Peer-to-peer rentals: Creating future buyers, or competing with sales?

Publish Date: 
Oct 16, 2012
By Holly J. Wagner

SAN JOSE, Calif. - It’s been a while since a disruptive force hit the powersports market, but watch out: There’s a small field of entrepreneurs racing to become the industry’s equivalent of Netflix.

They are launching peer-to-peer (P2P) powersports vehicle rental companies.

Here’s how it works: A P2P website lets owners of motorcycles, ATVs, personal watercraft (PWC), snowmobiles, boats – and in some cases, more exotic vehicles like airplanes – list their vehicles for rent to private parties. The renter contacts the owner through the P2P website to negotiate terms of the rental. The renter pays through the website, picks up the vehicle from the owner and returns it after the rental is over (some owners offer delivery and pickup). The website takes a percentage of the rental fee, but offers owners the exposure and administrative support of a big business.

The pitch is appealing for both sides of the transaction. Rentals may cost 40 to 70 percent less than from a fleet-based rental operation, many of which don’t offer renter insurance. With P2P, the variety of vehicles is limited only by the number of owners listing rentals.


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For owners, renting out a vehicle that otherwise may only get out of the garage a few times a year is a way to offset the cost of ownership and storage. Renting offers the opportunity to supplement income in a weak economy. It could even mean the difference between keeping or selling a vehicle when times are tight.

For dealers, P2P may represent a new revenue stream for an emerging group of younger buyers who would rather share than own outright. On the downside, it could compete with a dealer's rental or even vehicle sales business. 

But there are challenges to the P2P business model. Not everyone is convinced it can work for powersports, especially due to potential liability issues.

“The biggest risk that we see in peer-to-peer is underwriting standards,” said Jeff May, product director for Markel American Insurance Co., “that they have steps in place where they are training renters on the vehicles, screening the applicants to make sure that, for example, they are sober when they get the rental. There are some pretty specific guidelines for what they do at the point of rental. For us to get comfortable, we would have to know that in a peer-to-peer setting you don’t lose control of those guidelines.”

That’s a neat trick, according to EagleRider CEO Chris MacIntyre. EagleRider offers insurance to renters in the same way car rental companies do, as well as 24/7 support for renters.

“With a single, privately owned vehicle, that’s where everything falls apart,” he said. “When you break down and you are stuck in the middle of Lake Mead or Monument Valley, if you don’t have a place [that will] come pick up the disabled vehicle and give you a new motorcycle, your trip is ruined.”

Quality control is even more difficult when it comes to off-road and water vehicles. “The biggest issues are insurance, vehicle safety and maintenance. The street vehicle is completely different from ATV powersports or water,” said MacIntyre.

Most of EagleRider’s business is in street motorcycle rental, and for good reason. “Watercraft – I would love to tell you is perfect but it’s not. We are moving out of that next year,” MacIntyre said. “The liability insurance is so great.”

How P2P rentals would affect the rest of the market is unclear, given that rentals still comprise a small portion of dealership business.

“We have not seen a lot of penetration of our rental software in the powersports market,” said Ed MacFawn, CEO of BiT Powersports Software, which offers a rental module. “We’ve got very few people who actually sell and rent. And they are mostly on the marine side.”

"Reasonably affordable rentals of powersports vehicles could be the best tool yet to get young consumers hooked on riding." -- Jessica Prokup

But the model could be a way to win younger customers and keep them interested, said Jessica Prokup (left), owner of Yellow Devil Gear Exchange in Long Beach, Calif.

“Gen Y-ers respond more to experiences than things. You don't sell them a product, you sell them what the product will do for their lives,” she said. “Reasonably affordable rentals of powersports vehicles could be the best tool yet to get young consumers hooked on riding – and invested in it down the road," Prokup added. "Since many dealers aren't in a position to offer a rental fleet, these P2P companies may be doing their outreach for them.”

 

FIRST ON THE BUZZER: FUN2RENT
Furthest along in P2P powersports rental is San Jose, Calif.-based Fun2Rent, which launched in beta mode earlier this year. Also angling for a foothold is Qraft.com, which launched in beta in May and offers P2P rentals of everything from scooters to airplanes. Qraft’s founders did not respond to interview requests.

Shawn Gardner started Fun2Rent after he tried to rent a snowmobile in 2009 in Lake Tahoe, Calif., but found the fee ($300 for four hours) too high. Moreover, the rental company didn't offer renters' insurance.

The Fun2Rent website is in beta and probably will be for another year at least, Gardner said. “We have a lot of things to do to simplify the platform,” he added.

Getting the insurance he offers to members was the most challenging part of his business model. “We had to negotiate. We showed them our business model and our risk management plan,” Gardner said. He ended up obtaining insurance through Lloyds of London surplus lines.

Markel American's May explains that with a surplus program insurers have the ability to vary rates more quickly and are not held to the same guidelines. But that comes with higher policy rates and premiums. (continued)