What are the risks involved 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 exposed and have quite a few snags. Besides 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 that you can make informed decisions about whether to rent or lease a car.
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Sharing costs
Especially in large cities, car ownership and use is highly discouraged from the government. For example, parking permits are very expensive and it takes time to get them, if they are issued at all. In large cities, the car is also less necessary because there are often good public transport facilities and the relatively short distances are also easily covered by bicycle. Those who do own a car may - to reduce costs or for environmentally friendly reasons - choose to rent the car to third parties at times when the vehicle is not in use. This can be done on their own initiative, but nowadays can also be done through various intermediaries such as Snappcar, My Wheels and WeGo. Nationale Nederlanden had also launched an app; Gappie. But that 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?
Acceptance
Notification requirement
If you are going to rent out your own car - through an intermediary or otherwise - you are always required to report this to your own insurance company. The insurer wants to be able to assess any increase in risk and susceptibility to fraud whenever there is a change in the use of the car.
If you don't report the rental to your insurer where the car insurance runs and they find out after the fact, for example after a claim, this is considered concealment. Compensation may then be denied and a note may be placed in the fraud register, which in turn may cause problems when applying for any new insurance. Damage during rental is never covered by your insurer, as it is explicitly excluded in the policy terms.
However, there are options to take out additional insurance for damage during the rental period.
Risk increase and measures
Once you have (compulsorily) informed the insurance company that the car will also be rented out, it remains to be seen what measures your insurance company will take regarding this increase in risk. Because the insurance company finds it undesirable that several unknown drivers will drive the vehicle, there is a good chance that they will cancel the insurance policy.
In that case, it will also be very difficult to apply for a new car insurance policy elsewhere.
In fact, with every new insurance application there are always a number of closing questions (morality questions) to be answered. The question whether car insurance has ever been cancelled by the insurer is one such final question. You must answer yes and explain this question for up to 5 years after the fact (even if the car has not been rented in the meantime). A denied insurance application is a possible consequence of this. In that case, perhaps the only option left is to insure with De Vereende (formerly Rialto). De Vereende insures special risks, but usually at a higher premium, because it also carries more risk. At best, your own insurer leaves the policy running, but at a higher premium or with restrictive clauses on the policy. Damage during the rental, as indicated above, is always excluded on your own insurance and you will need to purchase additional insurance for that.
Uninsured vehicle
Suppose you, as a landlord, have not paid the premium of your own car insurance (on time).
In that case, there is non-payment , which causes the insurer to suspend insurance coverage until the premium is paid. The renter is then effectively driving an uninsured vehicle and has a problem if stopped by the police.
This is because the police consult the database of the National Road Transport Agency (RDW) where the details of your insurer are registered plus the fact that the vehicle is not insured at that time.
If the RDW signals at any time (reference date) that the vehicle is uninsured, you run a high risk of a hefty fine. If the vehicle was insured anyway because your insurer forgot to report the insurance to the RDW, for example, then the insurer in question can issue a so-called article 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? Then, in theory, the additional insurer could issue this article 34 WAM statement. However, we do not know whether the RDW will accept this, since this is not the insurer registered with the RDW.
New insurance application
When applying for new car insurance, all damages suffered and driven must be reported, regardless of who was driving the vehicle at the time of the damage. Thus, damages incurred while renting must also be reported. If these are many, they may cause delays in the underwriting process. If you do not report the damage(s) because, for example, you forget them (since you were not the driver), the application will be even more difficult, take longer or even be refused completely. The Vereende may then remain as the only possible insurer.
What insurance coverage do you have with a shared car?
Coverage abroad?
Always check carefully whether the additional insurer also provides coverage abroad and if so, in which countries. If the renter takes the car to a country for which the additional insurance does not provide coverage during the rental, no compensation will be paid in case of damage to, or theft of, your own car. If the additional insurer has to compensate an opposing party, then the damage payment and costs incurred will be recovered from you personally: after all, 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 the car is excluded on 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 (via Centraal Beheer). With any other intermediaries and with private rentals, you have to arrange this on your own initiative. As a rental company, do you forget to arrange such additional insurance or don't think it's that important? Then in case of damage to your own car no payment will follow, and the insurer will recover the damages paid to third parties from you. This is because your own insurer excludes coverage for damage during rental.
All claims are recorded in your name
To reduce or prevent the possibility of fraud, every damage in the Netherlands is registered in a designated database. Every damage driven and suffered is registered in the name of the license plate holder in the Fraud Information System Holland(FISH).
With a bit of bad luck during the rental, you can thus get many damages in this database in your own name, while you were not responsible for them yourself. These registered claims in your name may result in your application for new insurance not being accepted, or with restrictive conditions. Whether this concerns car insurance or, for example, household insurance is then irrelevant. The Fraud Information System is consulted for every new insurance policy.
Your insurer is going to recover from you
If the lessee has caused damage to others with your car, the victim - or his insurer - will initially turn directly to the (third-party) car insurer under the direct right of action. In fact, one may apply directly to the insurer without notifying you first.
The details of your insurer can be obtained from the National Road Transport Office (RDW). The RDW records whether and where cars on the road are insured. Please note, your own car insurer is listed in this and NOT the insurer where the car is insured during the rental. If the driver of your car (the renter) is liable, the insurer will have to compensate the victim in full. And because you are the contracting party, your insurer will then recover the damages and all costs incurred from you personally, because damages during rentals are excluded from coverage.
If you have taken out additional insurance for the rental period, then you can turn to that insurer and ask them to handle the matter. Whether or not they do this (immediately), you remain responsible for repaying the damage to the insurer until then.
Example:
Suppose the renter of your Opel drove into the back of a Fiat and caused €5,000 in damage.
The insurer of the Fiat will check and claim your insurer through the RDW.
Your insurer will pay the €5,000.00 to the victim or the victim's insurer and will then recover the paid damages from you personally because there was no coverage (during the rental). You could turn to the additional insurer on this, asking them to take care of this claim, but during this process the claim will remain against you. With a small car damage, this might not be a problem, but with a personal injury claim of thousands of dollars, it becomes a different story.
Snappcar states that the additional insurer deals with the damage immediately and that it almost never happens that the own insurer is addressed.
However, Alpina strongly doubts this since (the insurer of) the victim will always send a liability claim to the insurer using the data from the RDW (where only your own insurer is listed). The insurer may not refer the victim to another insurer, but must 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 the insurer is held liable by a victim or his or her insurer, the damage will immediately be registered as a 'fault damage' unless it is established beyond doubt that the driver is not liable. This at-fault claim registration immediately affects your claim-free years and no-claim discount, and may also result in a higher premium. At a later date this may be able to be administratively reversed, but during this period you will face a higher premium. If you are unable to pay this more expensive premium, this can result in registration as a 'defaulter', which in turn can cause coverage to be suspended. This puts you at risk of a hefty fine from the RDW because of the uninsured vehicle.
Since your insurer may not refer the victim, the claim will have to be handled regardless. Perhaps the additional insurer will reimburse the damage at a later date, but insurers are not keen on unnecessary administrative actions and the question is how this will be handled (in the long run).
Exclusions
Should you have plans to rent out the car, check carefully in advance what differences in coverage exist between your own insurance and the additional insurance you take out during the rental (whether or not through the intermediary). It may be that the additional insurer - which covers the damage during the rental - has certain exclusions, limiting conditions and/or additional deduct ibles.
Own risk
At Centraal Beheer (the additional insurer that Snappcar and MyWheels, among others, work with), the amount of the excess 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 the car, the additional insurer that covers the damage during the rental will pay the damage to you minus the excess. You will have to advance this deductible yourself to the garage where the car is being repaired. The question is how quickly Snappcar will pay this deductible to you. Snappcar states that the deductible is for the account of the renter, but the question is whether Snappcar guarantees this and how quickly it will be paid.
The situation can 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
Should you go to rent a private car, whether through a broker or not, check carefully whether the car is insured including occupant insurance. For example, information from MyWheels shows that the insurance during the rental does not include passenger insurance. If the occupants suffer injury or property damage during a loss event, this damage is not covered. If the driver is liable, the occupants may have a claim against the vehicle's third-party insurer. After the claim is paid, the insurer will recover it from their own insured (the rental company) because there was no coverage during the rental.
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 on a new-for-old basis. 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 scheme, with or without deduction of a small percentage of depreciation.
The insurance company that insures your vehicle during rental (whether or not arranged through the intermediary) always handles such a claim based on the current value.
If the renter total loses your car, you will not be paid the new-for-old value, but the current market value, and you could lose thousands of euros. Your own insurer will not be able to reimburse you for the difference, because they exclude damage during rental. In short, you can end up with an enormous loss.
If the renter totaled the vehicle, for the amount paid (the current market value), an equivalent vehicle cannot be purchased. The difference between the daily value and the purchase value of a replacement equivalent vehicle cannot be recovered from the renter.
No cover if the hirer allows another driver to drive
Intermediaries state that the supplemental insurance provides coverage only if the registered driver is driving the vehicle. Thus, if the renter allows another driver to drive the vehicle, the additional insurance will not provide coverage for damages either.
Your own insurance does not provide coverage anyway because it excludes damage during rental.
Unfortunately, because you as the rental company are not present during the ride(s), you have no control over who the renter lets drive the car. Nor does there have to be malicious intent. Perhaps the renter is not feeling so well and lets the partner drive. If a damage then occurs, it will not be covered and will not be reimbursed by any insurer.
It can also happen that the registered renter drives your vehicle, but under circumstances under which damage is still excluded by the insurer. This applies, for example, when the damage occurs if the renter drives without a valid driver's license, if they intentionally caused the damage by participating in a race, or if the driver has an excessive blood alcohol level. All circumstances that the insurer excludes and in which the damage to your car is not compensated.
In short, a big risk for you as a rental company because in that case you are left with damage or have to go after your money yourself - whether or not through a lawyer - 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 lessee has no interest in your vehicle and therefore there is no guarantee that, in the event of damage, the claim form will be completed (properly, completely and promptly) and that the lessee will otherwise provide all cooperation. However, the claim form and cooperation are essential in the claims process. As long as the insurer does not have a claim form, there will be no compensation. If the form is not filled out properly or incompletely and the tenant's cooperation is minimal, this may even result in you being (partially) stuck with your claim because the insurer will not be able to settle and/or recover damages.
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 the vehicle(slipping tires, too fast/slow shifting etc.). Any damage as a result is not always immediately detectable 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.
APK
If the car is not MOT tested on time, insurers may void your car insurance coverage in case of damage (think of damage caused by malfunctioning brakes or slippery tires, for example).
If you, as a renter, are stopped in a car whose MOT has expired, the fine will be issued directly to you as the driver and you will have to pay it (initially).
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 license plate holder. The giro slip from the Central Judicial Collection Agency will therefore fall into your mailbox. Although the renter (or the intermediary who acts as guarantor) will eventually have to (re)pay the fine, you remain ultimately responsible to the Justice Department and if you are unable to advance the fine yourself, this can cause problems with the Justice Department. Moreover, it remains to be seen within what period of time the intermediary or the renter will pay (back) the fine and what effort you will have to put in.
If you rent the car without an intermediary, you will have to recover the amount of the fine from the renter 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 lessee of the car has unpaid traffic fines outstanding and is stopped by the police, the police may impound your car (which the lessee is currently driving) if the lessee 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 lessee. However, under the Mulder Act, which the police can invoke, this is possible. - Does the lessee of your car have debts with the tax authorities? Then in principle your car could be recovered by the tax authorities under the Soil Right or Soil Seizure. The tax authorities may then seize all movable property that is on the tax debtor's soil but does not belong to him or her.
In both cases, therefore, the landlord is at great risk.
More on this in the following articles:
Other risks?
Reliable tenant?
Within the rules of privacy laws, screening cannot be very intensive.
In fact, it only becomes apparent afterwards whether a tenant is reliable or not, but by then it may already be too late. Also, a particular tenant may be reliable at some point, but this may not always remain so. Without rescreening, you won't find out.
Personal Data Protection Act
As a tenant or landlord, check carefully whether the intermediary you are dealing with is affiliated with the Dutch Data Protection Authority. If that is the case, then you know that this organization acts in accordance with the Personal Data Protection Act and that the privacy-sensitive data you need to pass on or upload (such as a driver's license or license plate) are therefore guaranteed.
Criminal activity done to your car?
If you rent your car, then you know virtually nothing about the person who is going to rent the vehicle and what they intend to use it for. Drug couriers, ram-raids and other criminal activities seem unlikely but certainly cannot be ruled out. Aside from the fact that you probably want to stay far away from that, another factor that comes into play is that the insurer will not pay compensation if the vehicle was used for purposes other than those permitted by law. This means that damage to the vehicle remains at your own expense.
In what condition will you get the car back?
The lessee may not returnthe car in the condition in which it was given.
For example, there may have been heavy smoking in the car or the interior may have been soiled by pets. In that case, the broker could impose a fine on the renter, but if the renter denies it, this creates unnecessary extra hassle.
If you rent the car privately, i.e. without a broker, then this is an additional point of concern.
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 case 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 do need your car on the agreed rental day, you can cancel the rental request (at the last minute). However, the intermediary can charge a penalty at that time. This is because the hirer has a problem because they had counted on the car.
If the renter returns your car (much) too late, while you needed the car, you are forced to rent a car yourself or use public transportation. You can try to recover these costs from the renter, but it depends on his cooperation or the intermediary whether and how quickly you will get these costs back.
Is the tenant careful with 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 damage, the usual processes will be 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.
Reaction Snappcar
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 won't encounter unexpected surprises.
Consumer Association review
The Consumers' Association tested Snappcar in May of this year, and finds that while the idea is likeable, in practice it is not flawless. For example, far from every car that seems available on the website is actually available in practice. The test, as well as the experiences of users on the Consumers' Association website and the Snappcar Facebook page, show that the Snappcar website regularly has malfunctions, that the rental contract is not always in time and that requests are regularly rejected (at the last minute) because the availability is not up to date. Furthermore, the Consumers' Association indicates that you are actually doing business with consumers who may have all kinds of demands and do not always update the availability information on the website properly. As a result, you can't always count on renting.
(Source: consumers' association)
In the end, what is the conclusion?
Renting out your own car means an investment of time anyway.
Among other things, the lessor must maintain the availability information on the website, formulate requirements and rules, arrange the key exchange, keep track of mileage and fuel levels, note any damage that may or may not be present, and advance fines and deductibles in the event of a traffic violation or damage. These additional items, as well as the additional maintenance, wear and tear and depreciation due to the rental, will have to be factored into the rental price by the lessor in order - in addition to the intermediary's fee - to earn something himself from the rental.
Also, as clearly described above, renting out one's own car is certainly not risk-free, and sometimes even very dangerous. So you may wonder whether renting out is worth the effort and risk in relation to the earnings. The same goes for renting from private individuals. Professional rental companies need not always be more expensive, and if they are, then there are fewer regulatory issues and risks.
In short, whether a car is borrowed, shared, rented or leased, all is well, if considered.
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