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Rent Your Car to a Neighbor?

New websites match you up. But check your insurance first

Own a car but don't drive it much? You may be able to rent it to a neighbor.

See also: Buy or lease a car?

Start-up companies RelayRides, Sprideshare and Getaround put you and potential renters together, placing some extra cash in your pocket that can help offset the costs of ownership.

See what you can save with the AARP Auto Buying Program

For now, rent-out-your-own-car service is available only in California and Massachusetts, but it could eventually expand to other states. In Britain the trend is already established, with London-based WhipCar claiming 1,000 cars and service in 450 towns and cities.

The details vary by company in this relatively new business, but here's how it works at RelayRides, which is backed by Google Ventures: You register with the service's website. Your vehicle needs to be reasonably new and in good condition, with mileage under about 85,000. RelayRides installs a special device in your car that allows renters to unlock the door. The company takes reservations, provides insurance coverage for the period your car is rented, and collects the fees.

You set your own rates (currently averaging $8 an hour) and the days and times when your vehicle may be used. You pay for the gas.

Says Shelby Clark, RelayRides' founder: "People who need to borrow a car for a few hours try to find one close to home. We tell them where it's located, maybe parked on the street or in the owner's driveway, and they unlock the doors with an authorized smart card. The keys are inside."

Renters are required to have clean driving records. They agree to pay any traffic or parking tickets, and insurance deductibles if there's an accident.

After the car is returned, you keep 65 percent of the proceeds, with the rest going to RelayRides for administration and insurance. You might make anywhere from a few hundred dollars a month to a thousand or so, Clark says, depending on pickup location and hours on the road. The income is taxable, though you may be able to reduce the bite through deductions.

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Rent your car and get some extra cash. — David Lidbetter/Gallery Stock

But before you rent out your wheels, consider this: Your own insurance company may not like the idea. Loretta L. Worters, vice president of the Insurance Information Institute, says that some insurers worry about unintended consequences for them.

What happens if a renter who has had an accident accuses you of knowingly providing a defective car? What if there's a dispute about exactly when a fender-bender occurred — was it while the rental company's insurance covered the car or when your own policy did?

California has enacted legislation that bars insurance companies from raising rates or revoking the coverage of owners who rent out their cars, as long as the income they collect doesn't exceed the annual cost of owning the car. Similar legislation is under consideration in Massachusetts and Oregon.

So if you live in a state other than California, it's wise to check in with your insurance company before you offer your car to a neighbor.

Joan Rattner Heilman writes about good deals and where to find them.

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