Californians that own cars in cities like San Francisco, where parking is scarce and public transportation is not, have a new option to earn back some of the money they pay to keep their cars: renting those cars to strangers.
A recent change to California’s law — spurred by one entrepreneur’s business idea — will allow individuals to rent out their cars commercially but keep their insurance. And technologies pioneered by companies like ZipCar, proponents say, will help by overcoming people’s concerns about giving their car keys to strangers.
A small study that Spride Share — whose founder helped push the legal changes necessary to allow his business to prosper — conducted with UC Berkeley showed that trust is the major obstacle to handing over the keys in a peer car sharing scheme.
Outsiders agree. “P2P car sharing will face the huge hurdle of customer perception right from the get-go because even though a comprehensive million dollar auto insurance policy might be covering any accidents, there is still the fact that most people simply don’t treat rental cars that well,” said Joel Ohman, founder of website Car Insurance Comparison.com “This will be a major problem for most people who are considering renting out their vehicles.”
So aside from basic issues like daredevil driving and muddy shoes, how do you know your Prius won’t end up in a Tijuana chop shop? The same RFID fob system installed in rental cars that allows users to unlock cars can also block ignition in case of theft or other mishaps in peer-to-peer car sharing.
“Your car is probably safer with us than parked on the street,” Sunil Paul, Spride Share CEO, said.
Spride Share, which checks renters’ driver’s licenses and driving records, is also counting on building trust through social networks and via an alliance with City CarShare, giving its 13,000 already-vetted San Francisco members who want to rent their cars access to the P2P service.
The company is one of several P2P start-ups, including RelayRides and Getaround, that hope to ride the car sharing trend. In two years, national car sharing membership grew 117% percent, according to Frost & Sullivan research, and is predicted to total 4.4 million members in North America by 2016.
The company estimates that a sedan rented 20 hours a week can earn the owner about $2,850 a year — a nice dent in car payments or parking fees.
But first, would-be entrepreneurs face a legal obstacle: state insurance laws, which usually say that car owners are liable for damages if someone else drove their cars.
Enter Stride Share’s Paul in California, who enlisted then-Assemblyman Dave Jones (D-Sacramento) to change that state’s law, making it possible for individual car owners to rent their vehicles commercially without invalidating their insurance policies.
In February 2010, Jones introduced AB 1871 which was signed into law in September and went into effect January 1, 2011.
Jones, who recently took office as the California State Insurance Commissioner, said the bill would take car sharing to a new level, as well as reducing parking and traffic problems.
“Democrats liked it because it’s good for the environment and Republicans liked the idea because it is entrepreneurial,” Paul said. “And everyone liked it because it’s also good for the pocketbook.”
