Getaround Scam or Good Deal?

I stumbled across this company called Getaround while reading through one of my less focused RSS feed lists. Basically, the way Getaround works is that you can (but do not have to) rent out your car when you are not using it to someone else who wants to rent your car on an hourly basis. The idea is that if your car sits parked in front of your house most of the time, or if you don’t use it on weekends, or whatever, you can earn money renting your car out, and if you need a short-term car rental (something regular car rental companies are horrible for) you can rent a nearby car for a reasonable rate.

Getaround Business

If you have ever tried to rent a car from a rental company for a single day, you know that it is not worth the expense and hassle. Don’t even think about trying to make it worth it to rent a car for a few hours. It isn’t really a scam or conspiracy on behalf of the car rental companies, it just doesn’t make sense for their business model. Between reserving, delivering, returning and cleaning the car, the costs are just to high to be able to offer a reasonable hourly rate.

Getaround gets around this (Hah!) by not doing any of those things. Instead, Getaround signs up car owners to rent out their cars rather than buying and maintaining a fleet of cars. No Getaround personnel are involved and the company has no responsibilities during a problem-free rental. Nice low overhead.

If this sounds like a lot of risk for the car owner, you’re thinking. The company works around this issue by doing two things. First, ever rental includes full coverage car insurance including comprehensive and underinsured coverage. Second, the company offers a kit that is installed in your car that acts as a monitor and, if you have an iPhone, can even handle the rental and drop off without any face-to-face meeting with the renter.

Theoretically, if a renter gets in a car accident or you car gets stolen while someone is renting it, you are covered. Of course, that isn’t much comfort if your car gets totaled by a renter the day before a big job interview. Much more likely, than losing your car or having it wrecked, however, are those little things that aren’t quite so obvious. Was that scratch on the door before the rental? How about that flat tire? What about the chain-smoking renter who says that they never smoked in the car? Those kinds of things might be problematic to collect on and/or prove.

The biggest risk for renters, is those unseen things. While most renters are reasonable drivers, even when renting from Hertz, there are always those who view a rental car as a chance to squeal the tires and punch it from every red light they hit. Think of the guys joy-riding the car in Ferris Bueler’s Day Off. They don’t wreck the car in anyway, but it certainly is worse for the wear when it comes back.

The company relies on the standard internet quality mechanism, user reviews, as its guard against such things. Until there are a lot of regular renters, however, this will be little help. Most renters will be first-time (and likely only one time) renters during the startup period.

Getaround Rentals

For the renter, the risk is lower. In fact, at first, the toughest part is probably finding a rentable car. The company says it has thousands of cars available, but they aren’t available at all hours of the day because their owners are using them some times. As a new techie-type business, rental offerings are sure to be clustered in certain cities like San Francisco, Austin, and other high-density, high-tech cities.

The service might prove especially tough to take advantage of in less compact cities. Here in Denver, for example, you might need a rental just to get to your rental.

Of course, the included insurance helps, but there is no guarantee that a rentee won’t claim that you did something to their car while you had it.

Getaround Insurance and Local Laws

The biggest potential problem with Getaround, however, isn’t what happens between the company and the renters, but how this all flies in the event something goes bad.

Many cities and states have strict rules and regulations when it comes to offer a car for hire, which this type of rental may very well fit into. Owners probably won’t get a visit from anyone while everything is working, but an unpleasant visit may occur if there is an auto accident. Sure, the car is covered, but are you covered for operating a rental business without a proper license and how big is the fine for not keeping proper maintenance records?

While Getaround’s insurance covers your car while it is being rented, does offering your car out for rental affect your own normal car insurance? Most specifically forbid activities such as renting the car out.

Finally, what about the tax implications? Is this a business? Do you owe taxes on the revenue? If you deduct car expenses or take the standard mileage deduction for your business, offering our your car for rent may cause you a big IRS headache down the line. (Of course, if you fold renting out your unused automobile into your business that is a different story.)

Getaround sounds like a great idea, and frankly, I hope it works out. I’d love to rent out the second car that sits in front of the house most of the time, but I’ll be waiting to see how it goes for a while before signing up.

On second thought, if someone in the Denver area is renting out a sweet car, I wouldn’t be above a fun drive around Denver and back.