A long queue, endless paperwork and hidden fees: there’s a lot to dread about renting a car, domestically or on holiday. But the pandemic gave way to a new type of car rental – peer-to-peer car rental apps.
These platforms can make car rental completely contact-free. Customers don’t need to head to an office to pick it up, there’s no need to have documents looked at and you don’t even need to have keys handed over to you.
This idea feeds into the sharing economy generally, which has shot up in popularity in recent years. The global sharing economy is expected to reach $794 billion by 2031, up from $150 billion in 2023.
This boom has given way to a host of ways people can make passive income from, such as renting out their driveways on apps like JustPark.
Location is everything if you’re to make a success from this idea. Just like Airbnb works for hot holiday destinations, car parking spaces and car leasing work for public transport hotspots like train stations and airports.
Jump straight to the relevant section or on for the full details on starting a vehicle leasing business.
- Why start a vehicle leasing business?
- Vehicle leasing growth trends
- Business opportunities for vehicle leasing
- Who else has started a vehicle leasing business?
- Small business expert opinion
Why is becoming a vehicle leasing host a good business idea?
As business ideas go, earning while you do nothing is always a seductive route to take. And that can be possible if you work from home and have a car sitting idle on the driveway. While you’re locked away in the home office, you can get it to work for you as a leased vehicle.
And that could amount to a lot of time where it is working for you, as the RAC Foundation claims our cars on average spend 96 per cent of their time sitting on a driveway.
This ‘Airbnb for cars’ idea is becoming a popular option particularly among young people in urban areas who need the use of a car for a very short time period (cars can be rented by the hour).
Peer-to-peer car rental apps hold customer driving licences on file, so instead of having to fill in multiple forms at a traditional car rental office, they can turn up and use the car straight away – in most cases without needing to have the keys handed over to them as the car can be unlocked via the app, too.
All peer-to-peer rental apps will also provide insurance from a reputable insurer – usually around £6 a day – but this is typically charged to the user as part of their rental fee, rather than the host.
It’s worth bearing in mind that location and availability to drop off the car to customers plays a big role in the number of bookings you will take. But if you’re near a city, airport or busy train station, this could be a profitable business idea for you.
Vehicle leasing growth trends
The car-sharing market revenue currently stands at £249.7 million, with revenue increasing 3.3 per cent annually, according to IBISWorld.
The number of car share users is increasing, too, and is expected to amount to 2.12 million users by 2028. Research in March last year also found that demand for car sharing increased by 22 per cent in the UK, mirroring the trend in the US.
According to the Department for Transport, car ownership among young people is at its lowest point in two decades and it is this demographic which is the primary market for carsharing apps and marketplaces and accelerating growth in the sector.
What vehicle car leasing business model opportunities are there?
Marketplaces like Turo – essentially an Airbnb for cars – allow anyone to sign up, start leasing and earn up to 75 per cent of the booking price. There are also protection plans available to cover the possibility of damage to the vehicle. Turo claims its hosts make on average £423 a month per car.
Other apps like Getaround – formerly Drivy – require the car to be no more than 11 years old and allow customers to unlock the car via the app so you don’t need to hand over the keys every time.
Although demand is increasing, there are a few things to bear in mind if you choose to go down this road. It is advised by many already leasing their car that you should buy a car with the specific intention of leasing it out, rather than a car you rely on yourself or are sentimentally attached to. That’s because the car may not always be returned in the same state it was lent out in and there is a higher chance of damage considering the number of different drivers using the car.
You should also take into account wear and tear costs over time, depreciation of the vehicle, fees to the app company, and the competition for prices in urban areas. Many companies set their prices low and rely on high volume sales.
In terms of vehicle you should consider, vehicles which are economic, reliable and easy to use will be best. It should also be relatively new – some platforms will only allow cars that are less than 10 years old and meet a mileage cap before it can be listed.
This idea feeds into the wider sharing economy, which aims to make better use of the things we already have – whether that’s an item, skills, services or physical spaces. There are apps from help with household chores to having dinner round someone else’s house.
Who else has started a vehicle car leasing business?
There have been a few standout success stories from Turo hosts since using the platform. Student Azeem Muhammed earns up to £600 a week from renting out his three cars and aims to make between £10,000 and £15,000 a year to supplement his studies.
“I’ve been able to add cars and I’m hoping to make it my full-time venture soon,” he told the Daily Express. “It’s a great, easy way of earning extra money.”
The success from his first car paid for the purchase of his other two – and he aims to expand on those in future. He charges anywhere between £30 and £80 a day for the use of his cars.
Other hosts, this time on Karshare, include Tim Kay and Rafiq Salman. Kay rents out his personal car while he uses his company car and makes around £400 a year doing so, while Salman has earned £5,300 by renting out his car while he works from home a few days a week.
Small business expert opinion
Peer-to-peer car rental apps such as these are also having a beneficial effect on the uptake of electric car adoption across the UK, providing a practical and cost-effective way for consumers to experience the benefits of electric driving without the commitment of ownership, John Ellmore from Electric Car Guide thinks. “Services like Zipcar, Car2Go, and Getaround have disrupted traditional car ownership models by offering electric cars on-demand, by the hour or day,” he says. “This flexibility removes the barriers to entry, such as upfront costs, that may have deterred some from making the switch to electric.
“As we look to 2024, I anticipate the sharing economy’s influence on EV adoption to continue, with electric car-sharing platforms becoming increasingly important. They not only promote a greener lifestyle but also foster a sense of community and shared responsibility towards our environmental footprint. The convenience of these services will support the next wave of electric car adoption.”