It hit me the other day that I’ve been sitting on a goldmine of wealth and knowledge living here in San Francisco, the startup capital of the world. As a 12 year resident of the city with an entrepreneurial bug, a desire to meet more interesting people, and a personal finance blog with a yearly readership in the millions, what a great opportunity to meet up with some of the promising new companies of our generation and bring their stories to all of you. I plan on profiling at least one new startup a quarter in an assortment of industries. I hope you enjoy the new series!
For most people, your car is usually your first or second most valuable asset, and it’s also one of the fastest depreciating assets. Long time readers know that I don’t recommend anybody spend more than 1/10th of their gross income on a car if they want to build financial wealth.
Not only do you have to pay ongoing operating and maintenance costs, you’ve also got insurance costs that could easily total in the thousands of dollars a year. With the average car sitting idle 92% of the time, most folks are flushing money down the toilet with cars they don’t need.
The multiple financial meltdowns over the past 10 years have created a shift in consumer’s attitudes towards ownership. I think consumers are wisening up to the fact that tying up a lot of capital to own a car when good jobs are hard to come by is foolish. Millions of car owners with uncomfortable car payments that last long after the initial euphoria of ownership wears off are wondering how to mitigate costs.
RelayRides is trying to make these economics more favorable for their car owners by allowing them to turn this idle, depreciating asset into a source of income. For car renters who want to preserve their capital, but still want the flexibility of having a car for 20-40% cheaper than renting from a large agency like Avis or Hertz, RelayRides wants to help you as well.
FS: As a hater of traffic and a proponent for a cleaner environment, I love the proclamation that by renting out your car on RelayRides, you help take on average 14 cars off the road. How did you come up with this figure? It makes a lot of sense.
RR: Susan Shaheen at UC Berkeley found in her study that one shared car takes 14 cars off the road on average.
FS: How does RelayRides make money? Does the money get debited from the renter or the car owner?
RR: The owner keeps 75% of the reservation cost and RR takes 25%, and we also charge a 10% rental fee to the renter.
FS: How large is the current RelayRides community? If you can break it down by owners and renters that would be great.
RR: I can’t specify the exact numbers, but we have several thousand cars being rented by tens of thousands of renters. We’re in all 50 states and in over 1300 cities.
FS: I imagine that certain areas are more popular for car sharing than others. As a car owner, which areas have received the most rental activity?
RR: It helps to be in an urban setting with higher population density, but we’ve seen that the vehicles that get the most rental activity are the ones where the owner is the most engaged. That means putting up a couple good photos of the car, pricing their vehicle reasonably, and responding to all of their requests (we display response rate on the car page and it goes into our search filtering algorithm). Also, some owners who are doing a great job self-marketing have found ways building their own renter base in areas that aren’t as densely populated – like Honolulu Hauler and the Green Machine in Tempe, AZ.
FS: What is the average price that a car owner rent outs his/her vehicle? Are there price differentials for car age, original purchase price, and condition?
RR: The average total price of renting out a vehicle is $50/day (with insurance, $40/day without insurance). We have recommended prices for our car owners based on year, make, & model based on our analysis of rental demand, but the owners can set whatever price they want.
FS: What were the roadblocks you faced when dealing with insurance companies covering RelayRides renters and owners?
RR: We’ve worked really hard to get it right and find the proper protections for our members. It’s really the foundation of trust in our marketplace. Under our insurance coverage, all of our members, both renter and owner are covered during each rental. Owners are covered up to $1M for liability and 100% physical damage coverage for their car, and renters can choose which insurance package they’d like to have when they check-out.
FS: What is the most popular types of cars that RelayRides rents?
RR: BMW 3 series, Honda Civic, Toyota Prius are our top vehicles – but the great thing about our marketplace is we have a wide variety of cars. We have cars like a Ford Model T bucket and a car that runs on veggie oil. In fact, we have over 500 make/model combinations in our marketplace. We are the only nation-wide peer-to-peer car sharing company in over 1300 cities and all 50 states, and we see ourselves as the Airbnb or Ebay for car rentals.
FS: What would be the most profitable car a potential RelayRide owner should own?
RR: We’ve found the most successful car owners are the ones who price their car appropriately, always respond to requests and communicate with their renters, and self-market aggressively.
FS: How often can owners raise or lower their prices?
RR: Our owners have complete control – they set availability, pricing, and decide who to rent to.
FS: How do you make sure you’re only letting “good” renters use my car?
RR: We only allow safe drivers in our marketplace – drivers who have had NO major violations and a maximum of two minor violations in the past 3 years. We also do credit card screening. Another great part of the marketplace is the two-sided rating and reputation system. After every trip, the renter can rate the owner and the owner can rate the renter, so you’ll get to see what other people have said about your potential renter.
Also, if the renter connects their account with Facebook, you can see if you have any friends in common. Remember, the owner always gets to decide who they want to rent to. So far, our transactions have gone very smoothly. The average vehicle rating is 4.8 out of 5 stars, and out of all of our transactions, 99% of the time the owner has said they would rent to the renter again.
FS: How much do your owners make on average? How much have your top earners made?
RR: We’re very excited about how successful our car owners have been in turning their idle cars into extra income. The average active owner is making $200-250/mo, with our top owners making well over 1k a month. There are so many great stories about how RelayRides has helped its customers: from a single mom who couldn’t justify buying a car in SF until she learned about RelayRides, to a guy that lives near the DC airport who bought another car just to list it on RR because the first car he listed was so successful, and another in Chicago who is building a fleet of 5 cars. We’re very excited about how successful our car owners have been in turning their idle cars into extra income.
There are over 250 million cars in the US and a billion cars worldwide. Eventually, something has to give unless we all want to live with LA-style traffic. Besides putting more income in owners and renter’s pockets, I’m very excited about the environmental impact RelayRides can have. Unless you’re destroying your old car when buying something new, even buying a hybrid is worse than just owning an old SUV. If RelayRides can grow its market place big enough, it’s quite a possibility that RelayRides can grow into the next $1 billion dollar company.
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Lower Your Auto Insurance Costs: Check out Esurance online. They have some of the best plans with the lowest rates around due to their lower overhead costs. It’s worth spending a moment filling out a quote to see if you can save some money. Car insurance is one of the largest ongoing expenses for car owners. Esurance has good driver discounts, and multi-product discounts as well.
Updated for 2021 and beyond. RelayRides got sold in 2016! Uber and Lyft went public in 2021. Ridesharing is bigger than ever, but the industry is not profitable.
Related: Why I’ll Never Drive For Uber Again