Take the Wheel

A decade ago, few people would have dreamed of handing over their car keys to complete strangers in exchange for quick cash. Individual car owners could hardly risk becoming their own Avis, Hertz or Zipcar–all companies that own or lease vehicles by the thousands and have the financial muscle to insure against fender benders, spills and theft.

But San Francisco–based start-up RelayRides, which launched in two cities in 2010, went nationwide in March and now claims 20,000 members, is betting that neighborly car sharing can take hold across the U.S. Backed by $13 million in venture capital from the likes of Google and General Motors, the start-up will promote its service through GM’s OnStar communications system starting this summer. It works like this: Car owners rent their vehicles for $5 to $20 an hour using a membership-based service that coordinates payment and logistics online. The business, started by Harvard Business School grad Shelby Clark, collects 15% of the hourly fee, with 20% going toward insurance. Car owners pocket the remaining 65%.

As more people move to cities–the number of American urban dwellers grew 12% from 2000 to 2010–more urbanites and young people who don’t own a car want access to one when public transport falls short. For car owners saddled with high gas prices, sharing their ride can provide extra income when money is tight. Also, if the service takes off, it could help the environment by reducing the millions of new, underutilized cars that are cranked out each year. “Peer-to-peer car sharing has tremendous social and environmental benefits,” says Susan Shaheen, a co-director of the Transportation Sustainability Research Center at the University of California, Berkeley. Market-research firm Frost & Sullivan estimates that more than 4.4 million North Americans will be sharing cars by 2016.

The trick will be getting more car owners on board. RelayRides has 1,000 vehicles in its network (compared with Zipcar’s 9,300). That’s partly because car sharing carries more responsibility than, say, renting designer dresses via Rent the Runway or someone’s living-room sofa via Airbnb. To allay fears, RelayRides runs driving-record checks on renters, and its insurance covers $1 million in liability for car owners and $300,000 for renters. Beyond that, it’s unclear who’s responsible, and personal insurers are understandably jittery. California, Oregon and Washington recently passed laws limiting insurers from canceling the policies of car owners who decide to rent their vehicles.

GM’s OnStar service could reduce squeamishness by providing GPS tracking of rented vehicles in case of loss or theft, as well as 24-hour roadside assistance. After all, for many people the idea of paring back to save the planet is nerve-racking enough.