Rental car shortage is a boon for Turo, the Airbnb of cars

By Judy J. Beasley Last updated Oct 9, 2021

Traditional car rental companies have seen massive drops in rental income thanks to the sharp drop in travel last year. This is not the case for Turo, whose income rose 7% as more car owners signed up to rent their private vehicles unused in the driveway due to job loss or home work.

“A lot of times it starts with the car you already have or a second car you don’t use very often,” said CEO and founder Andre Haddad.

And for some travelers unable to find their normal choice of rental cars lately, Turo has proven to be a savior.

Julian Levesque drove to Phoenix a week ago from his home in Newport Beach, Calif., And started looking for a traditional car rental only to find there wasn’t much available.

“All I found was a van for $ 300, but I don’t need a van. So I checked out Turo, and there was a Jaguar there, also for 300 $, “he said. “I thought I might as well take the Jaguar.

This wider selection of cars is one of the advantages of Turo, said Haddad, which offers users more than the economy cars that dominate many traditional rental fleets. Tenants can find You’re here and various luxury cars such as Porsches, which are difficult, if not impossible, to find in the mainstream rental market.

Turo debuted in a few markets in 2010 and went national two years later. While most car owners registered with Turo only offer one or two vehicles, a growing number are purchasing additional cars to add to their rental fleet.

One of those power users is Ryan Costello of Kailua Kona, Hawaii, a former handyman who made the rental car business his full-time job.

“I don’t have time to be a handyman anymore. I’m too busy cleaning, maintaining and delivering cars,” he said.

Costello started in 2017 with his Chevrolet Silverado pickup, and now rents 10 Jeep Wranglers and Gladiators, saying, “It’s a lot cheaper than buying a house and renting it and the return is a lot better. a bad month, I make $ 800 per car. In a good month, $ 2,000. ”

His rental business took a hit in early 2020 when tourism and travel nearly stopped in Hawaii, having just bought three new Jeeps that he couldn’t rent for seven to eight months. But now Costello is busier than it has ever been, especially with the shortage of traditional rental cars in the state.

“I’m full for the next four months, and every day I get about 20 calls or emails from people asking for cars,” Costello said. “People are desperate when they arrive here and find that there is no way to get around.”

How Turo makes money

Turo says its hosts earn about $ 10,500 per vehicle per year after paying the company its commission, which ranges between 7.5% and 40% depending on the level of insurance vehicle owners purchase through Turo.

And compared to Hertz (HTZ), Budget Notice (AUTO) and Enterprise, Turo has a big expense advantage: because it doesn’t own the vehicles, the company doesn’t have to shell out to buy and maintain a fleet of cars.

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In contrast, traditional rental companies have spent much of the last year selling vehicles they didn’t need during the worst of the pandemic, in part to raise funds to make up for lost rentals. This year, they struggled to add more cars to meet the rebound in demand.

“That’s the problem with this heavy asset model. We don’t have that problem. We’re a light asset company,” Haddad said. “In many ways, the pandemic has shown the advantage of our model’s flexibility. “

Turo is privately held, although it is considering a variety of options, including an IPO – a move that could help “Airbnb of Cars” become its own name.

“We are very flattered” when someone refers to Turo in this way, he said. “We hope to one day reach this level of consciousness.”