Most people believe that cars are a necessary evil. Yes, they help you do your job, but man, do they suck a LOT of money out of your pocket. Between the loan payments, insurance, gas, repairs, and maintenance, they are almost as expensive as having another kid.
Not for me, though. And after you read this article, not for you either.
I’ve done a couple of presentations, been on a few podcasts, and written some articles about how I have turned my car from a money pit into a money tree. From these appearances, I’ve received a lot of questions from a lot of people.
In this article, I am going to explain exactly what I did, how I did it, and how you can do it, too. I will also share with you why I recently stopped doing it and the exact financial results now that my journey is over. If you are looking for a creative way to turn your car from Robert Kiyosaki’s version of a “liability” to an “asset,” this article is for you.
I understand that this exact tactic may not work in your current situation. I do hope that it will at least get yours wheels spinning so that you can find a way to turn your car into a money tree, too!
Here it goes.
Purchasing My Car
When I first moved to Denver in April 2017, one of the first things I did was purchase a car. My intention was to use the car to be a Lyft driver, so I was looking for something that was reliable and had good gas mileage. I purchased a 2013 Toyota Prius C with 52,000 miles from the dealer. It was listed at $12,500, but I was able to negotiate it down to $10,000 (paid with cash) using the tactics from the book Never Split the Difference.
For the first three months of living in Denver, I would drive around for Lyft. The purpose was to make money while getting to learn a new city and meeting a whole bunch of random people. I accomplished all of these goals. I made over $3,000, figured out where I wanted to buy my first property, and even found my Airbnb cleaning crew. Win! Win! Win!
After those three months, I realized that I did not have an “asset.” I had a job—a fairly low-paying one at that. So I stopped driving for Lyft and started focusing on other higher-paying activities, such as giving 110% to my 9 to 5 job at BiggerPockets.
Lyft had served its purpose for me, and I was happy to move on with an extra $3,000, a better understanding of Denver, and a great cleaning crew.
I intentionally purchased my first property 1.5 miles from the office such that my primary method of transportation would be my bicycle or my feet. Every single day, I would bike past my car in the drive. I thought, “It’s a shame that this car is just sitting there. How can I put it to work for me?”
Then I remembered that I once rented someone’s car on a site called Turo. For those of you who don’t know, Turo is the Airbnb for cars. People who have an extra car or do not use their cars regularly put them up on the site for people to use.
This is exactly what I did with my Prius. Now, rather than just sitting there, it would provide me with a passive income stream.
Listing Your Car on Turo
Turo is a great idea for many people, especially if they have little use for one (or many) of their cars. However, before you go try to list your car, know that Turo does have some criteria. This includes:
- The car must be legally registered in any state but New York. Sorry, New Yorkers! (Go Sox!)
- The car must be no more than 12 years old.
- The car must meet Turo’s insurance requirements.
- The car must have less than 130,000 miles on it.
If your car meets all the requirements, then you are now able to list it.
Putting Your Car on the Site
Creating your listing is intuitive. All you need to do is go to Turo.com and click “list your car” in the top navigation bar. Turo will then take you through the steps necessary to list your car. You will need your driver’s license, license plate number, and insurance, so be sure to have that handy.
Honestly, I’m not an expert on optimizing Turo listings. I just wanted to make some extra cash on the side. But here’s what I did: Give as much detail as possible. How good is it on gas? Does it have 4-wheel drive? Is it a smooth ride? Do you have a sunroof? What about a Bluetooth radio? Air conditioning? Power windows? Everything you can think of, put it down! Don’t worry, Turo helps you too.
Related: 4 Steps to Buy the Car You Want Within the Budget You Can Afford
Then, it’s time for the pictures. In some cities, Turo actually offers to pay for a photographer to come take photos of your car. The only downside is that they take a while to get there. Personally, I just used photos from my iPhone 7 and had success. When you take the photos, make sure your car is newly cleaned and take them on a sunny day. You’ve seen the car commercials—just imitate them.
Here are a few pictures of my car.
Running the Rental
Now that the car is listed and ready to go, the last step is to set pricing. This isn’t rocket science. All I do is look at similar cars in my area and charge a couple of dollars lower. Prices vary based on seasonality, so be sure to check back once a month to make sure your rates remain competitive.
When someone books your car, you will get notified through the app. Woohoo! If you would like, you could send them a welcome message telling them how excited you are for their trip. Honestly, I never did this. Once a week, I would send the renters for the upcoming week a generic message welcoming them to Denver and giving them instructions on how to find, unlock, and operate the car.
If they had any further questions from there, I would answer them kindly.
That’s pretty much it. It was an easy business to operate. It took less than an hour per week of time and most of it was just texting the drivers.
After explaining the above, I usually get a slew of questions: How do you know they are good drivers? How do you coordinate the key handoff? What if something happens? What if your car gets destroyed? I will try to be proactive and answer these questions right now.
How do you make sure the drivers are good?
In order to book a car through Turo, you need to go through this screening process. Turo needs to verify that you are 21, that you have a valid driver’s license, and that you meet their auto insurance score benchmark.
The auto insurance score benchmark is, in my opinion, the most important. It’s the equivalent of a credit score for insurance agencies. Essentially, it is a three-digit score that predicts the probability that the subject (your renter) will file an insurance claim. The driver’s ability to rent a car will be highly dependent on this score. If it’s bad, Turo will not allow the user on the site. This is how Turo sustains the reliability of its marketplace.
How do you do the key handoff?
This one is simple. The best way is to purchase a magnetic lockbox and put it underneath your car.
Tell your driver the location and combination of your lockbox in the message you send, and you will be good to go. Ask them to return the key and lockbox after the car has been rented.
Since you will not be there for the key handoff, make sure that they take before and after pictures! This is extremely important. Turo may not reimburse you for damage if there are no pictures.
What if something happens?
If something happens to your car while the renter is driving it, the renter will report the problem to Turo, the police, and you as the owner. The police will have your car towed, and you will then decide whether you want to take it to a mechanic (if it can be saved) or the scrap yard (if it’s totaled). So the million dollar question is—who pays for this?
Well, there are three tiers of insurance that can cover you.
- Turo-provided insurance for both you and the renter
- Your renter’s personal insurance
- Your personal insurance—make sure you’re covered
There is a high probability that one of the above options will play out and you will be covered. However, if neither of these options work, you will be left with the bill.
Let me tell you what happened to me.
After just over a year of renting my car through Turo, a renter totaled my car, and in hindsight, it was the best thing that could have happened! Here are some pictures.
First and foremost, everyone walked away uninjured—just a couple of scrapes and bruises. Phew!
Related: Why I’m Not House Hacking (& the Strategy That Will Cover More of My Rent)
Secondly, I was going to take my car off of Turo in a few weeks anyway because, as with Lyft, I thought it had served its purpose for over a year. I was ready to sacrifice a little bit of cash flow to have a car at my disposal.
Thirdly, I was cash flowing ~$250 per month on average for the past 12 months. That is $250 after I paid for insurance and set $100 per month aside for repairs. Remember, I paid cash for the car so no payments.
Lastly, after going through the insurance process, I was able to get over $11,000 back from my car. If you remember correctly, I purchased the car over a year ago for just $10,000. So after one year and about 20,000 miles, I was able to get $11,000 for my $10,000 car on top of the monthly cash flow.
Quick recap: I purchased the car for $10,000. For the first three months, I drove for Lyft and made $3,000 total. For the next 12 months, I rented it out on Turo and cash flowed $250 per month, or $3,000 for the year.
Then, my car got totaled and I was able to obtain $11,000 in insurance money for the car. That’s a $1,000 gain on the vehicle alone.
All in all, after about 15 months of having the car, my net worth increased by $7,000, meaning $6,000 from cash flow and $1,000 from the sale. Not a bad deal—especially when compared to the average American whose car likely costs them around $7,000 per year!
I hope this article proved to be useful to you and cleared up some of the uncertainties about renting your car out.
I realize that I am fortunate to have had this outcome. I’m not guaranteeing that you will have the same results, but I do believe that the odds of you improving your financial position by renting your car out is much better than if you don’t.
As for what’s next for me? I am looking for a car to buy that I can pay $6,000-$7,000 for so I can pocket $4,000-$5,000 of the insurance money.
Would you consider renting your car out on Turo? Why or why not?