What are the risks involved in renting out your own car?
Risks in renting out your own car
RENTING OUT YOUR OWN CAR. LUCRATIVE OR ASKING FOR TROUBLE?
Noble intentions lead to new market developments, which seem positive at first glance, until they are examined more closely and turn out to have quite a few snags. In addition to renting out your own home through Airbnb, for example, renting out your own car seems like a lucrative way to somewhat reduce the cost of car ownership and use. That can certainly be true, but there are also risks involved. Alpina.nl Map these out so you can make an informed decision about whether to (rent) a car.
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Especially in the big cities, the government strongly discourages car ownership and use. Parking permits, for instance, are very expensive and it takes a while before they are issued, if at all. In large cities, the car is also less necessary because there are often good public transport facilities and the relatively short distances can also be covered easily by bicycle. Those who do own a car may - in order to reduce costs or for environmental reasons - choose to rent it out to third parties at times when the vehicle is not in use. This can be done on one's own initiative, but is now also possible through various intermediaries such as Snappcar, My Wheels and WeGo. Nationale Nederlanden had also launched an app, Gappie. But this app is no longer in use.
Initiatives in France, for example, with shared cars via Autolib have not been successful. These were not private cars. The result was that the renters did not treat the cars properly, which often made them dirty. This can also be a disadvantage when you rent out your own car to strangers.
What is the insurance risk when renting out your own car?
If you are going to hire out your own car - whether through an intermediary or not - you are always obliged to report this to your own insurance company. The insurer wants to be able to assess any increase in risk and susceptibility to fraud each time there is a change in the use of the car.
If you do not report the rental to your car insurance company and they find out about it, e.g. after a claim, this is considered concealment. Compensation can then be refused and an entry can be made in the fraud register, which in turn can cause problems when applying for new insurance. Damage during rental is never covered by your insurer, because this is explicitly excluded in the policy conditions.
There are however possibilities to take out an extra insurance for damage during the rental period.
Risk increase and measures
As soon as you have informed your own insurer (compulsory) about the fact that the car will also be rented out, you have to wait and see what measures your insurance company will take regarding this increase in risk. Because the insurer considers it undesirable for several unknown drivers to drive the vehicle, there is a good chance they will cancel the insurance policy.
In that case, it will be very difficult to apply for a new car insurance elsewhere.
With every new insurance application, a number of final questions (morality questions) must always be answered. The question whether the insurer has ever cancelled a car insurance is such a final question. You will have to answer yes to this question up to five years after the event (even if the car is no longer being rented) and explain why. This may result in the insurance application being rejected. In that case the only option left may be to insure with De Vereende (formerly Rialto). De Vereende insures special risks, but usually at a higher premium, because there is more risk involved. In the most favourable case your own insurer will let the policy run, but at a higher premium or with restrictive clauses on the policy. As mentioned above, damage during the rental period is always excluded from your own insurance and an additional insurance will have to be taken out for this.
Suppose that you, as a lessor, have not paid the premium of your own car insurance (on time).
In that case there is a non-payment , as a result of which your insurer suspends the insurance cover until the premium has been paid. The hirer is actually driving an uninsured vehicle and has a problem if he is stopped by the police.
The police will consult the database of the RDW where the details of your insurer are registered plus the fact that the vehicle is currently uninsured.
If the RDW indicates at any time (reference date) that your vehicle is uninsured, you run a considerable risk of a hefty fine. If the vehicle was insured because your insurer forgot, for example, to report the insurance to the RDW, the insurer concerned can issue a so-called Section 34 WAM statement, in which the insurer informs the RDW that the vehicle was insured. The fine is then cancelled.
Was your own insurance suspended due to non-payment, but was there coverage on the supplementary insurance taken out during the rental on the reference date? In that case, the additional insurer could in theory issue this Section 34 WAM statement. However, we do not know whether the RDW will accept this, as this is not the insurer who is registered with the RDW.
New insurance application
When applying for a new car insurance, all damages suffered and driven must be reported, regardless of who was driving the vehicle at the time of the damage. Damages caused during the rental period must therefore also be reported. If there are many, the acceptance procedure may be delayed. If you do not report the damage(s), for example because you forgot to do so (you were not the driver), the application will be more difficult, take longer or even be refused completely. De Vereende could then be the only possible insurer left.
What insurance coverage do you have with a shared car?
Always check carefully whether the additional insurer also provides coverage abroad and if so, in which countries. If the hirer takes your car to a country which is not covered by the additional insurance during the hire, no compensation will be paid in the event of damage to or theft of your own car. If the additional insurer has to indemnify a third party, the damage payment and the costs incurred will be recovered from you personally: there was no coverage.
Breakdown on the road
If the tenant has a breakdown on the way, this is covered by additional insurance. In the case of private hire, however, this can cause problems for the lessor. The question then is whether the lessor has taken out breakdown cover and whether it is registered to a name or a vehicle.
Damage with a shared car: what are the consequences?
Additional insurance necessary
Because damage to your own vehicle and damage caused to others while renting out your car is excluded from your own car insurance, a separate additional insurance will always have to be taken out for this. There are rental agencies, such as Snappcar, that only mediate including this additional insurance (through Centraal Beheer). For any other intermediaries and private rentals, you will have to arrange this on your own initiative. As a rental agency, do you forget to arrange such additional insurance or do you think it is not so important? Then, in the event of damage to your own car, no payment will be made and your own insurer will recover the damage paid to third parties from you. This is because your own insurer excludes coverage for damage during rental.
All claims are registered in your name
In order to reduce or prevent the risk of fraud, every damage in the Netherlands is registered in a database intended for this purpose. Every damage driven and suffered is registered in the name of the licence plate holder in the Fraude Information System Holland(FISH).
With a bit of bad luck during your rental, you can end up with a lot of damage in your own name in this database, while you were not responsible for that. These registered claims in your name can result in your application for a new insurance not being accepted, or accepted with restrictive conditions. It is irrelevant whether this concerns a car insurance or, for example, a household insurance. For each new insurance, the Fraud Information System is consulted.
Your own insurer will recover from you
If the hirer has caused damage to others with your car, the victim - or his insurer - will initially turn directly to your (third-party) motor insurance company on the basis of the direct right of action. One may turn directly to your insurer without first notifying you.
The details of your insurer can be requested from the Dutch Road Traffic Authority (RDW). The RDW registers whether and where the cars on the road are insured. Please note that your own car insurer is listed here and NOT the insurer where the car is insured during the rental. If the driver of your car (the hirer) is liable, your insurer will have to compensate the victim in full. And because you are the contracting party, your insurer will then have to reclaim the damage and all costs incurred from you personally, because damage during rental is excluded from cover.
If you have taken out additional insurance for the rental period, you can turn to that insurer and ask them to deal with the matter. Whether or not they do so (immediately), you will remain responsible for repaying your insurer for the damage until that time.
Suppose that the hirer of your Opel drove into the back of a Fiat and caused €5,000 damage.
The insurer of the Fiat will then check with the RDW and sue your insurer.
Your insurer will pay the €5,000.00 to the victim or his insurer and will then recover the paid out amount of damage from you personally because there was no cover (during the rental). You could then turn to the additional insurer and ask them to handle this claim, but during this process the claim will remain with you. With a small car damage this might not be a problem, but with a personal injury of thousands of Euros it becomes a different story.
Snappcar states that the additional insurer deals with the damage immediately and that it almost never happens that your own insurer is sued.
Alpina, however, strongly doubts this since (the insurer of) the victim will always send a liability claim to your insurer using the data from the RDW (where only your own insurer is listed). Your insurer may not refer the victim to another insurer, but will have to pay the damage itself and then recover it from you for lack of insurance coverage (during rental).
Less no-claim, more premium
As soon as your insurer is held liable by a victim or his insurer, the damage will immediately be registered as a 'fault damage' unless it is irrefutably clear that the driver is not liable. This culpable damage registration has immediate consequences for your lossless years and your no-claim discount and may also result in a higher premium. Later on, it may be possible to reverse this administratively, but during this period you will be confronted with a higher premium. If you are unable to pay this higher premium, it may result in a registration as 'defaulter' which in turn may cause the coverage to be suspended. As a result, you run the risk of a hefty fine from the RDW due to the uninsured vehicle.
Because your insurer is not allowed to refer the victim, the claim will have to be dealt with anyway. Perhaps the additional insurer will reimburse the damage at a later time, but insurers are not waiting for unnecessary administrative actions and it remains to be seen how this will be dealt with (in the long run).
If you have plans to hire out your car, check carefully in advance what differences there are in coverage between your own insurance and the additional insurance you take out during the hire (whether or not via the intermediary). It may be that the additional insurer - who covers the damage during the rental - applies certain exclusions, restrictive conditions and/or extra excess es.
At Centraal Beheer (the additional insurer that Snappcar and MyWheels, among others, work with) the amount of the deductible in case of hull damage is 250 Euros. Snappcar states that this excess is not charged to the renter, but if the renter has caused damage to your car, whether by his own actions or not, the additional insurer who covers the damage during the rental period will pay the damage to you minus the excess. You will have to pay this excess to the garage where your car is being repaired. The question is how quickly Snappcar will pay this excess. Snappcar indicates that the excess is for the account of the renter, but the question is whether Snappcar guarantees this and how quickly the payment will be made.
The situation may also arise that the tenant does not want to pay the excess because he does not consider himself liable. If the intermediary does not act as guarantor and the other party is actually liable, the excess will have to be recovered from the other party.
The question is then who will take on this if the car is only third-party insured without recourse or legal expenses coverage. Perhaps the intermediary will do this, but Alpina wonders whether they have the knowledge and resources available to do so. If, for whatever reason, the intermediary does not recover the excess, it will cost you time and money to recover the excess yourself. Incidentally, there is a service provider that handles non-covered but recoverable claims free of charge. More information can be found via this link
injury to the driver or his passengers
If you are going to rent a private car, whether through an agent or not, check carefully whether the car is insured including passenger insurance. For example, information from MyWheels shows that the insurance during the rental does not include passenger insurance. If the passengers suffer injury or material damage during a claim, this damage is not covered. If the driver is liable, the passengers may have a claim against the third-party insurer of the car. After the damage payment has taken place, the insurer will start to recover from its own insured (the rental company) because there was no coverage during the rental.
More explanation about this can be found at: Your own insurer is going to recover from you?
Current value instead of new value: difference remains for own account
With your own insurer, you have the option of insuring a new(er) car based on its new value. In the event of a total loss or theft, the new-for-old value will be reimbursed on the basis of this new-for-old value arrangement, with or without the deduction of a small percentage of depreciation.
The insurer who insures your vehicle during the rental period (whether or not arranged through the intermediary) always handles such a claim based on the current value.
If the hirer drives your car into a total loss, you will not be paid the new value, but the current market value, and you could lose thousands of euros as a result. Your own insurance company will not be able to reimburse you for the difference, because they exclude damage during the rental period. In short, you can be left with an enormous loss.
If the hirer totals your vehicle, no equivalent vehicle can be purchased for the amount paid (the current market value). The difference between the current market value and the purchase value of a replacement vehicle of equal value cannot be recovered from the renter.
No cover if the hirer allows another driver to drive
The intermediaries indicate that the additional insurance only provides cover if the registered driver is driving the vehicle. If the hirer allows another driver to drive the vehicle, the additional insurance will not provide cover for damage either.
In any case, your own insurance will not provide cover because it excludes damage during rental.
Because you, as a rental company, are not present during the drive(s), you unfortunately have no control over who lets the renter drive your car. There does not have to be any malice either. Perhaps the hirer is not feeling well and lets the partner drive. If any damage occurs, it will not be covered and no insurer will pay for it.
It can also happen that the registered hirer drives your vehicle, but under circumstances where the damage is still excluded by the insurer. This applies, for example, when the damage occurs if the hirer drives without a valid driving licence, if he/she intentionally caused the damage by participating in a race or if the driver has a blood alcohol level that is too high. All circumstances which the insurer excludes and in which the damage to your car will not be compensated.
In short, a big risk for you as a rental company because in that case you will be stuck with the damage or you will have to - whether or not through a lawyer - go after your money with the renter.
Always make a note of any damage
It is important that the hirer and the person hiring out the vehicle properly assess the damage, if any, before the vehicle is handed over or taken back in order to avoid any subsequent disputes.
Tenant must cooperate in case of damage
The hirer has no interest in your vehicle and therefore there is no guarantee that, in case of damage, the damage form will be filled out (properly, fully and quickly) and that the hirer will provide full cooperation. However, the claim form and the cooperation are essential in the claim process. As long as the insurer has no claim form, no compensation will be paid. If the claim form is incorrectly or incompletely filled in and the tenant's cooperation is minimal, this may even result in you being left with (part of) your claim because the insurer is unable to settle and/or recover the loss.
What maintenance risks do you face when renting out your own car?
Tenant's driving behaviour
As a lessor, you do not know how the lessee handles your vehicle(slipping tyres, changing gear too quickly/slowly, etc.). Any damage caused by this is not always immediately noticeable and afterwards it is almost impossible to prove that the renter caused this damage.
Additional wear, maintenance and depreciation
The use of the car increases with rental and with it the wear and tear, maintenance and depreciation. If this is not factored into the rental price, the earnings from the rental are minimal, if not nil.
If the car has not passed the MOT test on time, insurance companies can void your car insurance cover in the event of damage (for example, damage caused by malfunctioning brakes or slick tyres).
If, as a renter, you are stopped in a car for which the MOT has expired, the fine will be issued directly to you as driver and you will have to pay it (in the first instance).
Risk traffic fines/outstanding debts what to do?
Traffic fine/parking ticket
If the tenant receives a traffic or parking fine with your car, this fine will still be registered in your name, because you are the licence plate holder. The giro slip from the Central Fine Collection Agency will therefore arrive at your doorstep. Although the hirer (or the intermediary who stands surety) will eventually have to (re)pay the fine, you remain ultimately responsible to the judicial authorities and if you are unable to advance the fine yourself, this can cause problems with the judicial authorities. Moreover, it remains to be seen how long the intermediary or the hirer will have to pay the fine and what efforts you will have to make.
If you rent out the car without an intermediary, you will have to recover the amount of the fine from the hirer yourself, which can be difficult.
Because all fines (and damages) during the rental will be in your name, this can have legal consequences in the long run.
Your car will be confiscated!
If the car is imp ounded for any reason (outstanding debt of the hirer, outstanding debt of the lessor, speeding etc.), both parties may have a problem. The hirer cannot continue driving at that moment and the lessor is confronted with this even though the cause may not be his or her fault. In addition, the insurer excludes damage that occurs while the vehicle is impounded.
The following seems unlikely but unfortunately occurs regularly and is a major risk when renting (and sharing or lending) your own car:
- If the hirer of your car has unpaid traffic fines and is stopped by the police, the police may seize your car (in which the hirer is driving at that moment) if the hirer 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 your car is not the property of the tenant. However, according to the Mulder Act, which the police can invoke, this is possible.
- Does the hirer of your car have debts to the tax authorities? Then, in principle, your car could be recovered by the tax authorities on the basis of the Soil Right or Soil Seizure. The tax authorities may then seize all movable property that is on the tax debtor's land but does not belong to him or her.
In both cases, the lessor thus runs a great risk.
More on this in the following articles:
Within the rules of the privacy legislation, screening cannot be very intensive.
In fact, it only becomes clear afterwards whether a tenant is reliable or not, but by then it may already be too late. Also, a certain tenant may be reliable at some point, but this does not always have to be the case. You will not find out without rescreening.
Personal Data Protection Act
As a tenant or landlord, please check whether the intermediary you are dealing with is affiliated with the Dutch Data Protection Authority. If this is the case, then you know that this organisation acts in accordance with the Personal Data Protection Act and that the privacy-sensitive details that you need to pass on or upload (such as a driving licence or vehicle registration certificate) are therefore safeguarded.
Criminal activity done to you car?
If you rent out your car, you know almost nothing about the person who is going to rent it out and what they are going to use it for. Drug couriers, ram-raids and other criminal activities seem unlikely but can certainly not be excluded. Apart from the fact that you probably want to stay away from these things, the insurer will not pay out any compensation if the vehicle has been used for purposes other than those permitted by law. This means that you will have to pay for the damage to your vehicle.
In what condition will you get your car back?
The hirer may not return the car in the condition in which it was provided.
For example, the car may have been smoked in or the interior may have been dirtied by pets. In that case, the intermediary could impose a fine on the hirer, but if the hirer denies this, it creates unnecessary extra hassle.
If you rent out the car privately, without an agent, this is an extra point of attention.
Discussions and conflicts
Suppose that the car radio or the air conditioning system stopped working after the car was returned to the rental company. The hirer indicates that it has not been used or was not working already and the lessor claims otherwise. This can lead to hefty discussions and conflicts.
The same applies if the rental company discovers or claims that property has been stolen from the car, or if the car is returned without fuel when the arrangements were otherwise.
You will always have to prove your right with evidence, and whether you succeed in this or not, in the meantime, you as a landlord will be stuck with a smelly car or a defective air conditioner.
Alpina wonders if and how the mediator gets involved in such conflicts.
Cancellation of rental request
If you need your car on the agreed rental day, you can cancel the rental request (at the last minute). However, the intermediary can then charge a penalty. The hirer has a problem because he had counted on the car.
If the hirer returns your car (much) too late, while you needed the car, you will be forced to rent a car yourself or use public transport. You can try to recover these costs from the hirer, but it depends on his cooperation or on the intermediary if and how fast you will get these costs back.
Is the tenant taking care of your car?
It is an established fact that people generally treat things that are not their property less sparingly. According to Snappcar, their renters handle the car carefully because it belongs to a private individual. Alpina doubts that. There have also been houses shared privately in the past in which, for example, hemp nurseries were discovered afterwards.
What is the response from insurers?
Alpina.nl submitted the (rental) construction to a few insurers for comment.
The insurers say they are wary of this construction because they do not know who is driving the car. Therefore, in case of a claim, the usual processes are used and the lessor of the car will in principle fall back in claim-free years.
If it turns out that the car is used for hire, the insurer will recover the loss from the policyholder, because hire is excluded in the policy. The insurer will not address the insurer of the intermediary, as legally the policyholder is the contracting party. If it is not reported that the car has been used for rental, it is a case of concealment and an entry in the fraud system follows. Any damage or loss will also be registered in the name of the policyholder, which may result in the policyholder not being accepted by insurers in the future.
Alpina has asked Snappcar for a response to the risks mentioned in this article, but unfortunately Snappcar is unwilling to comment.
Car rental company response
Alpina has also spoken to some car rental companies and they indicate that in the case of more exclusive cars, renting out one's own car can be a good alternative. Regular rental companies usually do not have these in the fleet. Price-wise, it is not always cheaper to rent through an individual than through an intermediary company. Also, when renting through a professional rental company, there is more assurance of a well-maintained car and you will not encounter unexpected surprises.
Consumer Association review
The Dutch Consumers' Association tested Snappcar in May of this year, and found that the idea is sympathetic, but that in practice it does not run smoothly. For example, not every car that appears to be available on the website is actually available in practice. The test, as well as user experiences on the Consumers' Association website and the Snappcar Facebook page, show that the Snappcar website regularly malfunctions, the rental contract is not always received on time and requests are regularly rejected (at the last minute) because the availability is not up-to-date. Furthermore, the Consumers' Association states that you are actually doing business with consumers who can make all sorts of demands and do not always properly update the availability information on the website. As a result, you cannot always count on the rent.
(Source: Consumers' Association)
In the end, what is the conclusion?
Renting out your own car involves an investment of time.
Among other things, the rental company must maintain the availability information on the website, formulate requirements and rules, arrange key exchange, keep track of mileage and fuel levels, note any damage and pay fines and excesses in the event of a traffic violation or damage. The lessor will have to factor these extra costs, as well as the extra maintenance, wear and tear and depreciation as a result of the hire, into the rental price in order to earn something from the hire in addition to the agent's fee.
Also, as clearly described above, renting out your own car is certainly not risk-free, and sometimes even very dangerous. You can therefore ask yourself whether renting out is worth the effort and the risk in relation to the earnings. The same applies to renting from private individuals. Professional rental companies do not always have to be more expensive, and if they are, there are fewer regulation issues and risks.
In short, whether a car is borrowed, shared, rented or leased, everything is fine, provided it is well-considered.
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