Turo meets tremendous headwind in Hawaii: Attention tenants
Turo Hawaii grew so fast that it shook the entire Hawaii rental car market. But the tide is turning quickly as Turo owners face many new problems. You could say it was inevitable. After all, the purchase and financing of vehicle fleets to set up your own car rental company was always very risky and subject to certain premises.
1) Turo owners trusted that rental car prices would remain high enough for a Turo car owner to conveniently make money renting.
While this was true for many months, the cost of rental cars and Turo rentals has fallen precipitously. Not long ago, we were paying between $120 and $200 a day for Turo rental cars that we needed while we were doing auto repairs. We searched Turo prices today and found a plethora of Turo cars starting at $42 per day using the example of Maui Airport with dates September 14-21. There were 20 choices under $50 a day and dozens more for under $60. The sheer volume of cars available has us wondering if Turo owners will be able to rent out their vehicles on the scale planned.
In comparison, we found a new Hertz Ford Focus (compact) for $47 a day, including all taxes and kayak fees.
2) Turo owners believed that supply vs. demand would keep cars on the road almost all of the time.
That was true for most of last year, when many days it was difficult to find a Hawaii Turo car or Hawaii car rental. But now that has turned almost 180 degrees and there is no shortage of car hire, except perhaps on traditionally sold-out dates.
3) Turo owners expected to make enough money to profit from their business and pay off the vehicle creditor.
Turo Hawaii Cottage Industry.
What we are talking about is very different from someone who has a car or maybe even two cars that they rent out when not in use. This became a significant cottage industry that has sprung up here in Hawaii and elsewhere.
Turo renters need to be careful.
The biggest problem a renter might face is that the car owner can cancel a rental with Turo at any time before picking up the car. If this happens to you, you may be left without a rental car and need to find a rental car at the last minute.
Turo redemptions: There are two issues.
Problem 1: Auto loans turned upside down.
When the market went up, there was no problem. However, now that the monthly income of Hawaii Turo owners is falling as rental rates fall by more than 50% and continue to fall.
It was easy to buy cars during Covid, and there were also incentives, forbearance, unemployment, and other perks that helped earn the money that went in part to buying Turo cars, even as car prices escalated rapidly . But that’s all over. Some Turo drivers will either be forced to sell cars or risk repossessing them. Last month, Ford Motor Company’s chief financial officer said auto loan arrears were rising. Others are even more pessimistic.
Edmunds data showed that a whopping 13% of new car buyers now face monthly payments in excess of $1,000.
Problem 2: Lenders can repossess vehicles if the financing doesn’t allow for commercial use (Turo).
The second issue is that Turo car owners who financed their vehicles may be violating agreements that often don’t allow for commercial use. It appears that financing or leasing a car violates the terms of many contracts to lease the vehicle commercially. On Facebook we found reports of cars being confiscated by lenders for this very reason.
Cars that are wholly owned by the owners are the safer rental bet. But how can a Turo renter tell if the car owner fully owns their vehicle or not?
Turo and Hawaii remain at odds.
You may recall that a few months ago, Turo owners received subpoenas when attempting to use Hawaii’s airport facilities to drop off cars for their renters. And they have to be towed when parking Turo cars in airport lots. It might work at some point, but it hasn’t so far.
What options does a Turo renter have if problems arise?
If a Turo owner opts out of their agreement, the host must pay a $50 fee if they cancel a trip less than 24 hours before the start of the trip.
But what about the tenant? Turo will refund the amount paid by the renter. But will they get a different car? There is no such destiny that we can find.
Are you still using Turo Hawaii rental cars or has that changed?