Many risks in renting out your car

MOOVBY is a new mobile app which matches private car owners with customers who prefer to drive instead of being driven.

Owners who wish to rent out their vehicles and the customers who want to drive them should be aware of the risks they are taking, as there are many considerations.

For the owners, they have to be sure it will not be the last time they see their cars after handing the vehicles over to their customers. Even a delay of a few days or weeks in returning the car would be a harrowing experience.

Should the worst happen and a police report be made, the case will be classified as NFA (No Further Action). After all, the car was not stolen as it was voluntarily handed over by the owner to the customer.

Likewise, making a claim would be futile as it is stated clearly in all motor insurance policies that private vehicles cannot be used for hire or reward.

The same applies to own damage claims, meaning insurance companies would not pay out a single sen if they discover it was rented out for a fee.

The authorities do not even have to wait for licensed car rental companies to complain against such illegal business.

All their enforcement officers need to do is to pose as customers, take the cars and send these unlicensed vehicles to secret yards where hundreds of impounded vehicles are kept.

In Peninsula Malaysia, the enforcement agencies are the Land Public Transport Commission which issues ‘Hire and Drive” permits, and the Road Transport Department with jurisdiction on other matters. In Sabah and Sarawak, the permits are issued by the Tourism and Culture Ministry.

Customers who hire such cars should know the risks they face. They should ask whether they are insured for third party injuries caused by them, if involved in a collision and others are injured.

They would not want to face a situation where the injured victims or their families file large claims through the court and the drivers would have to pay compensation as insurance companies can repudiate cover when terms and conditions of the policy are breached.

It gets trickier when it comes to vehicle damage and those who have rented from roadside operators would know.

They may have been advised that someone from the roadside operator would be making a police report in the event of an accident.

This person would claim to be a friend of the vehicle owner so that an own damage claim could be successfully made with the insurance company.

It may appear simple enough but in order to understand the complexity, it would be worthwhile examining how successful car rental companies operate.

Their frontline staff are trained not just to detect forged documents and particulars. They may also be able to pick up tell-tale signs of a con artist from their body language.

But such tasks are made difficult when confidence tricksters make use of an innocent party to rent a car.

There have also been many instances when genuine customers handed a rented vehicle to another party who had no intention of returning the vehicle to the car rental company.

Unknown to the public, major car rental companies insure their entire fleet under third party cover, as comprehensive insurance premiums are just too high, at 4.7 times more than private vehicles!

Thie difference in motor premiums is enough to cushion the loss of several cars a year and pay for all accidental damage repairs.

Many customers may not fully understand the terms and conditions of a rental agreement after reading it.

These terms and conditions differ among car rental companies, unlike the hire-purchase agreement which is standardised.

For example, the agreement can be written in a way that customers would be fully liable should the rented vehicle be stolen or damaged.

However, such liability could be reduced if the customer choose to pay for “car insurance”, which is different from personal accident insurance.

There are many names for such “car insurance.”

It started with CDW (collision damage waiver) and later “non-waiverable excess” was introduced.

Whatever the names used by a particular car rental company, customers need to be sure exactly what their liabilities are and the cost for reducing it.

If the cost or liability is too high, it is not worth renting a car to drive yourself.

Interestingly, the major business of large car rental companies is long term rentals which are charged on a monthly basis.

Large organisations, particularly multi-national corporations, prefer to rent instead of buy cars for use by their staff, particularly expats.

They would rather concentrate on their core business and not be bogged down by managing a fleet.

In Malaysia, few travel and tour companies ventured into the car rental business, even though it was highly profitable until 1998 when used car prices started to plunge.

Until then, car rental companies were able to rake in chunks of profits as the differences between market and book values for five-year-old cars were wide.

Today, even tour bus and limousine service operators stay out of the car rental business.

It would be foolhardy for private car owners to rush in where these experts fear to tread.

YS Chan

Kuala Lumpur