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New Car-Share Law Spurs Bay Area Business

City CarShare, in partnership with Spride Inc., will be among the first to take advantage of a new law allowing individual car owners to rent out their cars by the hour. Photo courtesy of City CarShare.
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City CarShare, in partnership with Spride Inc., will be among the first to take advantage of a new law allowing individual car owners to rent out their cars by the hour. Photo courtesy of City CarShare.
 
In 2011, car owners will be able to share their vehicles directly with other drivers and make a few bucks

If you have a car—preferably one that’s insured, reasonably new and clean—starting in January, it could make you money every time you park. All you have to do is let a few strangers drive it. This kind of car-sharing is not unheard of in California, but a new state law is about to make it easier to rent out your car when you don’t need it.

Given the Bay Area’s widespread culture of alternative transit, from bikes to buses to BART, it’s no surprise that car-sharing, or car rental by the hour, has been popular across the bay as the service has come into vogue over the last decade.  But new legislation stands to help California’s car-sharing industry live up to its name. Starting January 1, individual car owners will be able to share their own vehicles directly with other drivers—and make a few dollars in the process.

Technically, there’s no rule preventing the owner of a car from sharing it with whomever she wants, and letting a friend or family member drive one’s car is a common occurrence.  But until now, anybody who lent her car out for money risked violating the terms of her personal car insurance, which generally considers this kind of rental a commercial use of the car, akin to running a taxi service.  Such informal rentals may occur frequently without being recorded, but if the renting driver were in an accident and had paid even a small amount of money to rent the car, the owner would quickly lose her private insurance.

But Assembly Bill 1871, which Governor Schwarzenegger signed into law two weeks ago, reclassifies car-sharing for cash as a non-commercial use of one’s car—as long as the annual earnings from this practice do not exceed the cost of owning and operating the vehicle.

Under the new law, a person may offer a car through a formal car-sharing service (like the for-profit ZipCar or the nonprofit City CarShare) and still remain covered by her personal car insurance.  The solution is surprisingly simple: when the car is being driven by a car-share renter, the burden of liability insurance shifts to the driver.

Sunil Paul, CEO of a personal car-sharing startup called Spride Inc., can’t wait to see it start.  To blaze the personal car-sharing trail, Paul has offered his own Toyota Highlander as a guinea pig in a test program run by Spride and City CarShare.  “When he first told us it was a Highlander, we kind of groaned,” said Anita Daley, a spokesperson for City CarShare, explaining that the organization’s staff was hesitant to add an SUV to its fuel-efficient fleet.  “But then we saw it’s a hybrid,” she said, and the vehicle was outfitted with the standard lock and tracking device.

As a guinea pig, Paul will not be a precise representative of the larger program. Since he’s loaning his car before AB 1871 goes into effect, he had to actually transfer ownership of the vehicle to City CarShare in order for it to be part of the fleet (they’ll give it back to him after the new law kicks in).  And whereas personally owned vehicles will be distinguished in some way from regular fleet cars on City CarShare’s website, Paul’s has been left unmarked as an experiment.

City CarShare and Spride are among the first to take advantage of the change in statute.  The organizations are working together to identify 20 car owners for a pilot program that will likely start in January.  While City CarShare will continue to coordinate with renters, Spride’s role will be to manage the new relationship between the company and car owners.

AB 1871 applies throughout California, but is especially relevant to the Bay Area because the car-sharing industry here is one of the best developed in the nation. ZipCar, the industry’s biggest for-profit company, has a large presence here, as does City CarShare, a San Francisco-based nonprofit.

The new law represents a growth opportunity in cities in which City CarShare already operates, including Oakland.  “In San Francisco, people say, ‘Oh yeah, City CarShare, I know about that.’  And our adaptation rate is even higher in Berkeley,” Daley said.

But “in Oakland, there’s not a great awareness” of car-sharing or the City CarShare brand, she said.  “I see Oakland as a place we would like to target.” She noted that in addition to Oakland’s urban residents, drivers in the Oakland hills who are more likely to have private parking, would be good candidates for car-sharing. Spride’s Paul added that his firm is seeking a car owner in the East Bay for its pilot program.  “We’d love an owner in Oakland,” he said.  “Absolutely.”

Since personal car-sharing requires a smaller investment from City CarShare than buying a whole new car, Daley said that the new program may also help the company expand into new markets, like Marin and Walnut Creek.

Not all car-share companies are racing to adapt to AB 1871. A spokesperson for ZipCar, the country’s largest car-sharing company, said she was not aware of any plans to integrate personal cars into the company’s fleet.

Although City CarShare’s pilot program will include only 20 cars, Paul predicts that a full-scale personal car-sharing network will be in operation sometime in 2011.  From a renter’s perspective, little will change: Users will still locate a car on City CarShare’s website, and pick the car up from an unstaffed location. The only difference is that that location may be the car owner’s driveway—a much less anonymous space than the corner of a BART parking lot.

Meanwhile, car owners, as well as leasers, are welcome to apply (those interested can do so at Spride’s website).  The firm is looking for vehicles five years old or newer (with automatic transmissions only).  Although one’s own driving habits don’t necessarily reflect the integrity of the car he drives, Spride prefers car owners with relatively clean driving records.  They must also have access to a dedicated parking spot, and live in or near City CarShare’s service area, which includes San Francisco, Oakland, Berkeley, El Cerrito, Alameda, and Daly City.

All cars will undergo a safety inspection by a certified mechanic, and if a car passes this test, workers will install City CarShare’s tracking and locking devices into the vehicle.  “It’s very unobtrusive,” said Daley.  “You won’t even see the computer.  It’s a little bigger than a sandwich—like a triple-layer peanut butter and jelly.”

Notably, owners sharing their cars will likely be asked to place both City CarShare’s and Spride’s logos on the sides of their vehicle.  This may make the car look distinctly less like the owner’s personal property, but since car pick-up occurs at unstaffed locations, often in the corner of a large parking lot, some distinguishing label is necessary to help drivers find the car they’ve reserved.  “Our customers are used to locating our vehicles this way,” explained Daley.  She said the labeling makes sense both “from an operations perspective, and from a member adaptation perspective.”  With a magnetic key fob already in use among City CarShare members, renters will be able to unlock the door of their designated vehicle.  Once inside, the renter will find a conventional key with which to start the car.  When returning the car, the driver can simply leave the car in the cabin, eliminating the need for any meeting between driver and owner.

As the guinea pig for this program, Spride’s Paul is getting a firsthand sense of what it’s like to lend one’s car to a stranger—his Highlander has already been rented several times.   “It’s a super-interesting experience,” he said, adding that City CarShare’s members “know the rules.  They know they’re not allowed to smoke.  They know it’s not a rental car, that someone’s not going to clean it after every use.”  So far, he said, the worst mess that’s been left was a few pieces of paper in the trunk.   “And I’ve already made some money on it!” he said.  “Almost $100.”

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