By Jeff Cohen, Georgia EVentures, LLC
“You bought a brand new Tesla Model S just to rent it out to people you don’t even know?” I get that question asked all the time when I tell them that I purchased my 2015 Tesla Model S new so I could rent it out.
“Why would you want to do that?” is always the second question.
The answer is really quite simple. After a year of looking at second-owner Tesla Model S purchase opportunities online, I decided to create my own 3-year-old Tesla and give people who want to drive one for longer than a test drive the opportunity to help me fund it. This was my way of using a GoFundMe account without actually setting up that type of financing.
So how exactly does this work? The chart below shows the sources I used to finance my brand new 2015 Tesla Model S 60 (outflows) and the sources of funding to pay for it (inflows):
I used conventional automotive financing (cash-down auto loan note) to acquire the Tesla. That is represented by the 2015 cash outflows totaling the purchase price (sales tax and registration fees are captured in net income from rental business).
To self-fund the Tesla, I used the following means to recoup my upfront costs, targeting a three-year holding period:
- Established an LLC. I set up a Limited Liability Company (LLC) in Georgia to establish a business entity for renting out my Tesla, and creating the structure to report income and expenses for the rental business. It’s called Georgia EVentures, LLC.
- Income Tax Credits totaling $12,500 (Federal $7,500 and $5,000 from Georgia – now repealed), which will be taken against 2015 Federal and State Income Taxes.
- IRS allowed luxury car business use depreciation totaling $11,300 over the three-year holding period because the Tesla is used as a business asset not a personal vehicle.
- Net Income from Rental Business with losses in years 1 and 2 due to startup expenses and ramping up of rental income in 2016–2017 and ramping down in 2018 as the vehicle ages.
- Residual Value of 50% at end of Year 3: this vehicle should be worth 50% of its purchase price at the end of year 3. $42,235 for a three-year-old Tesla Model S60 with Autopilot and with 5 years of battery warranty and a year of factory warranty should be a strong car on the used market. But my plan is to keep it and make it my personal vehicle in 2018. Hopefully a 100 kWh/300+ mile replacement battery will be available by then.
Renting out the Tesla. So, how does that work?
Rental Platform. About a year and a half ago, I met two guys in Athens, Georgia, who started up a local EV car rental business called Juice Car. They purchased a Nissan LEAF and a Chevrolet VOLT and began renting them out by the hour/day/week through a San Francisco–based carsharing platform then called RelayRides. As the idea of renting my Tesla began to form, I looked into RelayRides (now called Turo) and liked what I saw. Turo offers vehicle owners a platform to market their vehicle, set pricing, manage the car’s availability, and communicate with prospective renters. Turo provides each renter with $1 million worth of auto insurance liability coverage and an easy-to-use pre-rental photo documentation feature so I can provide proof of vehicle condition before each rental. I can set airport delivery fees ($100.00 round trip) and add my own personal rental policies (e.g. no pets, small damage and cleaning fees and excess mileage charges). Customer support has been excellent with questions/issues resolved within a day. Until recently, Turo offered up to $100.00/month in marketing cost reimbursements for my Facebook page advertising. I currently charge $199.00 per day, well below Enterprise rates.
Renter Experience. Since July, I have rented out the Tesla to 12 renters. Overall, the experience has been very positive. People who rent a Tesla know what they are renting and tend to treat the car with a great deal of respect. Once a rental is confirmed, I send out my 3-page Quick Start Guide and provide links to Tesla’s excellent Walk Through video series. Almost every renter has test driven the Model S, so I can focus on new/updated features like Autopilot. I conduct a walkthrough and short test drive with the renter prior to handing over the key fob.
Renter profiles. So, who has been renting your Tesla? Not surprising, the majority of renters are pre-purchase intenders, individuals who plan to purchase a Tesla and want extended time behind the wheel to be really sure before they plunk down $65,000–$100,000 for a used or new Model S. These renters span the demographic spectrum. The second most popular rental use is as the Wedding Day ‘getaway’ car. A quarter of the rentals have been for this purpose; a one-day rental just for the bride and groom to drive away from their reception in a very cool (but never decorated) vehicle. On one occasion, the groom was too young (have to be 30+) to rent my car. So, I agreed to put on a suit and drive them from the reception to their hotel on the same property. Easy money! Then someone brought two small dogs to the car saying ‘here ya go, they are coming along for the ride.’ I was in disbelief, but here I am babysitting two small dogs barking away as the bride and groom take their final pictures of the night. That led to the ‘no pet policy’ and, fortunately, only a slight nick to the door panel trim was experienced.
How long do they rent and how far do they go? The average rental is 3 days, which balances the 1 day renters against a few 5–6 day trips. The Tesla is required to stay within Georgia, but trips down state can quickly become high mileage drives. I allow 150 miles/day, and my longest renters have driven 725–840 miles. My shortest-distance renter drove only 75 miles. Only one renter has paid excess mileage charges, as they could not get the Tesla returned and kept it over night (secured overnight parking required). Six months of renting has resulted in almost 11,000 miles being put on the Tesla!
Rental Issues. The biggest challenge to renting the Tesla is to ensure that renters know where/how/when to recharge the car. Because it is a fast and powerful rear-wheel-drive vehicle, they naturally love to ‘blast off’ from a standing start. Well that eats through a 60 kWh battery (EPA rated at 208 miles) pretty quickly. Fortunately, I can monitor the vehicle through my Tesla iPhone App. I always know where the vehicle is located, how fast it is being driven, and when it is being charged. Atlanta is a perfect city to rent the Model S because we have 14 Supercharging stalls centrally located in downtown Atlanta (10) and a large suburb (Decatur Tesla store — 4). Plus, we have over 700 L2 and DCFC stations, so finding a place to charge is not the problem. So far, I have had to call a “Code Red” to just one renter who let the battery get down to 12 miles of range. He was only a few miles from the Atlantic Station Supercharger, so crisis averted. I recently had to add a ‘battery excess wear fee’ to my personal rental conditions based on seeing all of the 600–900w/mile spikes on the energy histogram gauge.
Minimizing Vehicle Damage. Fortunately, my Tesla has only suffered one door ding, which was easily repaired with touch up paint. That renter sent me an extra $100.00 for the trouble. Four things I did to prepare the Tesla for rental has dramatically reduced incidental damage:
- Body armor placed on the front fascia/hood, A-pillars and part of the roof and on the rear fascia and rear door kick up. This has saved the car from the usual stone chip problems.
- Plexiglas Windshield sheet which protects the windshield from stones and other flying debris and keeps those annoying little star bursts away. This was a $500 add-on but well worth the expense.
- Alloygator Rim Protectors have taken beating and will need replacement but have protected the 19” rims from the ubiquitous rim rash Teslas experience due to their width. Best $100 investment I have made to protect my car!
- Paint Protection from OptiCoat provides incredible paint protection and a lasting shine and makes between-renters cleanup a 30 minute task! Renters like a vehicle that looks new; OptiCoat keeps it looking new. The detail firm I used, Peach State Detail, recommended I protect the leather seats as well. Good thing! A friend smeared black ink across the light grey leather rear seats. I panicked, and contacted the owner, Bryan Burnworth, who in turn called OptiCoat tech support. With a light application of the undiluted OptiCoat solution, the ink stains came right out without a trace of residue!
Last question. Do you ever get to just drive the Tesla yourself? Absolutely. I park the Tesla about 15 miles from my home in a more centrally located place in Metro Atlanta and I detail it at home, so trips back and forth for pre-rentals are the majority of my drives. But I have taken the Model S on two company business trips averaging 950 miles each and on personal trips to Nashville and Chattanooga, TN. From a mileage standpoint, 78% are business-related miles (rental, rental prep, Tesla service visits etc.) and 22% are for personal use. An exact mileage log is required for business use documentation.
Check back with me at the end of next year and we can see where things stand at the midpoint of the three-year holding period!
Jeff Cohen is an EVangelist who publishes the Atlanta Electric Vehicle Development Coalition blog (www.atlantaevdc.com), operates Georgia EVentures, LLC (www.gaeventures.com), and works by day as the National Sales Manager for General Electric’s EV Infrastructure Charging business in the US/Canada. He’s also a long-time CleanTechnica reader, and we are very grateful that he decided to share this info with our readership here.
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