Rental Cars: New Way to Make Money on Your Car

Last Updated Jun 6, 2011 10:16 AM EDT

A new iPhone app wants to turn your car - one of your most expensive assets - into a revenue stream.

Getaround is a peer-to-peer mobile platform that lets car owners rent their vehicles directly to the public on a hourly, daily or weekly basis.

I was a little skeptical of this at first. Who would let a stranger drive off in her car - for any amount of money? What if the renting driver wrecks it? But this start-up says they have it all figured out (read on to learn how), and has become quite popular in a short amount of time. Since launching at the TechCrunch Disrupt competition in New York in late May - where it won first prize among 32 presenters - the company has signed up over 200 cars and more than 1,500 renters ... and counting.
Getaround says it's trying to solve car overpopulation and underutilization. "Car owners invest huge amounts of time and money into an asset they barely use," Getaround co-founder and CEO Sam Zaid tells me. "Cars are driven only 8% of the time, while potential drivers walk past block after block of underutilized cars. We are here to connect the dots." It's very similar to Web sites RelayRides and the soon-to-launch JustShareIt, but what differentiates Getaround is that it's a mobile app.

For renters, the service is a cheaper alternative to hourly car rental companies like ZIpCar and Connect By Hertz, since owners can set their own rates. Average prices on Getaround range from $3 to $15 per hour, depending on the vehicle and location. There's no sign-up or annual fee, either. Car owners can, in turn, earn about $2,000 per year, according to Getaround's calculations, assuming hourly rentals throughout the year. That's not a bad way to reduce the true cost of car ownership, which AAA estimates is about $9,000 a year.

Ok. You're wondering about insurance, right? What if someone crashes your car or runs off with it? This was the final piece of the puzzle that had investors mesmerized at the TechCrunch competition: The company has partnered with Warren Buffett's Berkshire Hathaway to provide liability, collision and comprehensive insurance. When a driver gets in your car, your insurance turns off and Berkshire's kicks in.

Getaround is currently only available in the San Francisco Bay Area and parts of San Diego. But with the recent $1.5 million raised in funding (plus the $50,000 won at TechCrunch Disrupt, of course), the CEO says he anticipates market expansion. "We will soon begin accepting cars in additional cities across the US on a city-by-city basis," Zaid tells me. "The order of cities we expand to will be determined largely by where we have the most signups."

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    Farnoosh Torabi is a personal finance journalist and commentator. She is the author of the new book Psych Yourself Rich, Get the Mindset and Discipline You Need to Build Your Financial Life. Follow her at www.farnoosh.tv and on Twitter at @farnoosh.