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The Honolulu Advertiser
Posted on: Thursday, December 14, 2006

Renting out your car is risky

By Greg Wiles
Advertiser Columnist


Have a question about money matters? Akamai Money columnist Greg Wiles can try to answer it in The Advertiser. Reach him at gwiles@honoluluadvertiser.com or 525-8088.

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Q. I've been noticing Internet ads by Mainland people who want to rent a car cheaply while visiting Hawai'i. They are asking if anyone wants to earn some money by leasing a car that's not being used. I'm tempted, but are there possible pitfalls?

A. Yes, it appears there are many reasons why this wouldn't be a good idea for most people.

It's probably a sign of the times that this question is cropping up. The Internet makes it easy for people to post these ads and get responses. I looked and found about a half dozen ads on a classified Web site, each from folks who sounded sincere about wanting to rent a car from an individual instead of going to a rental company.

A former Kailua resident in San Francisco was seeking a car to use while staying at his uncle's house next month. A couple is willing to pay $125 a day for a motor home on the Big Island next spring.

There also was an ad from a family needing a van later this month, while a couple needed something while in Honolulu for last weekend's U2 concert at Aloha Stadium. A visiting golf pro is seeking a car he can use for several months in 2007.

At first blush the idea sounds good. If you have a spare car you're not using, why not make a few hundred dollars on the side?

Yet there are lots of reasons for most people to stay out of the car rental business, even if they only plan on it being a one-time venture.

"I could never do that," said Brent Chase, owner of Chase Hawaii Rentals LLC in Waikiki and someone who's worked in the car-rental business for a decade.

"Even though you'd be putting some pennies in your pocket, the risk is pretty out there."

For starters, there's the risk you take with insurance. Some companies may not allow your insurance to cover the car while it is being rented out, and the renter's own automobile coverage may not extend to your car.

Carolyn Fujioka, spokeswoman for State Farm Insurance, said there's a standard clause in her company's policies that stops liability and physical coverage damage when someone rents or leases their private car to others.

A State Farm policyholder who rents a private individual's car also can't use their policy to cover the time they're driving the car. It does cover them if the car is from a rental company, Fujioka said.

"From an insurer's point of view, it's a bad idea," she said.

Car rental companies usually take some sort of security deposit on the car with a credit card and this may be difficult for individuals who rent vehicles. Chase, who started a motorcycle rental agency in July, said he typically requires a $1,000 deposit and a major credit card.

He said a rental agency he once worked at required a $300 deposit. But that doesn't go very far if the car is damaged or worse, if the renter doesn't return and the car is later found abandoned and stripped of valuable parts.

Losses from a car may not be all that you could face. Chase said you could find yourself being sued by the renter if there's a bad accident. A renter could try to file a lawsuit saying you rented out a car with problems that caused the accident.

Do you have a question about personal finance, taxes or other money matters? Reach Akamai Money columnist Greg Wiles at 525-8088 or gwiles@honoluluadvertiser.com