Renting vehicles through car-sharing apps can cut prices — if politicians allow it

Have you tried to rent a car recently? Good luck. The number of vehicles available to rent has plummeted and costs have skyrocketed. But there’s a new option on the table: Renting from individuals using car-sharing apps — that is, if the government allows it.

The price for used cars began to climb significantly in 2020 as the supply of cars shrank. The pandemic and lockdowns pushed down the number of vehicles rental car companies were able to acquire. The number of vehicles available was even lower in 2021, as supply chain issues made it even more difficult and expensive to get cars.

The result has been called a “rental car apocalypse.” Renting a vehicle is more expensive by $35 per day than in 2019, or nearly double the pre-pandemic rate, according to Kayak.com. This skyrocketing price inflation is not expected to get much better in 2022. 

But the market is responding, as long as politicians and government regulators allow it to.

One key response has been the increase in people using car-sharing apps. That’s where individuals loan out their own vehicles — through services such as Turo — to people who need them.

Car sharing is like Airbnb on wheels and it competes with traditional rental companies. Those wanting to rent a vehicle (guests) can download the app and find vehicles nearby whose owners (hosts) are willing to rent. The hosts can list their cars for rent during designated days and times. Drop-off and pick-up locations are arranged. Guests and hosts can rate each other using an app similar to Uber’s and Lyft’s, and they can refuse to do business if they don’t want to.

There are a few key areas of concern, primarily dealing with potential fraud and navigating insurance issues. The state of Michigan, for example, has proposed a “Peer-to-Peer Car Sharing Program Act” to enact reasonable regulations without overly restricting this technology. The bill package would:

• Require that car-sharing platforms assume liability for the vehicle when it is being rented, unless the person renting engages in intentional fraud;
  
• Mandate an extensive insurance policy covering the vehicle owner and the driver who rents the car;
  
• Allow auto insurers to choose not to cover rental vehicles with their policies;
  
• Establish some record-keeping and disclosure requirements;
  
• Require that safety recall issues be repaired before an owner can rent out the vehicle;
  
• Mandate certain taxes be collected and paid by the car-sharing platform; and

• Regulate agreements with airports before vehicles can be dropped off or used to pick up renters from that property.

While most of the above is reasonable, some details must be worked out. Requiring insurance and ensuring that insurance companies know what their coverage is being used for is fair. Some minimal disclosure rules for companies make sense. But taxes should be low and fair for the whole industry. And there is little reason for state lawmakers to try to get involved when it comes to airports or other places where cars are dropped off or picked up — the hosts and guests can work that out themselves.

State lawmakers and other regulators should have a goal of establishing an equal playing field between individuals and rental agencies. But laws also need to recognize a difference between a company renting out thousands of vehicles and an individual renting a few days per month. For the most part, the private market can figure that out — with the car-sharing service regulating who uses its app, with insurance companies figuring out the correct costs for these vehicles, and with airports entering into their own agreements with the platforms.

Car sharing is fulfilling an important need in the market. Some people are able to make some extra money from an underused resource, while others are able to find a more affordable rental option. Lawmakers should allow this service to exist as freely as possible.

Jarrett Skorup is the senior director of marketing and communications at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Follow him on Twitter @JarrettSkorup.