By Dr. James M. Dahle, WCI Founder
It was only a matter of time. First, there was ride-sharing: Uber and Lyft. Then, there was house-sharing: Vrbo and Airbnb. There was even storage sharing: Neighbor, Stow It, and the like. Well, now there is Turo. Maybe you don't want to play taxi cab driver, hotelier, or storage facility mogul. How would you like your own rental car company? With Turo, now you can have one.
How Does Turo Work?
For somebody looking to rent a car, it's almost exactly the same as Airbnb, except for with a vehicle. You get on the website, pick a destination, pick a car, and the car owner delivers it to you at the airport ready to go when you arrive. Just like a rental car, you can use your own insurance or buy theirs and drop it off back at the airport when you're done. For the renter, you get to skip the rental counter line and perhaps enjoy better service and a more unique car. In fact, you get to choose the exact car you will rent rather than a random “economy” or “full-size” vehicle. You can cancel for free up to 24 hours before, and it only costs you $50 if you cancel at any time. For the car lender, you get a side gig, second job, or cash-flowing investment, depending on how you want to look at it.
Tips for Doing Well as a Turo Car Renter
There are a few things to remember if you decide to use Turo as a renter.
#1 The Cars Aren't New
When you rent a car with Hertz or National, the car is likely less than three years old with less than 20,000 miles on it. For all practical purposes, it's brand new. Yes, any car can break at any time, but the likelihood of a mechanical issue unrelated to a road hazard is incredibly small. With Turo, that's not the case. There are rules about the age and condition of the car, but Turo isn't going out and checking on them. Tread carefully. You might not be buying someone else's problem, but you are renting it!
Read carefully, especially the reviews. What a lender describes as “like new” may be lacking functionality, or it may have significant interior or exterior damage. Just like a rental car, take a walk-around video before you walk away so you know what was there and what wasn't. A quick glance at cars at my local airport showed a 2008 and plenty of 2013-2014s, although the majority of cars were newer. Here are the US rules if you're interested:
- The person listing the car may not even own it; they just need “permission” from the owner (stolen cars?)
- Can't be registered in New York
- Can be up to 12 years old (unless it's really special; then it can be even older)
- < 130,000 miles (unless in excellent condition)
- Worth less than $150,000
#2 Your Credit Card Isn't Going to Provide Insurance
That insurance you use from Visa or American Express when you rent? Yeah, that doesn't work with Turo. Your insurance at USAA or State Farm isn't going to work either. You are probably going to need to buy the Turo insurance, so be sure to price that in. If you want the Premier plan (the one with $750,000 in liability coverage and a $0 deductible), it might double the cost of your rental (the company says 60%-100% of the rental price with a minimum of $14 per day). The cheapest plan is 18-25% of the cost of the rental, but that comes with the minimum state liability amount and a $3,000 deductible. It has a $10 a day minimum. There is also a liability-only option at no extra charge, but just like the “standard” and “minimum” plans, you only get the state-required minimum. Better check with your umbrella insurance policy, but I bet they're going to require you to buy the premium policy if they will back it up at all.
#3 There Is No Big International Company to Deal With
Turo owners are not Hertz, Budget, or National. This is going to be a much more personal experience. That comes with its pluses and minuses, of course. Some hosts are going to be great to work with. Others are going to assault you in the dark parking lot where you are picking up the car. OK, maybe not. But be careful out there, especially until you get the hang of how this is supposed to work.
#4 Beware the Fees
Watch out for all the little fees. If you've ever rented an Airbnb for one night and found the cleaning fee was more than the rental fee, you know what I'm talking about. The same principle applies to Turo.
Tips for Doing Well as a Turo Car Owner
What about as an investment? Is Turo worth it? Is it a good idea?
#1 The Car Rental Business? Really?
Our content director asked me to write this post. My first thought was why in the world would a doctor want to get into the car rental business? I mean, at least if you're doing Airbnb or another kind of short-term rental, you've got an asset that is likely to appreciate over time. That's not the case with most cars. Plus, have you ever rented a car? How did you drive it? Yeah, me too. Do you really want people driving your car like that? Who looks at the car rental business and says, “Those guys are making a killing! Surely I can offer a lower price and better service and cut them off at the knees.”
Presumably, you need your car, at least most of the time. So, what are you going to put up on the website? Are you going to go out and buy a car JUST to rent it out on Turo? Or is your plan to do what lots of people do with their second homes? “I'll rent it out sometimes so that other people are covering the cost of me owning it.” In my experience, that does not work out as well as most people hope.
I know lots of docs killing it in real estate. I know lots of docs doing well with medicolegal work. I know lots of docs who do well coaching other docs, too. I even know a couple that do well blogging or running big Facebook groups. I don't know any who are killing it on Turo. Doesn't mean it can't be done, but a little skepticism is in order.
How Much Can You Make on Turo?
The average Turo owner is making $706 a month. That isn't going to move the needle for most people reading this post. If you want to do this, you're going to need to scale. You might need a fleet of 10 cars just to be making $60,000 in profit a year. Congratulations, you've just bought yourself a job that pays a lot less than doctoring.
#2 Delivery and Pick-up
Remember, someone has to deliver the car and pick it up. Sure, it can be left for a few hours, but this takes time. It's a half-hour for me to go from my home to the airport. That's two hours of my time roundtrip for the rental. What is your time worth? Even if it is only worth $100 an hour, you can subtract out $200 from your profit every time. But wait, there's more. You can't take the car out to the airport by yourself. How are you going to get home? You need a second person. Be sure to count the value of their time, too. How much profit do you think there is in the car rental business? The alternative, of course, is to hire two other people to do that. What do you suppose it costs to have someone willing to deliver your car(s) at any given hour or day of the year? Why don't you ask Hertz or Avis? I bet they know. By the way, that mileage, gas, and parking to deliver and pick up the car, though it's deductible, is also on you.
#3 Name Your Price
Wondering how much you can make on Turo? The thing I like best about the Turo model is the fact that you can name your price. If it's not enough money, you don't have to rent out the car. Kind of like your “make me move” price with Zillow. Maybe you only get a renter on a really busy weekend when all the other cars are gone, kind of like Uber drivers that only drive during peak periods.
#4 Get a Unique Car
In my area, there are the following cars available as I write this:
- 2013 Mercedes Benz G Class: $449 per day
- 2014 Jaguar F Type: $252 per day
- 2022 Tesla Model 3: $138 per day
Meanwhile, if I go to Budget's website for the Salt Lake City airport, I discover cars are $90-$113 per day. A Suburban is $227. And I don't have to buy any extra insurance. Who is going to rent any of those other cars? Someone who wants something special and has money to spare. If you're going to rent out cars, get something special (but still worth < $150,000), charge enough to make it worthwhile, and hope that's a price at least a few people will be willing to pay every month. But don't assume a high-end car will automatically do well and a low-end car won't. Some experienced hosts swear they do way better with economy cars than luxury cars.
#5 Know Your Market
Find out if people are going to rent your car before you buy it. For example, big families often come to Salt Lake to visit family members or to go skiing. Minivans probably do well. Maybe a Suburban or a Sequoia in the winter. Jeeps and trucks supposedly do well in Colorado but poorly in Missouri. See what cars are renting for in your market BEFORE you buy.
#6 Buy Used
This is an investment here. It's all about the numbers. When you drive a new car off the lot, thousands of dollars in depreciation go up in smoke. It'll take a long time to make that up. Best to just start with a used car in the first place.
#7 Get Commercial Insurance
You're running a business here. Buy business insurance. No, your personal policy isn't going to cover this, even if agents mistakenly say yes because they don't know the difference between ride-sharing (Uber) and car-sharing (Turo). No, Turo's insurance is not good enough. Per the experts, the few times the Turo “policy” has been put to the test, Turo has tried to wiggle out of it, usually successfully.
#8 Form an LLC or Corporation
Speaking of business, there's liability here. That means you don't want to be running this thing as a sole proprietorship or a partnership. You need an LLC or a corporation. Keep the finances separate. The business needs its own EIN, bank accounts, and maybe even a credit card. If you hire someone to work for you, you need to do all the appropriate paperwork (I-9, W-2, W-3, W-4, etc).
Is Renting On Turo Worth It?
In case it's not obvious, I don't think becoming a Turo host is a great idea for members of the WCI audience. I'm sure there's someone out there who hates medicine enough to try this and could end up scaling it into a 150-car empire. But for the rest of you, enjoy your day job and stick with the more well-known side gigs. You're going to be a lot better off doing Vrbo/Airbnb than Turo. Now if you want to try RENTING a car via Turo, knock yourself out. But be extra careful and double-check the insurance situation.
What do you think? Have you rented with Turo? Are you a Turo owner? How is it going? What has your experience been like? Comment below!