A car dealer working out of the Atlanta area often films conversations he has with clients about their bad car loans. In the spring, a caller says he purchased a course on how to rent vehicles on Turo as a business model. After taking the course, he financed several cars. Nine months in, though, and the storyline isn’t as positive as he thought it would be.
“I didn’t know that could happen.”
He bought a 2022 Tesla Model 3 for $34,000 at 12% interest. His payment on the Model 3 is about $800 a month. Then, he signed for a 2023 Mercedes-Benz C300 for $44K with an 11% interest rate. His monthly payment landed at about $1,000 on it. The 2023 Audi A3 was $33K. He only put $1,000 down on the A3, so his interest rate is higher – 14%. That payment is $800 a month.
He has decent credit, 695..but all three loans are considered high interest. So, all told, he’s shelling out $2,600 a month just on car payments. That doesn’t include insurance and other overhead costs.
The caller says he was making payments on the Mercedes on time. However, it was suddenly repossessed…while a Turo guest was renting it.
When he called the bank, they told him he was breaching the loan contract. He didn’t even know that was possible, he explained to the dealer, Yusef Benallal.
Some people rent on Turo to actually avoid repossession
If you follow Benallal, he often advises drivers underwater on bad car loans to see if they can rent the vehicle on Turo. While it doesn’t free them from the loan, it’s a way to create an extra income stream. This helps mitigate the loan payments. Once the loan is paid down below the car’s market value, the driver can sell it or trade it in for a more affordable option.
Here, though, the car dealer explains that yes, you can get a car repossessed if you rent it out when the loan terms explicitly forbid it. This might even include using the vehicle to taxi people, like Uber or Lyft.
Private financial institutions can prohibit renting or using a vehicle in certain scenarios because they view the risks to loan term completion as “too high.” They want to make their money, which they do from interest on a full loan term.
The client tells the car dealer that overall, renting the cars out “isn’t ideal.” He’s making some money, but it’s a lot of work for a small profit. At this point, the caller just wants to sell all three cars and abandon the Turo business. It sounds like Benallal will try to work with him. However, it might be difficult for the caller to get out of all three without facing gaps in the loan balances and their trade-in values.
