One of the biggest questions that I get asked by people when I tell them that I rent my car on Turo is if they should do it to. So today, I want to give you some tools to answer the question, “should you rent your car out on turo?” I recently had a brief email exchange with a reader that addressed a question that I have received in different formats a few times, so I thought it would make sense to share it with the whole stealthy and wealthy community. Jessie P asked the following question:
I came across your blog and your experience renting on Turo, I was thinking about it but one of my biggest fears was over saturation of markets (i.e. everyone can theoretically drive for uber and lyft). I am concerned that I am getting into the trend that has already reached “critical mass” and there won’t be any money left to be made. Is this of big concern or do i just need to transition from a scarcity mindset to an abundance mindset?
Thank you for your response in advance,
P.S. i am recently a college graduate who understands jobs are not secure in this day and age and someone who wants to achieve financial freedom so that i never have to worry about money again
Should you rent your car out on Turo?
In addition to loving Jessie’s mentality and approach to financial freedom, I was also intrigued because this is a question that I hear frequently. Should you rent on Turo when the market is getting more competitive each day? There are a few ways to look at this question, but it mostly comes down to the competition in your market and your personal goals with renting on Turo and if the site can fulfill those goals. In my response to Jessie, I talked through a lot of the key factors in deciding if you should rent on Turo and thought that it would be worth sharing that reply with the rest of you fine folks. Here is my full reply:
Thanks for the email. I think that you have a very valid question and the “saturated market” angle can be a legitimate concern. I am currently considering purchasing a second car purely for renting out on Turo and I’m going through the same type of analysis.
- There are a couple of questions that I would ask you (or you would ask yourself) to determine the potential:
- What type of car would you be renting out?
- What market are you in?
- Do you own the car outright, have a payment, or lease it?
You’ll want to look at the competition for that specific car in your market and see how many similar cars are currently for rent on Turo. Make sure you consider similar models, not just the exact same. For instance, there may be few Ford Mustangs, but a lot of Chevy Camaros, so you’ll want to look at the 3-4 models that are closest to yours. You can’t see earnings for others who are renting a car that is similar to yours, but you can see how many times it has been rented and what their current rental rate is. Keep in mind that many people use dynamic pricing, so it may be higher now than it typically would rent for. For instance, my car is currently listed at $79.00 per day, but I have rented it for as low as $34 per day when it is a less busy season.
Once you get a sense of the supply and demand in the market for your type of vehicle (assuming that you already have a vehicle and are not purchasing one specifically for renting out), you will want to determine how much you would need to make to consider it worthwhile for you to rent your vehicle out on Turo.
- If you lease or have a payment on your car, what is your monthly payment?
- If you lease your vehicle, what is your mileage allowance and how much do you have to pay per mile if you go over that allowance?
You want to make sure that you are making a high enough “per mile” rate to make it profitable even if you exceed your mileage.
- If you own your car, you will want to do a similar analysis of how the value will decline for each mile that you rent it out. You can do this by looking at Kelley Blue Book.
You will want to look at the current value of your car. Let’s say you have a 2012 Ford Focus with 25,000 miles on it. KBB values this car at $7,794.00 if you sell to a private third party. If that same car has 30,000 miles on it, it is valued at $7,646.00. So if you are renting that vehicle, your cost per mile is essentially $0.0296. If you rent your car with a daily limit of 200 miles, the “mileage cost” to you would be around $6.
Costs of renting on Turo
Next, you will want to factor in your other operating costs that you will incur. Your Turo expense calculation should include:
- Cleaning – Assume at least a $5.00 car wash per rental. If you assume an average rental period of 3 days, you would be looking at about $1.67 per day in “cleaning fees.”
- Insurance – You do not have to pay for any additional insurance beyond what is provided to the renter through Turo, but you will want your own personal insurance on the vehicle that you own. My insurance is $100.00 per month, so we can assume an “insurance cost” of about $3.33 per day (this can vary greatly depending on the driver and the car).
- Alternative transportation method – let’s say this is your primary vehicle and you will need to get yourself to work, school, etc. If you don’t have a bike or friends who are willing to drive you around, you can assume about $4.00 per day in bus or light rail passes (this is close to what I’ve experienced in my city, but I’m really not sure). If you choose to take Uber rides, your cost may be slightly higher.
- Your time – This is often overlooked, but if you assume that getting your car cleaned, dropping it off and communication on Turo will take about 1.5 hours per transaction and you value your time at $12.00 per hour, then you are looking at a cost of $18 for a three day period, which comes out to $6.00 per day.
- Turo Fees – with the vehicle protection package that I’ve chosen in the past, Turo takes 25% of profits.
There are a lot of different ways to play with this formula, but hopefully this gives you a framework for making decisions. So in our example that we have here, your equation would look like the following:
Ford Focus Rental: Turo Profit Calculation
In our Ford Focus example that we used above, the profit calculation for renting that vehicle would look something like this (all numbers are for demonstration purposes only):
- Rental Price: $40.00 per day (one example from Phoenix, Arizona)
- Turo Fees: $10.00 per day
- Mileage Fees (assuming ownership): $6.00 per day
- Cleaning Fees: $1.66 per day
- Insurance Fees: $3.33 per day
- Alternative Transportation Fees: $4.00 per day
- Your Time: $6.00 per day
- Total Profit: $9.01 per day
Let’s say that you rented your car out for 2 days per week for the rest of the year, with one month being unavailable for different reasons (vacation, unavailable to provide keys, etc.). That would be 88 total days for a grand total of $792.88 in profit. Again, there are a ton of variables in this scenario, so think about what is most realistic in your situation and determine if it makes sense to you. One other thing to keep in mind is that your profits will be taxed, so that is another factor to consider, although a certain percentage of your car expenses can be deductible.
Hopefully this helps to answer the question of how to evaluate if you should rent your car on Turo. If you have other questions, thoughts or success stories, don’t hesitate to add them in the comments section below.