LINKEDINCOMMENTMORE

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 and hammering together digital platforms to handle car-sharing reservations. 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. Ford, meanwhile, is offering car-sharing options to those financing a purchase via its in-house lender, Ford Motor Credit.

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 fence.

But how much money can someone make by lending a car to strangers via a slick smartphone app? 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.

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 hour.

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 hour, assuming it is borrowed for three hours. AAA says the cost of owning a small sedan is about 58 cents 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 cents for every mile the car is being driven by a stranger.

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 miles.

LINKEDINCOMMENTMORE
Read or Share this story: http://detne.ws/1IqZX7T