Car Sharing Picks Up Speed: Should Detroit Be Worried?

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ZipcarHaving a car is awesome, but the ownership experience isn't cheap.

Between monthly car payments, insurance premiums, pesky gas prices, maintenance costs, and annual registrations, even a cheap secondhand vehicle will set you back thousands of hard-earned dollars over the course of a year.

There's an alternative, but you're going to have to adjust your car seat to make it happen.

Car sharing is sweeping the nation as companies cash in on the largely immobile nature of automobiles. Whether it's through a company-owned fleet or by encouraging neighbors to let each other borrow their wheels, it has never been easier to get by without a car.

Just don't tell Detroit.

Sharing the Load

Asset sharing is alive and well when it comes to big-ticket items. If you can't afford a vacation property, yacht or corporate jet, for example -- and who can, really -- there are alternatives.

One of legendary investor Warren Buffett's businesses is NetJets, a company that lets executives rent corporate jets by the hour.

Likewise, destination clubs and timeshares exist for those who want regular access to actively maintained getaway properties, and those who want to avoid any long-term travel club memberships can just turn to HomeAway (AWAY), VRBO.com, and other websites where property owners rent out their vacation homes.

Car sharing really isn't any different, through there are two distinct models.

A Vehicle When You Need One


Zipcar (ZIP) is the industry leader in conventional auto sharing. About 673,000 members share the company's fleet of 8,900 cars, which are conveniently parked in a few major metropolitan cities and dozens of college campuses.

Members pay $60 a year -- or less for college students and faculty -- and then pay as little as $7 an hour to rent an available Zipcar.

There are no hassles. A smartphone app or a Zipcard unlocks cars that are reserved through Zipcar's website or mobile app. Gas is included, along with up to 180 miles per rental. Insurance is included, though there is a $750 deductible if you need it. All of the costly layers of traditional car ownership are gone.

Zipcar's success has attracted attention. You don't grow your user base by 25% over the past year and not get noticed.

Rental giant Hertz (HTZ) has been the most aggressive about jumping on the bandwagon. Its recently rebranded Hertz on Demand no longer charges annual membership fees, and it offers some perks Zipcar doesn't. Zipcar requires that renters return their cars to the same reserved parking spot where they started. Hertz allows one-way rentals, as long as they are dropped off at a Hertz on Demand location.

The industry is still in its infancy. Hertz on Demand is only available in a dozen cities, compared with Zipcar's more than 200 locations through its university programs.

Take My Ride, Please

Some companies are taking car sharing to the neighborhood level. RelayRides, Getaround, and countless regional upstarts are making waves by allowing car owners to make their automobiles available when they are not in use.

RelayRides claims that the average car is only in use for roughly an hour a day. By sharing cars -- RelayRides opines -- one is helping the environment by keeping fewer cars on the road. Automakers won't be too happy, but it's true.

The challenge for these peer-to-peer outfits is convincing owners that contributing their cars will be worth it. Auto owners get nearly two-thirds of the revenue, but they're the ones who have to deal with the extra wear and tear on their cars. What if someone doesn't bring the car back in time for the owner to drive it to work? What if the renter leaves a Big Mac container behind?

The car owner needs to have hardware installed in the car to automate the unlocking and usage tracking features, but the hassle could be worth it for someone that was struggling with car payments on a largely dormant asset.

Car Companies Fight Back

Car sharing may be great for the consumer and the environment, but automakers have to be worried.

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Still, if they're fretting, they're not showing it. Ford (F) actually teamed up with Zipcar late last year, sending many of its new models to college campuses. It may lose coed customers to auto sharing, but it may as well let them test drive new Fords along the way.

General Motors (GM) teamed up with RelayRides, allowing its OnStar-equipped cars to join the service without having to go in for the hardware installation.

Naturally, Ford's and GM's interest will cool if the movement does hurt auto sales. Right now, it's a novelty. Auto sharing will never take off in a suburban setting where drivers have regular commutes or errands to run.

However, the numbers don't lie. More people are sharing cars. When money's at stake, that Whopper wrapper to clean up is inconsequential.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article, except for Zipcar and Ford. The Motley Fool owns shares of Hertz Global Holdings, Ford Motor, and Zipcar. Motley Fool newsletter services have recommended buying shares of Zipcar, General Motors, HomeAway, and Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor.




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