Americans in the market for a rental car have much to complain about lately. First there’s sticker shock: Rental costs are astronomically higher than even pre-pandemic levels. Then there’s supply: Even with price hikes, there aren’t enough vehicles to go around.
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The causes are no great mystery. The COVID-19 pandemic had a devastating impact on the major car rental agencies. With travel at a standstill, bookings nosedived last spring. Rental operators sold large portions of their fleets and curtailed new purchases as demand contracted. The turmoil was enough to push even long-established industry leader Hertz into bankruptcy.
A year later, the landscape looks completely different. More than four months into a nationwide vaccination campaign, travel is picking up again. Vehicle bookings are way up year over year, and both established rental agencies and venture-funded upstarts are seeing their revenue jump.
“It was a total 360,” said Anthony Paulino, who rents out four cars in the Orlando area through the Turo rental platform. Whereas a year ago he had virtually no active rentals, his vehicles are now “booked all the way till November.”
Peer-to-peer rental startups look poised to be potential big winners in a post-pandemic economy. While rental fleet operators face supply crunches, venture-backed companies like Turo and Getaround, which rely on existing car owners, have an easier time scaling to meet the quickly escalating demand.
It’s too soon to tell whether startups will make significant gains in market share. Peer-to-peer car rentals have been around for a while and have raised over a billion dollars, yet their footprints are still a fraction of the big, branded rental fleet operators.
San Francisco-based Turo, founded in 2009, was one of the first P2P players out of the gate. To date, it’s raised at least $467 million in known funding from a long list of venture and strategic investors, including IAC, August Capital and Kleiner Perkins.
Turo competes in the same space as the big rental fleets, offering airport pickup as well as daily rentals and discounts for longer periods. Its offerings consist of vetted independently owned vehicles, with owners themselves arranging rentals via its platform. Turo sets maximum and minimum prices, and takes a cut of each transaction.
Fellow San Francisco startup Getaround also operates a marketplace of independently owned vehicles, but has historically focused on shorter-duration rentals. The company, which operates in cities across 17 states, has raised over $540 million in known venture funding since its inception in 2011, with SoftBank as its largest investor. Like Turo, it’s also seeing business pick up.
“There’s no doubt that demand has increased across the country on Getaround in the last couple months,” said Pat Notti, the company’s vice president of marketplace and operations. The rising cost of purchasing a car has also boosted demand, he said, as many people use the service as an alternative to owning a vehicle.
How P2P operators sell their competitive edge
Operators of P2P rental platforms pitch their offerings as a cheaper, more fun and more flexible alternative for people who need a vehicle temporarily.
Turo, in particular, likes to play up its varied selection of rides, which includes a high proportion of electric vehicles, sports cars and luxury models.
Teslas are especially abundant across the platform. They can be a good fit for rentals because there are fewer moving parts to maintain than in a gas-powered car, said Ryan Levenson, who runs an EV YouTube channel and rents out EVs in the San Francisco Bay Area via Turo. Broadly, P2P renters say they do well offering a sexier model than a standard airport rental at a price that’s lower or at least not too much higher.
Meanwhile, for Getaround, smaller, fuel-efficient gas-powered cars and hybrids dominate the listings. Predominantly, people are picking up vehicles for errands, day trips and other use cases in their local communities, Notti said.
How the numbers work
The economics for those renting cars on platforms seem typical of the gig economy: It’s commonly a side income, rarely a primary one. Levenson estimates that he makes roughly double the cost of owning and maintaining his cars.
It’s not for everyone, though. There are a lot of details to juggle — such as cleaning, charging or fueling, and checking for and repairing damages. Message boards of those who’ve experimented with renting their vehicles show mixed feedback: Some see a nice payoff for modest work, while others say it’s not worth the hassle.
Paulino, the Orlando Turo rental operator, is hopeful that down the road P2P car rentals will become increasingly mainstream as people see they can get more bang for their buck than at established agencies.
A lot of people accustomed to traditional taxis were suspicious about using the app at first. Now, it’s their go-to.
“It’s just like Uber in the beginning,” he said.
Illustration: Dom Guzman
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