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How Turo Hosts Lose Money Renting Cars on Turo

How Turo Hosts Lose Money Renting Cars on Turo

I posted a few times about Turo and I really like it so far. I am making money on Turo and I will be expanding my fleet of cars next year. My fleet consists of 6 cars on Turo and I am able to make a profit from these 6 cars. The most important thing about Turo is buying and listing the right cars. Most people do not do this correctly and end up losing money on Turo either through depreciation or an accident. There are various other ways to lose money on Turo and I will highlight them in this post.

Here are the top reasons why Turo Hosts lose money renting cars out on Turo:

The Car is Too Expensive

There are many types of cars on Turo. It ranges from very nice luxury cars like Porsche and Ferrari and very cheap cars like Kia and Toyota. Some businesses can make luxury cars work. Luxury cars (value over $20k) for most Turo hosts will not be able to generate enough revenue as a business for them to make a profit, once you factor in depreciation, maintenance, and insurance. In the summer months when rental cars are scarce, luxury cars can command a much higher premium. During the slow months, the price range compresses so you make much less. Renters become much more price conscious during the slower months. Luxury cars aren’t rented nearly as much during the slower months, which will impact revenue.

The difference between ACV and retail value of cars also tend to be much higher as the cars get more expensive. In the unlikely situation that the car is totaled on Turo, you may take a sizable loss from the difference between ACV and retail value.

Turo Host doesn’t take enough pictures

It can be very time consuming to take a lot of pictures of your car to document the condition before and after a trip. Turo relies on pictures before and after trip to assess damages and fees. If the host does not provide enough pictures, Turo denies the claim. It is critical that Turo hosts take pictures of the odometer and all 4 sides of the car. I typically take 45 pictures:

Wheels are typically covered for each body panel (front fender, rear quarter panel). If you have very nice wheels, take a picture of each wheel with some overlap of the body so you can tell which wheel it is. Assume that if you don’t take a picture of it, you will need to pay out of pocket to fix it.

I always take a picture of the odometer so I can document before and after miles and fuel status. If a renter is over miles or doesn’t fill up on gas, I can charge them for that from these two pictures. Without documentation, you cannot charge for miles or gas.

Listing the Wrong Cars on Turo

You can list almost any car 2006 or newer on Turo that has a clean title. However, there are some cars that you shouldn’t list on Turo. Remember that it will become a rental car, which means that it needs to be reliable and be able to take a little abuse from the renter negligence or malice. Toyota and Hondas are a good bet. Nissan is ok but they always have transmission problems, especially with their CVT. Mazda has similar issues and some hosts noted replacement transmissions past 100k miles but they are cheap to replace.

BMWs are great to list (top search on Turo), but expensive to maintain. Newer BMWs has many electronics modules and they are expensive to replace. I have been lucky so far with my E90 but I can do the work myself, saving hundreds of dollars in labor. The modules are a few hundred dollars each and some are considered wear items like TPMS modules. Specifically, the E90 (e91, e92, e60 as well since same engine) has engine gasket issues that causes loss of oil over time.

The key is to buy or own reliable cars with automatic transmissions. Toyota is a good bet since everyone knows they are reliable and often cheap to maintain and fix. Manual transmissions can do well on Turo, but there are expensive risks. See below to read about putting a manual transmission on Turo.

Unlimited Miles or High Mileage Limit

It is very important not to allow unlimited miles on any car. If you do, assume that they will drive 600 miles a day. On my 20 day road trip, I managed hit about 700 miles a day and I was driving literally 18+ hours a day. I allow only 100 miles a day on all my cars. Many hosts allow 150 a day, 750 a week, 2000 a month, which is fairly reasonable. I tend to lock down my miles but offer a lower price. I like to maintain a high CPM (cents per mile) on all my cars.

Turo Host Paid Too Much for a Car

There are some people who want to start renting cars out on Turo by going out and buying a car. Some buy brand new cars, which is not the smartest move to make. You will essentially be competing with traditional rental car companies since they have brand new cars as well and also in much better locations. Buying used cars is the best strategy but some Turo hosts make the mistake of paying too much for an used car. Do not buy any car unless its a good deal. Compare the selling price with the value listed on KBB. I try to be on the low end of that range to ensure that I have some financial room in case I need to fix anything on the car.

Manual Transmissions and Clutches

One of the risks of Turo is renter abuse and clutches is probably the most expensive item that can be abused or misused. Turo does have a clutch policy and it is based on a 5 year life of a clutch. If the car is two years old, they will pay out 3/5 of the cost to replace the clutch. It seems fairly reasonable but something to note that Turo will not pay to have the clutch replaced nor will they charge the renter the full cost of it unless you have paperwork from a shop or garage to show it was brand new. If you plan on putting a manual transmission on Turo, financially plan on paying out of pocket for a brand new clutch.

There is a market for manual cars but it is quite small. It is mostly Europeans who enjoy driving a manual car, but there are car enthusiasts who would prefer to drive a manual car. There is two markets: cheaper manual cars and performance manual cars. I believe that clutch failure may not be as common with cheaper cars since the engine doesn’t produce much power and renters are less likely to maliciously abuse it. You will inevitably get a renter who cannot drive manual well and wear out your clutch but this is a risk you need to be willing to take. Renters who rent performance manual cars are more likely to abuse the clutch. I haven’t heard of widespread clutch abuse by renters but it is something you need to worry about if you have a performance manual car.

Cars Have Branded Title

This one doesn’t come up that often but it is worth mentioning. Cars on Turo (or on Lyft, Uber) need to have a clean title, free from any branding (Salvage, reconstructed, etc). Turo hosts need to check the carfax to see if it has ever been declared a total loss. Some people will fix up the car before getting a new title after a total loss, so even though they hand you a clean title, the registry will already have branded the title. Once you get your new title, there will be a brand on it. If the car is in an accident on Turo and Turo finds that your car has a branded title, they will not cover you for the accident. Your personal insurance won’t cover it either since it is a business use. Your personal insurance may not insure the car anyway because of the branded title.

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