Monday, December 15, 2008

Carsharing for Retirement Communities

I regularly get inquiries from people in retirement communities who realize that many residents are spending a lot of money owning vehicles that mostly sit around and realize that carsharing could be the answer.

I've heard that a few urban retirement complexes have had carsharing vehicles at them, most retirement communities are not located in urban centers, so doing-it-themselves is the only option at the present.

The most important issue to figure out is vehicle insurance - after that everything is easy. As everyone interested in carsharing finds out very fast, the carsharing concept is not embraced (or even very well-understood) in the insurance world. The insurance options vary depending on the business model that's set up - so it's a sort of catch-22 situation - you can't get a quote until you decide what kind of company you're going to be and you're not sure what kind of company you should be until you get an insurance quote.

It's worth noting that most commercial carshares have a 70+ age cut off, after which technically the member needs to provide an annual letter from a physician indicating they are fit to drive. That requirement by itself will often get a senior's blood pressure up a couple of notches all by itself!

To anyone contemplating starting a carshare, I would pose a couple of questions:

How large is the group of residents that wants to participate? If it's 5 or 10 households it's possible that doing something informal will be easier than trying to set up a formal business. Set up an LLC company to own the vehicle(s); agree the financial issues and on how to reserve the vehicles and how you'll notify each other. I'm told that Progressive has written a business policy for non-related individuals. Don't give up, keep asking.

If you see the service expending to more than 3 vehicles, you're probably looking at a creating a separate entity - nonprofit (or possibly for profit business) - to manage things. The options would be to set up a nonprofit or to build consensus within your group to have the management of your retirement community run the service (after all they probably already provide some transportation-related functions like vans to events). They could add the vehicles to their corporate liability policy (if they wanted to).

Establishing a nonprofit to operate the business itself seems the most likely. It could contract with a local garage to maintain the vehicles and clean them twice a month. The board would establish policies on membership, payment, reservations, gas reimbursement, etc. Many nonprofit organizations get their insurance from Non Profit Insurance Alliance of California, which works through brokers in many states.

Establishing a nonprofit corporation is very easy in most states. Don't worry about getting federal tax-exempt status for your nonprofit at this point, it's not nearly as important as you might think. It's primary benefit is to enable people who make donations to your nonprofit to write them off on their taxes. Any nonprofit can offer that right now by setting up a deal with organizations such as this or this.

A final possibility is to contact Enterprise WeCar, U Carshare or even Zipcar to see what their terms might be.  Typically, they will be looking for a minimum guaranteed usage revenue - probably over $1,000 per month and a minimum number of vehicles.  It's not worth your time to start talking to these companies until you have a pretty good idea of the number households that might be willing to use the service and how much they might drive.

If the majority of trips are likely to be a full day or longer - this is the domain of car rental and things are pretty straightforward. So a final option would be to try to make a deal with a local car rental operator, which in smaller communities may also the local car dealer, to set up a satellite rental "office" at your complex.  In this scenario your carsharing members would fill out car rental paperwork in advance, similar to joining one of the national car rental company's "number 1 club" with prearranged car rental preferences (such as supplemental liability coverage) and authorization. If the vehicles would come from your members, perhaps the rental company would agree to a management fee per rental or per month rather than providing the vehicles themselves.  

Of course this post doesn't get into technology or any of the other management issues which will be somewhat specific to the decisions made above. The best single guide to starting a carshare continues to be the short and long publications by City Carshare in San Francisco. Other resources can be found in the library at including my now somewhat out of date 2004 guide for startups.

So here are a couple of more questions for small scale operations to get you started:

1) Are the vast majority of the trips your members will take going to be more than 12-18 hours?

2) Will a large percentage of the households in your potential carsharing group not own any car/truck at all?

If you answer yes to both of these, then consider a car rental model - easier insurance being the big advantage.

This is a start. I hope many others will contribute their ideas, suggestions and experiences below, as well.