Photographer: Harold Cunningham/Getty Images

How Much Does Car Sharing Really Save You?

The equations don't always add up for car owners

Car sharing, to a company that makes cars, is a bit like solar power is to a big, coal-burning utility: The more efficient it gets, the less people subscribe to the original business model. 

Realizing as much, a few car companies have taken the if-you-can’t-beat-them approach, rolling out fleets of their own machines and hammering together digital platforms to handle car-sharing reservations1. The trend took an interesting turn last week, as BMW and Ford said they would also funnel some of their customers onto car-sharing platforms.

BMW will let U.S. buyers of its Mini brand lend them out via its DriveNow platform, which had about 240,000 users in seven cities in the U.S. and Europe in March 2. Ford, meanwhile, is offering car-sharing options to those financing a purchase via its in-house lender, Ford Motor Credit3.

The genius of these programs is that they are designed to spur buying, even as car sharing threatens the traditional auto business. The option to lend out a vehicle provides a little nudge to a customer on the fence4. BMW spokesman Almut Stollberg said via e-mail that the Mini program turns the car into “an investment that can be (partially) recouped.”

But how much money can someone make by lending a car to strangers via a slick smartphone app? The answer is wide-ranging and a little complicated but boils down to a fairly simple equation. Returns can be good under two conditions: The borrower doesn’t drive far and the lender doesn’t pay much attention to maintenance, new tires, and the depreciation that comes as the odometer spools up.

Let’s kick the tires on Getaround, Ford’s car sharing partner, which launched out of a Silicon Valley incubator in 2011. A scan of its San Francisco footprint shows a range of options, from little Smart pods that can be had for $5 an hour to a brand new BMW M4 that fetches $40 an hour5.

Getaround keeps 40 percent of the total fee to cover the cost of insuring the car while it's on loan, pay its programmers, and keep its investors happy. How much of the rest of the loot can be counted as profit depends entirely on how far someone drives.

Let’s take a small sedan like the 2014 Honda Accord on offer for $8 an hour6, assuming it is borrowed for three hours. AAA says the cost of owning a small sedan is about 58¢ per mile. The car owner, however, must pay for insurance, taxes, and a few other items whether or not the vehicle is out on loan. Stripping those costs out—as well as the price of gas, which is covered by the borrower—the lender is paying somewhere around 14¢ for every mile that the car is being driven by a stranger.7

If the borrower drives only 20 miles in that three-hour window, the lucky Honda owner pockets about $11.65, after accounting for the sundry costs of ownership, as well as Getaround fees. However, if the miles add up, that margin disappears. At 50 miles, an owner nets only $7.50. At 105 miles, the rubber is burning, the profit is gone, and the transaction is costing the Honda owner. This is why Getaround adds a per-mile surcharge when borrowers drive more than 200 miles8.

The math gets bleaker with SUVs, which cost quite a bit more to own9 but do not fetch substantially higher rates on the swap market. A 2015 Volkswagen Tiguan, for example, can be had for $12 an hour, but every mile costs its owner 23¢.

To be sure, this is back-of-the-envelope math. A lot of factors are at play here, from how shrewd drivers are when they buy new tires to how rare it is for someone to borrow a car and flog it for 150 miles in three hours. Given the amount of time the average car sits idle10, vehicle-sharing seems like a no-brainer11. However, as a source of income—a way to justify an expensive trip to the dealership—the rationale gets fuzzy.

Getaround says most of its trips fall into two categories: short distances over a brief rental period and long day trips. "Every car on Getaround is paying for itself right now," says Padden Murphy, the company's head of business development.12

This, however, points out a potentially troublesome little loop in the logic of car sharing platforms and the carmakers behind them. If the system really is such an economic win, more people will want to loan their cars. Ford and BMW, no doubt, would love to see a horde of buyers they otherwise wouldn’t have. Car borrowers may even switch sides, buying a ride and then offering it around.

“From our view, this is putting people into a Ford product,” says Ford Motor Credit spokeswoman Margaret Mellott. “If someone is not in the market right now, maybe someday they will be, and they’ll remember the Ford.”

But the more car lenders jump on board, the less each stands to make—and the more pressure each will be under. Prices to borrow will likely fall before the system settles to some equilibrium. In the meantime, the biggest winners in the car sharing game probably won’t be car companies or even car buyers13. It will be the folks who get to drive whatever they want, whenever they want, without ever waiting for an oil change or setting foot in a dealership.

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  1. 1 Daimler has dispatched Smart cars, via its Car2Go platform, in 29 cities in North America and Europe. PSA Peugot Citroen in October bought a stake in Wedrive, a French company focused on carpooling commuters.
  2. 2 BMW will also let Mini drivers confine lending to a small, select circle of family and friends.
  3. 3 Ford's plan is a trial program that will run through November. It is open to about 14,000 customers in six U.S. cities, along with 12,000 drivers in London.
  4. 4 Chairman Bill Ford's take: “The company that figures out how to navigate this could really actually end up raising margins and changing the business model in a way that will be very healthy.”
  5. 5 Nothing is stopping Ford owners from joining Getaround now. The company is just "actively nudging" owners to participate via mail and e-mail.
  6. 6 Car owners set their own rates with guidance from Getaround.
  7. 7 This assumes that about half of the vehicle's depreciation is based on miles driven, with the other half based on its age.
  8. 8 Thanks to that fee, the car owner moves back into the black after 200 miles.
  9. 9 AAA puts the average cost of SUV ownership at 93¢ per mile.
  10. 10 Getaround says the average car sits idle 22 hours a day.
  11. 11 Silicon Valley is certainly keen on the idea. In November, Getaround raised $24 million in funding at a valuation of about $200 million.
  12. 12 Murphy says the average car lender on Getaround collects $600 a month in revenue, while some Tesla owners are getting up to $3,000 a month.
  13. 13 Murphy at Getaround said: "It's a good problem to have." According to him, demand from borrowers has stayed ahead of supply from lenders -- at least thus far.