Why Car Sharing Services May Be a Lousy Deal

NEW YORK (MainStreet) –In a sluggish economy, consumers are throwing quarters around like manhole covers.

One way they’re looking to save a buck on driving costs is to drive less, and that’s where car sharing services come into the picture. With car sharing, consumers can get access to a car at a fraction of the cost of ownership. Car service customers usually pay an annual fee, and a per-hour fee for use of a car, and can walk away once their trip is complete.

Sounds great, right? But hold on, for all its pluses – especially usage with no ownership accountability- car sharing customers may not feeling like "sharing" after hearing more about car sharing services.

Certainly, there is no doubt that car sharing services are increasingly popular, especially with urban consumers.

In a study on the impact of car sharing, the city of San Antonio, Texas notes the rising tide of support and growth for the industry:

“Car sharing offers numerous economic, environmental and community benefits to San Antonio residents and employer,” says the report. “Multiple jurisdictions have successfully incorporated car sharing into their municipal operations, and car-sharing operators are well-versed in partnering with public sector entities to launch and manage car-sharing programs.  The prospective growth in car sharing – in existing and new markets – is forecast to be strong over the next decade.”

There’s also the positive impact that car sharing has on the environment. A 2010 study from the University of California surveyed 6,000 car-sharing users and concluded that the very act of using such a service shows  that “the average number of vehicles per household of the sample drops from 0.47 to 0.24. Most of this shift constitutes one car households becoming car-less.”

The study also shows that car sharing also reduces the amount of gasoline needed among survey participants.

So why isn’t car sharing a no-brainer? Here are a few reasons that come to mind:

Lack of adequate insurance: Car insurance is at the top of the list of potential car sharing headaches. By and large, The New York Times reports, auto insurance liability coverage is capped at $300,000, a number that might not be sufficient in the event of a ‘serious” accident.

As The Times notes, median jury awards brain damage alone top $289,000. Toss in a leg injury, and you’re looking at a median jury award of $192,000. Considering the skill level of most young, urban drivers, the odds of an accident can be higher than normal.

Booking issues: Ideally, you have to book a car "rental" at least a week in advance for Saturday and Sunday usage, and you’re better off giving the care sharing service two weeks notice. That leaves any spontaneous weekend road trips up in the air, with no guarantee you’ll get access to a vehicle. Another potential issue is leaving personal possessions in the car – there’s no promise you’ll get them back.

Condition of the vehicle: When car sharing, the vehicle you choose may or may not be in the best condition – it’s, for the lack of a better word, a real crapshoot. Common courtesy is the rule with car sharing services, but that doesn’t mean you’ll get a pristine vehicle, or one that even works.
High taxes: Cash-strapped cities tend to look at car sharing services as cash cows. In a DePaul University study, researchers found that car sharing consumes were taxed at an alarmingly high rate.

“In many markets, including Miami, New York, Philadelphia, Pittsburgh, Seattle and Tampa, one-hour car sharing reservations are taxed at well over twice the prevailing rate of sales tax,” says the DePaul study. ”In seven of the 25 largest cities in the study‘s sample of 82 cities with car sharing services, taxes on one-hour reservations exceed 30%.  Nationally, the average tax is 17.93% for one-hour car sharing reservations and 14.08% for 24-hour reservations.”

None of these issues, save the insurance situation, are potential deal breakers. But in the interest of full disclosure, know going into a car sharing experience that, while there are plenty of “pros” involved, you’d better be aware of the “cons,” too.