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Forbes: Turo's 'Airbnb For Car Owners' Helps Consumers Pay Off Auto Loans Faster

A few years ago, a company named Relay Rides operated a peer-to-peer car rental business in which consumers could rent a car by the hour for everything from shopping to traveling. But the traditional car-sharing market was getting crowded, and the CEO had another idea: What if car-owners rented out their own cars to their peers by the day?

This piqued the interest of investors, and in November of 2015, Relay Rides was reborn as Turo.

In a model similar to that of Airbnb, Turo allows car owners to advertise for free on its website, and as soon as they rent out their cars, Turo’s insurance plan kicks in. That way, your personal car insurance isn’t affected by renting out your car, according to the company.

The rebranded company now operates in at least 4,700 cities in the United States, Canada, and the United Kingdom, with 130,000 cars listed and 2.5 million signups, according to communications coordinator Christin Di Scipio. The car owners set the rental fee, and Turo takes out an average of 25 percent, depending on which vehicle protection plan they enroll in. According to a new report from Turo, many car owners cover their entire car loan by renting out their vehicles, with some paying off the loan a year or more in advance.

Among them is Jeff Cohen, who lives in Alpharetta, Ga., and works full-time for the California-based company ChargePoint, which oversees charging stations for electric vehicles.

Cohen was devoted to electric cars and had his heart set on a new Tesla Model S. However, the price tag of $85,000 was a major roadblock. “My wife – and she would agree -- is the Genghis Khan of financing, so she wanted to know how we were going to pay for such an expensive car,” he says. “Well, I remember attending a church sermon one time in which the pastor said he bought a grand piano by selling one key at a time. And Turo was a key part of my strategy.”

Getting a Tesla to pay for itself

Planning ahead, Cohen started a one-man business to rent out the Tesla (and possibly other cars) and opened a separate banking account for his limited liability corporation. He also spent an extra $5,000 on ceramic paint, window tints and other protections that made the electric car easy to clean. By combining federal and state tax credits for electric vehicles, depreciation write-offs and Tesla rentals through Turo, Cohen was able

to able to pay off his loan and own his Tesla free and clear within two years, paying it off a year ahead of schedule.

According to Turo’s data, Cohen’s experience is not an anomaly: The average monthly earnings for a Tesla are $913 a month, and for the latest model, it’s $1,031 a month. Since the average monthly loan payment for a Tesla is $1,020, a Tesla can pay for itself if it’s rented out only 7 days a month, according to the company. (On Turo, cars are rented by the day, not the hour.) Turo’s data also shows that a Jeep Wrangler can pay for itself if it’s rented 6.5 days a month, and a Honda Civic if it’s rented for 11 days monthly.

Was it hard for Cohen to rent out his beautiful new electric car to complete strangers?

“By and large, people took really good care of it,” says Cohen, who rented out the Tesla from between $179 and $199 a day. “I had an app where I could see how fast they were driving, and once I did notice a driver doing 95 miles an hour in my Tesla on I-20. I sent a warning text about it to the person who had rented it. You don’t want to be all Big Brother-ish, but you definitely want people to know you are monitoring.”

Whether dealing with customers or pricing, Cohen found Turo the ideal partner. “I can’t say enough good things about their customer service,” he says. “I tried driving for Lyft once, but I couldn’t get through to anyone when I needed to,” he says. “But Turo gets back to you within a day: it’s the essence of high tech, high touch.” His experience with Turo spawned another weekend business: using his Tesla to drive married couples from their wedding to their next destination (“In the business it’s called the ‘get-away car,” he says).

Di Scipio notes that many of its clients are car enthusiasts. “We have a lot of clients who love vintage, classic and foreign cars, and renting them out on Turo has helped some afford to buy these cars or pay them off early.”

Car enthusiasts and Alfa Romeos

Ryan Ortmann of Monrovia, California is among the car enthusiasts using Turo – “in fact, I probably love cars too much,” says Ortmann, 31, who works as a paralegal. His passion for cars led him to buy an Alfa Romeo 4C that he and his girlfriend saw advertised for $55,000.

“When I test-drove it, it was love at first sight,” he says with a touch of awe. “An Alfa Romeo is like a poor man’s exotic: It’s like a street-legal race car. It doesn’t have power steering or heated seats. It’s all about the drive. It can be a little lurchy, but I absolutely love it. It’s the perfect car for me.”

Since Ortmann already had another car and a mortgage to pay for, he planned to pay for the Italian car by renting it out on Turo. For nearly a week no one responded, and he began to worry that he had made a grievous error.

“I was sweating bullets,” says Ortmann. “The car loan was $1,200 a month and I started thinking, ‘Oh god, what have I done?’ I lowered the price until finally someone contacted me. And not long afterwards, the rentals just took off.”

Ortmann recalls his first rental experience as a bit unsettling, though it turned out to be an anomaly. “I remember texting the driver to say I hope you’re enjoying the car,” he says. “And he sends me back a photo of my Alfa Romeo right next to the beach, on the sand! Oh my god, my heart was beating in my forehead. And when it finally came back, really late, it was filthy and coated in dirt with a scrape under the bumper. I just about had a panic attack.” However, Ortmann says, Turo fixed the problem by reimbursing him for fixing the bumper and everything else.

Since then, Ortmann says his ride with Turo over the past year has been a smooth one. Turo rentals have fully paid for the Alfa Romeo payments for all but one month, he says, and he’s months ahead on his car loan. Last February, he says, he made $3,100 by renting it out.

However, Ortmann cautions that this experience may not hold true for everyone. “Someone else I know tried renting out an Alfa Romeo and it wasn’t really doing that well,” he said. “You have to build up your business.” (Ortmann would also like the company to decide how to make it up to owners when renters return cars with the wrong octane gasoline, which has happened at least once.)

Safety cautions for drivers

Turo’s safety precautions for customers include providing 24-hour roadside assistance with its insurance and requirements that cars not be older than 2005 or have more than 130,000 miles on them. Its website allows customers to rate cars and their customer experience, and if any safety defects are noted, Turo blocks the car listing until the vehicle is fixed.

Like car-sharing companies Uber and Lyft, however, Turo does not screen its clients’ cars for open recalls – that is, for a recall defect that hasn’t been fixed. (Customers who want to ensure that recall defects have been fixed should look for the cars’ vehicle identification number, or VIN, and then check it against a list of open recalls.)

“Last year the federal government required that [traditional] car rental companies fix all recall defects before renting them to customers,” says Rosemary Shahan of Consumers for Auto Reliability and Safety (CARS).

Shahan began the campaign to fix open recalls in rented cars after being contacted by a mother who lost two daughters in a tragic rental car accident that occurred as the result of an unfixed recall defect. “Customers rent cars with the expectation that they’re safe,” she says. “Turo could really get a leg up on the competition by ensuring that they are.”

Car owners should also look into a commercial insurance policy: It will help cover you should there be any dispute over insurance coverage if someone renting your car gets involved in a serious crash. In addition, some state "lemon laws" do not allow car owners to return a defective car if they have used it for commercial purposes, according to Shahan.

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