What are the risks of renting out your own car?

Sharing Costs

Especially in large cities, car ownership and use are strongly discouraged by the government. For example, parking permits are very expensive, and it takes a while to obtain them—if they are issued at all. In large cities, cars are also less necessary because there are often good public transportation options, and the relatively short distances can easily be covered by bicycle. Those who do own a car may—to reduce costs or for environmental reasons—choose to rent it out to third parties when the vehicle is not in use. This can be done on one’s own initiative, but nowadays it’s also possible through various intermediaries such as Snappcar, My Wheels, and WeGo. Nationale Nederlanden had also launched an app called Gappie, but it is no longer in use.

Initiatives in France, for example, involving car-sharing through Autolib have not proven successful. These were not privately owned cars. As a result, renters did not treat the cars with care, so they were often dirty. This can also be a drawback when you rent out your own car to strangers.

What are the insurance risks involved in renting out your own car?

Acceptance

Reporting Requirement

If you plan to rent out your own car—whether or not through an intermediary—you are always required to reportthis to your insurance company. The insurer needs to be able to assess any increase in risk and susceptibility to fraud whenever there is a change in the car’s use.
If you fail to report the rental to the insurer with whom you have your auto insurance and they find out later—for example, after a claim—this will be considered a misrepresentation. Compensation may then be denied, and a note may be added to the fraud registry, which in turn can cause problems when applying for any new insurance policy. Damage occurring during the rental period is never covered by your insurer, as this is explicitly excluded in the policy terms and conditions.
However, there are options to purchase additional insurance to cover damage during the rental period.

Increased Risk and Measures

Once you have (as required) notified the insurer that the car will also be rented out, you’ll have to wait and see what measures your insurance company will take in response to this increased risk. Because the insurer considers it undesirable for multiple unknown drivers to operate the vehicle, there’s a good chance it will cancel the insurance policy.
In that case, it will also be very difficult to apply for new auto insurance elsewhere.

With every new insurance application, there are always a number of final questions (good-faith questions) that must be answered. The question of whether a car insurance policy has ever been canceled by the insurer is one such final question. You must answer “yes” to this question and provide an explanation for up to 5 years after the date in question (even if the car is no longer being rented out). A rejected insurance application is a possible consequence of this. In that case, your only remaining option may be to obtain insurance from De Vereende (formerly Rialto). De Vereende insures special risks, but usually at a higher premium, since it also assumes greater risk. In the best-case scenario, your own insurer will allow the policy to continue, but at a higher premium or with restrictive clauses in the policy. As noted above, damage occurring during the rental period is always excluded from your own insurance coverage, so you’ll need to purchase supplemental insurance for that.

Uninsured vehicle

Suppose, as a rental car owner, you have not paid your own auto insurance premium (on time).
In that case, it constitutes a default on payment, causing the insurer to suspend coverage until the premium is paid. The renter is therefore effectively driving an uninsured vehicle at that moment and will face problems if pulled over by the police.
This is because the police consult the database of the National Road Traffic Authority (RDW), where your insurer’s details are registered, along with the fact that the vehicle is uninsured at that moment.
If the RDW determines at any time (as of a specific date) that the vehicle is uninsured, you run a high risk of receiving a hefty fine. If the vehicle was in fact insured—for example, because your insurer had forgotten to report the insurance to the RDW—then the insurer in question can issue a so-called Article 34 WAM declaration, in which the insurer informs the RDW that the vehicle was indeed insured. The fine will then be waived.
Was your own insurance suspended due to non-payment, but was there coverage under the supplemental insurance policy taken out during the rental period on the reference date? In that case, the supplemental insurer could, in theory, issue this Article 34 WAM statement. However, we do not know whether the RDW accepts this, since this is not the insurer registered with the RDW.

New Insurance Application

When applying for a new auto insurance policy, you must report all claims you’ve filed and all accidents you’ve been involved in, regardless of who was driving the vehicle at the time of the incident. Damage that occurs while the vehicle is rented must therefore also be reported. If there are many such claims, this can cause delays in the underwriting process. If you fail to report the damage—for example, because you forget to do so (since you weren’t the driver)—the application process will become even more difficult, take longer, or even be rejected entirely. In that case, De Vereende may be the only insurer left as an option.

Bad luck on the road

If the renter experiences a breakdown while on the road, this is covered if they have supplemental insurance. However, in the case of a private rental, this can cause problems for the rental company. The question then is whether the rental company has purchased roadside assistance insurance and whether it is registered under the renter’s name or the vehicle’s registration.

Damage to a car-sharing vehicle: What are the consequences?

Supplemental Insurance Is Required

Because damage to your own vehicle and damage caused to others while renting out the car is not covered by your personal auto insurance, you’ll always need to purchase separate supplemental insurance for this. There are rental brokers, such as Snappcar, that only facilitate rentals that include this supplemental insurance (through Centraal Beheer). With other rental agencies and when renting to private individuals, you must arrange this on your own. If, as the renter, you forget to arrange such supplemental insurance or don’t consider it important, you will not receive any compensation in the event of damage to your own car, and the insurer will seek reimbursement from you for the damages paid out to third parties. This is because your own insurer excludes coverage for damage that occurs during the rental period.

All claims are recorded under your name

To reduce or prevent the risk of fraud, every claim in the Netherlands is recorded in a dedicated database. Every incident involving a rental vehicle and resulting in damage is recorded under the vehicle owner’s name in the Fraud Information System Holland (FISH).
If you have a bit of bad luck during a rental, you could end up with many claims registered under your name in this database, even though you weren’t responsible for them. These registered claims under your name may result in your application for new insurance being rejected or accepted only with restrictive conditions. It doesn’t matter whether this concerns auto insurance or, for example , home contents insurance. The Fraud Information System is consulted for every new insurance policy.

Your insurer will seek reimbursement from you

If the renter causes damage to others with your car, the victim—or the victim’s insurer—will initially contact the auto liability insurer directly , based on the right of direct action. This is because the victim or the victim’s insurer may contact the insurer directly without first notifying you.
Your insurer’s details can be obtained from the National Road Traffic Authority (RDW). The RDW records whether and where vehicles on the road are insured. Please note: the information provided lists your own auto insurer and NOT the insurer with which the vehicle is insured during the rental period. If the driver of your car (the renter) is liable, the insurer will have to fully compensate the victim. And because you are the contracting party, your insurer will then seek reimbursement from you personally for the damage and all costs incurred, since damage occurring during the rental period is excluded from coverage.
If you have purchased supplemental insurance for the rental period, you can contact that insurer to ask if they will handle the matter. Whether or not they do so (immediately), you remain responsible for reimbursing the insurer for the damages until then.

Example:

Suppose the renter of your Opel rear-ended a Fiat and caused €5,000.00 in damage.
The Fiat’s insurer will then check with the RDW to identify your insurer and file a claim against them.
Your insurer will pay the €5,000.00 to the victim or the victim’s insurer and will then seek reimbursement from you personally because there was no coverage (during the rental period). You could contact your supplemental insurer to ask them to handle this claim, but the claim against you remains in effect throughout this process. In the case of minor auto damage, this may not be a problem, but when it comes to personal injury claims amounting to thousands of euros, it’s a different story.

Snappcar states that the supplemental insurer handles the claim immediately and that it is extremely rare for the policyholder’s own insurer to be held liable.
Alpina, however, strongly doubts this, since the victim’s insurer will always use the RDW’s records (which list only your own insurer) to send a notice of liability to the insurer. The insurer is not allowed to refer the victim to another insurer but must pay the claim itself and then seek reimbursement from you due to the lack of insurance coverage (during the rental period).

Lower no-claim discount, higher premium

As soon as the insurer is held liable by a victim or the victim’s insurer, the claim will immediately be recorded as a “at-fault claim” unless it is conclusively established that the driver is not liable. This at-fault claim record has immediate consequences for your claim-free years and your no-claims discount and may also result in a higher premium right away. This may be administratively reversed at a later date, but during this period you will still be faced with a higher premium. If you are unable to pay this higher premium, this may result in you being registered as a “delinquent payer,” which in turn could lead to your coverage being suspended. As a result, you run the risk of a hefty fine from the RDW for driving an uninsured vehicle.
Since your insurer is not allowed to refer the victim elsewhere, the claim will have to be processed regardless. The supplementary insurer may reimburse the claim at a later date, but insurers are not eager to deal with unnecessary administrative tasks, so it remains to be seen how this will be handled (in the long run).

Exclusions

If you plan to rent out your car, be sure to carefully review in advance the differences in coverage between your own insurance and the supplemental insurance you take out during the rental period (whether or not through an intermediary). The supplemental insurer—which covers damage during the rental period—may have certain exclusions, limiting conditions, and/or additional deductibles.

Own risk

At Centraal Beheer (the supplemental insurer that works with Snappcar and MyWheels, among others), the deductible for comprehensive damage is 250 euros. Although Snappcar states that this deductible is not charged to the rental company, if the renter causes damage to the car—whether or not through their own fault—the supplemental insurer covering the damage during the rental period will pay you the amount of the damage minus the deductible. You will have to pay this deductible upfront to the repair shop where the car is being repaired. The question then is how quickly, for example, Snappcar will reimburse you for this deductible. Snappcar states that the deductible is the renter’s responsibility, but the question is whether Snappcar guarantees this and how quickly reimbursement will be made.

A situation may also arise in which the renter refuses to pay the deductible because he does not consider himself liable. If the mediator does not act as a guarantor in such a case and the other party is in fact liable, the deductible will have to be recovered from the other party.
The question then is who will take on this responsibility if the car is insured only under third-party liability without recourse or legal assistance coverage. Perhaps the broker will handle this, but Alpina wonders whether the broker has the necessary knowledge and resources to do so. If, for whatever reason, the broker is unable to recover the deductible, it will cost you time and money to recover the deductible yourself or have it recovered.

Current value instead of replacement value: the difference is at your own expense

With your own insurer, you have the option to insure a new(er) car based on its replacement value. In the event of a total loss or theft, this replacement value provision provides compensation for the replacement value, with or without a small depreciation deduction.
The insurer covering your vehicle during the rental period (whether or not arranged through an intermediary) always settles such claims based on the current market value.
So if the renter totals your car, you won’t receive the replacement value but rather the current market value, which means you could lose out on thousands of euros. You can’t turn to your own insurer to cover the difference, because their policy excludes damage that occurs during rental. In short, you could be left with a massive financial loss.

If the renter totals the vehicle, the amount paid out (the current market value) will not be sufficient to purchase an equivalent vehicle. The difference between the current market value and the purchase price of an equivalent replacement vehicle cannot be recovered from the renter.

No coverage if the renter allows another driver to drive the vehicle

The brokers state that the supplemental insurance only provides coverage if the registered driver is operating the vehicle. Therefore, if the renter allows another driver to operate the vehicle, the supplemental insurance will not cover any damage either.
Your own insurance does not provide coverage in any case, as it excludes damage that occurs during rental.
Since you, as the rental owner, are not present during the trip(s), you unfortunately have no control over who the renter allows to drive the car. There doesn’t even have to be any malicious intent. Perhaps the renter isn’t feeling well and lets their partner drive. If damage occurs in that case, it will not be covered and will not be reimbursed by any insurer.
It’s also possible that the registered renter is driving your vehicle, but under circumstances where the insurer still excludes coverage for damage. This applies, for example, if the damage occurs while the renter is driving without a valid driver’s license, if the renter intentionally caused the damage by participating in a race, or if the driver’s blood alcohol content is too high. These are all circumstances that the insurer excludes, and in which damage to your car will not be covered.
In short, this poses a significant risk to you as the rental owner because, in such cases, you’ll be left to cover the damage yourself or will have to pursue the renter for reimbursement—whether directly or through a lawyer.

Always note any damage found

It is important that the renter and the rental company thoroughly inspect the vehicle for any existing damage before it is handed over or returned, in order to prevent future disputes regarding such damage.

Tenant Must Cooperate in the Event of Damage

The renter has no stake whatsoever in your vehicle, and therefore there is no guarantee that, in the event of damage, the accident report form will be filled out (correctly, completely, and promptly) or that the renter will otherwise cooperate fully. However, the accident report form and the renter’s cooperation are essential to the claims process. As long as the insurer does not have a claim form, no compensation will be paid. If the form is not filled out correctly or completely, and the renter’s cooperation is minimal, this could even result in you being left to bear (part of) the cost of the damage yourself because the insurer cannot settle the claim and/or recover the costs.

What maintenance risks are involved when you rent out your own car?

Tenant's Driving Behavior

As a rental company, you don’t know how the renter handles the vehicle (skidding tires, shifting gears too quickly or too slowly, etc.). Any resulting damage isn’t always immediately apparent, and it’s virtually impossible to prove afterward that the renter caused the damage.

Additional wear and tear, maintenance, and depreciation

Car usage is increasing due to rentals, and with it , wear and tear, maintenance, and depreciation. If these factors are not factored into the rental price, the profits from the rental will be minimal, if not nonexistent.

APK

If the car has not passed its APK inspection on time, insurers may void your auto insurance coverage in the event of damage (for example, damage caused by malfunctioning brakes or bald tires).
If you’re pulled over as a driver in a car with an expired APK, the fine will be issued directly to you as the driver, and you’ll have to pay it (initially).

Your car will be impounded!

If the car is impounded for any reason (outstanding debt owed by the renter, outstanding debt owed by the rental company, speeding violation, etc.), both parties may face a problem. The renter will be unable to continue driving at that point, and the rental company will be left to deal with the situation even though the cause may be beyond its control. In addition, the insurer excludes coverage for damage that occurs while the vehicle is impounded.

The following may seem unlikely, but unfortunately it happens regularly and poses a major risk when renting out (or sharing or lending) your own car:

• If the car renter has unpaid traffic fines and is pulled over by the police, the police may impound your car (which the renter is driving at that moment) if the renter cannot pay the debt immediately. In the worst-case scenario, the police may even end up selling the car to collect the outstanding fines with the proceeds.
  This sounds unreasonable because the car is not owned by the renter. However, according to the Mulder Act, which the police can invoke, this is indeed possible.
• Does the renter of your car owe money to the tax authorities? If so, in principle, your car could be seized by the tax authorities under the right of possession or attachment of property. The tax authorities may then seize all movable property located on the taxpayer’s premises but not owned by him or her.
  In both cases, the lessor therefore faces a significant risk.

Any other risks?

A reliable tenant?

Under privacy laws, background checks cannot be conducted very thoroughly.
In reality, it only becomes clear after the fact whether a tenant is trustworthy or not, but by then it may already be too late. Additionally, a particular tenant or landlord may be trustworthy at a given moment, but that doesn’t necessarily mean they’ll remain so. Without a follow-up screening, you won’t be able to determine that.

Personal Data Protection Act

Whether you’re a tenant or a landlord, be sure to check whether the broker you’re working with is registered with the Dutch Data Protection Authority. If so, you can be confident that this organization operates in accordance with the Personal Data Protection Act and that the privacy-sensitive information you’re required to provide or upload (such as a driver’s license or vehicle registration certificate) is safeguarded.

In what condition will you get the car back?

The renter may not returnthe car in the same condition as when it was handed over.
For example, someone may have smoked heavily in the car, or the interior may be soiled by pets. In that case, the intermediary could impose a fine on the renter, but if the renter denies it, this creates unnecessary extra hassle.
If you’re renting out the car privately—that is, without an intermediary—this is another point to keep in mind.

Discussions and Conflicts

Suppose the car stereo or the air conditioning stops working after the car has been returned to the rental company. The renter claims that it was not used or was already malfunctioning, while the rental company claims the opposite. This can lead to heated arguments and conflicts.

The same applies if the rental company discovers or claims that items have been stolen from the car, or if the car is returned without fuel even though the terms of the agreement were different.

You’ll always have to prove your case with evidence, and whether or not you succeed in doing so, in the meantime, as a landlord, you’re stuck with a smelly car or a broken air conditioner.
Alpina wonders if and how the mediator gets involved in such conflicts.

Cancel Rental Request

If you end up needing your car yourself on the agreed-upon rental date, you can cancel the rental request (at the last minute). However, the broker may charge a penalty at that time, since the renter is left in a difficult situation because they were counting on having the car.
If the renter returns your car (significantly) late, while you needed the car, you’ll be forced to rent a car yourself or use public transportation. You can try to recover these costs from the renter, but whether and how quickly you get reimbursed depends on the renter’s cooperation or that of the intermediary.

What is the response from insurers?

Alpina.nl has submitted the rental arrangement to a few insurers for their feedback.
The insurers have indicated that they are wary of this arrangement because they do not know who is driving the car. In the event of damage, the usual procedures will therefore be followed, and the car’s lessor will, in principle, lose their no-claims bonus.

If it turns out that the car is being used for rental purposes, the insurer will seek to recover the damages from the policyholder, because rental is excluded under the policy. The insurer will not seek recourse against the broker’s insurer, since the policyholder is legally the contracting party. If it is not disclosed that the car was used for rental purposes, this constitutes a misrepresentation and will result in a note being added to the fraud database. Any claims will also be attributed to the policyholder, which may result in the policyholder no longer being accepted by insurers in the future.

Response from Snappcar

Alpina asked Snappcar for a response to the risks mentioned in this article, but unfortunately, Snappcar is not willing to comment.

Response from Car Rental Companies

Alpina has also spoken with several car rental companies, and they indicate that renting out one’s own car—especially in the case of more exclusive vehicles—can be a good alternative. Regular rental companies usually do not have these vehicles in their fleets. In terms of price, it is not always cheaper to rent from a private individual than through a brokerage firm. Additionally, renting through a professional rental company offers greater assurance that the car is well-maintained and helps you avoid unexpected surprises.

Consumentenbond Review

The Consumers' Association tested Snappcar in May of this year and believes that while the concept is appealing, it doesn't work flawlessly in practice. For example, not every car that appears to be available on the website actually is. The test, as well as user experiences shared on the Consumers’ Association website and the Snappcar Facebook page, show that the Snappcar website frequently experiences technical glitches, that the rental agreement isn’t always received on time, and that requests are regularly rejected (at the last minute) because the availability information isn’t up to date. Furthermore, the Consumentenbond points out that you are essentially doing business with consumers who may impose all sorts of requirements and who do not always update the availability information on the website properly. As a result, you cannot always count on being able to rent a car.
(Source: Consumentenbond)

So what's the conclusion, ultimately?

Renting out your own car requires an investment of time, no matter what.
Among other things, the owner must keep the availability information up to date on the website, establish requirements and rules, arrange for key handoffs, track mileage and fuel levels, document any damage, and cover fines and deductibles in the event of a traffic violation or damage. The owner will need to factor these additional tasks—as well as the extra maintenance, wear and tear, and depreciation resulting from the rental—into the rental price in order to make a profit from the rental themselves, in addition to the broker’s fee.
Furthermore, as clearly described above, renting out your own car is certainly not risk-free—and can sometimes even be very dangerous. So you might wonder whether renting it out is worth the effort and risk in relation to the earnings. The same applies to renting from private individuals. Professional rental companies aren’t necessarily more expensive, and even if they are, there are fewer administrative hassles and risks involved.
In short, whether a car is borrowed, shared, rented, or leased, all options are fine—as long as the decision is well-considered.