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Business In Transformation

A New Way to Rent a Car

A New Way to Rent a Car
Image credit: autoblog.com
Relayrides allows car owners to rent out their vehicles safely
A New Way to Rent a Car
Andre Haddad and Sam Zaid of RelayRides and Getaround
Image credit: twitter.com

There are few investments less sensible than car ownership. A new purchase loses close to 9 percent of its value the minute it leaves the dealer's lot, according to automotive-information site Edmunds. Further, most cars sit idle the majority of the time.

Two San Francisco-based startups, RelayRides and Getaround, are working to change these inefficiencies--and snag a piece of the nation's $20 billion car-rental market. Similar to Airbnb, both companies facilitate peer-to-peer transactions through which car owners can rent out their vehicles to those who need them by the hour, day or week. Owners set the rental price for their vehicles; both companies say the average rental runs $8 to $12 per hour and lasts 40 hours.

The Disruptors: 2013

Disrupters: Andre Haddad, Sam Zaid
Companies: RelayRides, Getaround
Big idea: Allow car owners to rent out their vehicles safely

The model offers big savings for customers--generally half of what a local car-rental agency would charge. Plus, the range on offer allows renters to get exactly the vehicle they want, whether it's a pickup truck or minivan for a jaunt to IKEA or a Porsche or Tesla for a night out.

The business model would not have been possible without a new class of insurance created for this purpose. Every individual's car is insured for $1 million against collision and accident coverage. "When we say the service is all-inclusive, that means the vehicle is covered should something go wrong," confirms Andre Haddad, CEO of RelayRides. "Owners like the peace of mind. And as a customer, considering you usually have to pay extra for insurance with a car rental, this is a big deal."

Founded in 2008, RelayRides operates in 1,500 U.S. cities. Getaround, which launched in 2009, has cars in San Francisco, San Diego, Chicago, Austin and Portland, Ore. While their business models are similar, the companies are executing them in subtly different ways. RelayRides is a big believer in the face-to-face meeting between car owner and customer to pick up keys and sign paperwork. That said, the company does offer a mobile access kit for qualified car owners and allows anyone to use General Motors' OnStar system to remotely unlock GM vehicles--pointing to an acknowledgement that many users may not want to be directly involved in the exchange.

The meet-and-greet is also an option with Getaround (minus the paperwork), but that company would rather see owners install "Carkits" that allow renters to unlock the vehicles remotely and access a hidden set of keys through its iPhone app. "We focus on the app," says Sam Zaid, Getaround's co-founder and CEO. "The way we see it, we want to provide a service, and the app is the most efficient way to achieve that."

The nascent car-sharing industry is not without challenges. Cars have long been sold as "a product that is closely associated with who you are," says Arun Sundararajan, a professor at the NYU Stern School of Business, explaining that letting strangers in can uncomfortably infringe on that identity. Perhaps, but RelayRides and Getaround are banking that their financial appeal will help car owners get over it.

Matt Villano is a freelance writer and editor in Healdsburg, Calif. He is a regular contributor to Entrepreneur, and has covered startups and entrepreneurship for The New York Times, TIME and CIO. He also covers a variety of other topics, including travel, parenting, education and -- seriously -- gambling. He can be found on his personal website, Whalehead.com.

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