Cars have never been in such short supply. Rental cars that I’ve been lucky enough to find, in our inflation-free economy, cost 2X what similar cars at the same locations cost in 2019, e.g., $120/day for a Camry at Dulles Airport.
The Democrats who rule in Washington, D.C. have promised higher tax rates on the subjects. Sales tax on a new car is a “state and local tax (SALT)” deduction that was limited during the Trump administration. (The richest 1% get more than half the benefit form a big SALT deduction, so the Democrats who say that they’re upset about inequality would have some explaining to do if they were to restore this and were unlucky enough to encounter an independent journalist.)
What if we combine the above trends? Any new car that we happen to have ordered should be rented out via Turo! People who can’t find cars at Hertz, Avis, and Enterprise will be forced onto the Turo platform out of desperation. Rates obtainable via Turo should be much higher right now than in previous years. Suppose that the new car is used primarily or exclusively for Turo rentals for a year or two. Wouldn’t you then be able to deduct sales tax, insurance, garage space, depreciation, and other car-related expenses?
Suppose that the U.S. economy goes from boom to bust? (after all, we’re told that low-skill migrants are the primary driver of U.S. economy prosperity and the Biden administration is talking about deporting thousands of Haitians) We get back to the days when anyone could walk into a car dealer and buy a car and anyone could go to the Hertz counter and rent a car for $45/day. Shut down the Turo operation and convert the car to personal use, having managed to cover much of the cost of the car via rental income that was mostly balanced out by deductible expenses and therefore that didn’t get taxed.
Some Lamborghini owners working the tax angle or would it work in a tax-free environment (these seem to be all in Beverly Hills, but there are also some in Miami)?
There are perhaps 100 Corvettes available from Turo in Southeast Florida. They range in price from $85/day (2010) to $200-400/day (2020 and 2021 C8 version). Here’s a 2020 in NW Miami that has been rented 55 times at $299/day:
Omar lets people run up 200 miles per day as part of the price. Let’s say that he’s rented it for 110 total days (2 days per rental) and that Turo takes 30 percent of the revenue. Omar’s revenue is about $23,000. Suppose that people actually drove it 15,000 miles during these rentals (i.e., not quite the full 200 miles). Omar is charging $1.50/mile for extra miles driven. So if that number reflects the cost of depreciation and marginal maintenance from miles driven, he has actually not made any money (since $1.50 times 15,000 is $22,500). This YouTube enthusiast, at about 6:00 in, says that the C7 depreciated 48 cents/mile driven and predicts the same rate for the C8. On the third hand, 60 cents is probably the new 48 cents in our inflation-free economy. So Omar’s costs are perhaps 75 cents/mile driven (depreciation plus tires/oil). That leaves a profit from $23,000 of rental of only $11,750. That hardly seems worth it unless he is getting some huge tax savings on what would otherwise have been a non-deductible personal purchase. The IRS allows depreciation of $18,200 in 2021 and $16,400 in 2022 for a car placed into service in 2021. For a Californian or New Yorker in a roughly 50% state+federal tax bracket, that’s a potential tax savings of over $17,000 from the depreciation (though if the Turo business never makes any money, the IRS has a better chance of saying “that Lambo is a hobby”).
What about humbler vehicles? In our vicinity, I found a $30/day Hyundai Sonata 2016 (joined August 2021; never rented), an $87/day Tesla 3 2018 (joined April 2018; never rented; “The host cancelled this trip 11 minutes before it started.” and “The host cancelled this trip 3 hours before it started.”), a $48/day Kia Sorento 2017 (9 trips), a $35/day 2012(!) Camry (24 trips), a $39/day Volkswagen Jetta 2018 at $39/day (70 trips; this one must actually work as a business).
Readers: Did Turo get much more popular during the rental car famine of 2021? And will the Biden tax rates boost Turo yet higher? When the UK had high tax rates, one response was that nearly all cars of any value became company cars, paid for with pre-tax dollars (of course, the most sensible response was to emigrate to Australia, Canada, or New Zealand, and that worked out great for most of those who abandoned the sclerotic U.K.).
Related:
- “Tax Deductions for Turo Car Rental Fleets”
- “Top Tax Write-offs for Turo Rental Car Company” (LYFE Accounting)
- “Child Support Litigation without a Marriage” (another source of tax-free income, potentially 100X more than you could make from renting via Turo)
I wonder if any of the Big Brand rental car places that are independent franchises are using Turo “in the background” so to speak? It would make sense to me that some of them would try to use Turo in double-secret mode to rent out cars that aren’t moving off the lot otherwise, because Turo Disciples prefer to use Turo.
I used Turo for the first time in 5 years due to pandemic for one week car rental for our yearly family trip. We rent a midsize car for the same week for the last 8 Summers. The price of this year’s Turo rental (2015 Camry $560) was only a little more than last year’s Enterprise rental form the airport (2019 Altima $500). But this year’s Enterprise rental was going to be $790 for a compact car and $820 for a midsize. I had tried Turo once years ago and the price savings was about $100 over the airport rentals, but I found the extra hassle of coordinating a pickup and drop off not worth it, but a $250 savings shifts the amount of convenience I’m willing to forego.
In both my rentals the car owners were clearly “power renters” operating a fleet akin to the AirBnB Super Hosts that are running an ersatz hotel operation. Much like AirBnB the idea of a car owner renting out their personal vehicle on the weekends is just a fairy tell Turo likes to tell to ward off regulation.