If you’re looking to make some passive income and you have an extra car that you don’t use very much, consider renting it out.
While there can be some 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.
Key Points
• When renting out your car, ensure your car is in good condition, clean, and well-maintained.
• Select a reputable car rental platform like Turo or Getaround to list your vehicle. These platforms provide insurance, customer support, and a vetting process for potential renters.
• Research the market to set a competitive price for your car. Consider factors like the car’s make, model, age, and location to attract renters while maximizing your earnings.
• Write a detailed and engaging description of your car, including its features, condition, and any unique selling points.
• Communicate clearly with renters, set realistic availability, and handle the logistics of pick-up and drop-off efficiently.
What Is Car Renting?
Everyone’s 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 or Getaround.
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.
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Why Might You Consider Renting Out Your Car?
There are a number of reasons you might want to consider renting 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.
If you work from home, you may need your car less. Making monthly payments on a vehicle you use infrequently may feel like a drain on your budget. Renting the vehicle out might help offset those costs.
Finally, demand for rental cars is up. 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 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 a 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.
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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: Turo claims to be the world’s largest car-sharing marketplace, with locations in the United States, Canada, the UK, Australia, and France. 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.
• Getaround: 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.
Risks Associated With Renting Out Your Car
Yes, there are downsides.
Whenever you allow someone else to drive your car, there is a possibility of an accident, damage, or theft. 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.
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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 you’ve built your credit score 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 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.
It’s also important to consider the costs of auto loan refinancing, including early termination fees, transaction fees, registration fees, or title transfer fees.
Recommended: Refinancing a Car Loan: What to Consider
The Takeaway
Renting out your car can be a good way to increase passive income, especially if you don’t need the vehicle 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.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
Can you rent your car out?
Yes, you can rent out your car through platforms like Turo or Getaround. Ensure your car is well-maintained, set competitive pricing, create an attractive listing, and manage rentals effectively to attract renters and maximize earnings.
How do you rent out your car?
Sign on to the car-sharing app of your choice, fill in information about your vehicle, and the app will pair you with drivers.
Where do you rent out your own car?
The rental process is online. Drivers will pick up and drop off the car at a predetermined location, or owners may offer a delivery service.
Photo credit: iStock/FangXiaNuo
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