How to be a smart entrepreneur on Turo
Owning a car is notoriously expensive. Fortunately, our peer-to-peer car sharing community offers a unique opportunity for car owners to offset some of the costs of car ownership and sometimes even take home a little extra profit. In 2018, a car shared on Turo earned hosts an average of about $522 per month. While these earnings and the earning potential of various cars inputted into our new Carculator tool may seem lucrative, there are a few things to keep in mind as you seek to expand your car sharing endeavors.
1. Take it slow
Like any investment, you should do your due diligence and test the waters before you take a plunge. According to Bloomberg, about 80% of entrepreneurs who start businesses fail within the first 18 months. Unless you’ve had experience managing large fleets of vehicles, there are so many nuances of peer-to-peer car sharing to learn. Before you take on new debt or make a large investment, you’ll need to understand what the demand is like in your area year-round and have a plan in place to weather seasonality as well as cars that could be sidelined due to claims or manufacturer recalls. Corporate-owned fleets have the luxury of tax breaks and scaled operations that make it easy for them to “in-fleet” quickly when business is booming and “de-fleet” when things slow down. What might be perfectly manageable for hosts sharing cars at a small scale is not likely to be realistic for individuals on a larger scale.
“Markets widely vary across the country. So know your market and what cars are the best. Be tactical and wise in your business decisions.” – Chad M.
2. Car sharing isn’t a “get rich quick” scheme
Cars are expensive assets not only to acquire but also to maintain. When you share your car at the higher volumes required to potentially turn a profit, your car’s depreciation and frequency of both preventative maintenance and repairs increase exponentially. On a more regular basis, keeping the cars in good cosmetic condition means more regular cleanings that have their own costs besides just your time.
As a host, your guests are your customers and require just as much time and attention as the car or cars you’re sharing with them. When guests book a car on Turo, they’re booking with a local host rather than a generic corporation. While you may have figured out ways to automate your hosting responsibilities (like Turo Go), there’s no such thing as completely hands-off hosting. Once you think you’ve hit your stride keeping up with your cars and providing your guests with five-star experiences, you’ll also have to reconsider where and how you operate, too. Your scaled operation may not work the same way as your single daily driver parked on the street would. More often than not, you can’t practically or legally leave numerous cars strewn around the street outside your house when you are using them for commercial purposes, unlike personal use; you’ll need to find appropriate (and legal) solutions to housing your Turo operations. Being a good neighbor isn’t just good business, it’s also Turo policy.
“Treat this like a real business. NEVER underestimate the importance of giving superior customer service with every trip.” – Bill H.
“Start slow and build asset wealth, pay off cars and own a good percentage of your fleet. As you add a car that you can buy cash add a car that you might finance.” – Ryan L.
3. All that glitters is not gold
Leasing a brand new car is not a low-risk and high-return method for profitable car sharing either. Your lease or gap insurance may not allow for car sharing and will likely have steep penalties for mileage overages, early termination, and even the most basic wear and tear. Even if your car has been financed, similar terms prohibiting your car from being used for commercial purposes, as well as other hidden fees such as prepayment penalties, may still apply.
The good news is that it’s not just the brand new cars that have high earning potential on Turo. In fact, less than about 5% of all Turo searches in the last year filtered for cars of a particular year. Your best return on investment most likely will be a car that is a couple years old and that you’ve bought outright. When you purchase a car with all cash, you have some equity in the car which will be a huge benefit if you decide to scale down or re-strategize your operation or when a claim pops up that might sideline trips while repairs are made.
“Don’t go into a dealer and buy whatever you can get approved on. You really have to do your homework and have an exit strategy in case something happens. Best bet is to buy something cash that’s on the economy side. You can then try out your logistics and what Turo life has to offer. It’s not for everyone!” – Eric K.
“Invest in cash cars and avoid financing if possible until you have a good system in place and your cash cars can “carry” your financed cars if they fail, OR vice versa.” – Michael M.
4. Accidents can and will happen
Just as the frequency of repairs and preventative maintenance increases with the frequency with which you share your car, so does the probability of damages. Most damages will be covered by the protection plan you select for your car, however, deductibles and damage covered vary, and thus could add up and should absolutely be accounted for in your plan. Additionally, only our Premium vehicle protection plan covers your loss of potential earnings while your car is undergoing any repairs.
While not common, your car may also be at a higher risk of being rendered a total loss, too. In these instances, Turo will only compensate you for the Actual Cash Value (“ACV”) of your car and not the amount you owe on your lease or loan. Paying for Guaranteed Auto Protection (“GAP”) insurance might close the “gap” between the ACV of your car and the balance you still owe if you do find yourself upside down. However, you’ll need to read the fine print before you sign because some policies could be voided if you share your car.
“Be safe and find out what your car’s Actual Cash Value is, so if it gets wrecked or stolen, you won’t be negative. Realize bad things will happen to it…” – Adam B.
5. Don’t get in over your head
In behavioral economics, this concept is known as the “sunk cost fallacy” in which we continue to invest in something because we’ve already put forth a “sunk” cost upfront. When we’ve already put forth the time, energy, and money into something. we want to make it work — but at what additional cost?
“Employment is still up and inflation low, but that could change, and it’s better to have cash than debt for the next couple of years.” – Bill J.
“Have fun! Driving around fun cars and meeting great people is a heck of a lot more fun than sitting at a desk all day.” – Ade B.
Sharing your car is a great way to offset the cost and maybe earn a little extra money but it’s not a silver bullet towards financial freedom. We’re constantly inspired by the clever entrepreneurs who make the Turo community innovative and dynamic, but we urge all hosts to make smart and sustainable choices as they scale their car sharing operations.