With more and more Americans flocking to urban areas and leaving the rural life behind, programs that help urban commuters minimize their reliance on a personal vehicle are booming in popularity. Both ride-sharing programs (where a driver picks up or drops off passengers for a fee) and car-sharing programs (where owners allow others to rent and drive their personal vehicle for short errands) have begun to gain footholds in many U.S. cities. However, the relative newness of these types of programs can present some complications when it comes to your auto insurance policy (or even your auto loan). Read on to learn more about how joining a car-sharing program could impact your insurance rates, as well as what else you may want to consider before allowing your vehicle to be rented and driven by strangers.
How can lending your car through a car-sharing program impact your insurance rates?
Much media attention has been given to the insurance implications of ride-sharing programs (with some insurers even offering ride-share-specific policies). It is fairly settled that those who use their cars to make money by essentially providing taxi services will likely need to purchase a supplemental or commercial policy to protect against any lapses in coverage if an insurer determines that this ride-share use falls outside the bounds of the typical personal policy.
However, car-sharing programs are a bit different. Because you're not providing chauffeur services yourself, just letting someone else use your vehicle, you may assume this use falls under the personal use component of your insurance policy -- just as it would if you let your friend borrow your car. However, the structure of the car-sharing agreement may impact whether your primary insurance policy provides any coverage.
Generally speaking, if you're accepting money in exchange for services provided with your vehicle (like a taxi service) or the use of your vehicle, your use may fall under the "commercial" rather than the "personal" umbrella. If you're not accepting money from anyone, but merely splitting the cost of transportation with a larger group, you may still be considered a personal user. Your best bet is to contact your insurance agent before entering into any formal car-sharing agreement to ensure your current policy still provides coverage or to purchase additional coverage if needed.
Insurance companies are busily working on ways to better apportion the risk (and cost) among members of car-sharing groups, including devices that can tell which driver is using the vehicle or even tracking the number of miles driven per operator.
What else should you take into account when deciding whether this arrangement makes sense for you?
When considering a car-sharing arrangement, you'll want to think through the logistics of such an arrangement, as well as your typical use. If you find yourself in your vehicle for hours each week and frequently hit both the morning and evening rush hours, you may not be able to make your vehicle available at the peak times. In other cases, your vehicle may sit in a garage during the workweek while you take public transportation or work from home, making it the perfect candidate for a sharing arrangement.
If you're planning to offer up your own vehicle to a car-sharing group and you still have an auto payment, you'll want to check with your lender first -- particularly if you plan to accept money in exchange for use of your vehicle. Some lenders may impose restrictions on commercial use of the vehicles used as collateral for their loans, which could lead them to accelerate the payoff of the loan if they discover you've been sharing your vehicle with others in exchange for payment.
Alternatively, you may want to enter into a more formal car-sharing arrangement that will allow you and your fellow drivers to lease "shares" of a vehicle. This split ownership may seem complicated, but there are a number of financing companies and even auto manufacturers who are creating products targeted to this market, allowing multiple people to own and use a single vehicle while paying only a fraction of the cost they'd pay by purchasing or leasing a vehicle on their own.
For information on how car sharing can impact your auto loan, contact an auto financing company like Western Avenue Nissan.
Share2 June 2016
After driving an older car to work for several years, my husband was finally ready to buy another vehicle. He got tired of his car breaking down at his workplace, the grocery store, and the mall. Because gas mileage is important to him, my spouse shopped at local auto dealers for a small, four-door sedan. We were open to purchasing a new vehicle or a slightly used one. Whenever we saw a potential car at a dealership, we always studied its exterior and interior closely. My husband of course also requests to drive it down the road. On this blog, I hope you will discover tools for finding your dream car at an auto dealership. Enjoy!
