the repair of damage.
The platforms generally commit to cover costs if a renter does a ‘runner’ while owing money for damage, towing and so on.
Replacement transportation or reimbursement is offered under some circumstances if a vehicle is off the road.
Some pluses, some minuses
Apart from reducing the costs of motoring for both owners and renters, the platforms argue they are contributing to reduced traffic congestion and emissions. How so? Well think of it as two people or more sharing the one car rather than them all owning their own.
Intriguingly, research has shown that owners of vehicles on peer-to-peer platforms tend to walk more and take public transport more once they do start renting their car out.
Of course, not having your car available when you want it is a negative if the vehicle is your only form of motorised transport. It also means the car will more quickly accrue mileage, and servicing schedules will cycle around more quickly.
Another negative is a reported trend in the USA for criminals to hire cars through peer-to-peer networks to steal or for use in their nefarious work. Although the platforms do some screening of customers to establish their bonafides and GPS trackers are either supplied for a fee or encouraged.
If all this has left you interested, head to the various company websites where there are in-depth guides to becoming a host.
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