They Rented Their Cars Out Online. Then Things Fell Apart

(Bloomberg) -- Los Angeles resident Matt Hauer has been renting out his Toyota Corolla to strangers since last May using the popular car-sharing app Getaround Inc. Occasionally his renters got parking tickets or left messes, but he was always satisfied with how Getaround addressed the issues. 

Then last month, his front bumper partly fell off and began dragging—which he said his mechanic assessed as the result of a renter’s fender-bender. But this time, Hauer’s attempts to get Getaround pay the $1,200 bill degenerated into a string of unanswered emails and long stretches of waiting on hold. His last interaction with the company was a phone call last week. “They told me they’d call me back in 10 minutes,” he said. “I have yet to hear back.”

The economic crisis triggered by the Covid-19 pandemic is hitting startups hard. More than 7,000 employees at young tech companies have lost their jobs since March 11, according to the website Layoffs.fyi, which compiles public reporting. The so-called sharing economy in particular has been hobbled by the reaction to the pandemic. On March 20, Bloomberg reported that Getaround was actively looking to sell itself and could seek bankruptcy protection if it couldn’t secure a deal. It cut jobs in late March.

“Like most startups, we are often in discussions with potential investors and strategic partners, some of whom may also be potential acquirers,” a Getaround representative said in a statement. “With the amount of uncertainty related to Covid-19—we are continuing to model scenarios for the business as we often do throughout the year. We are not actively seeking bankruptcy protection.”

Getaround’s main competitor, Turo Inc., said this week it had also reduced its staff by 30%. A Turo spokesman said it was in a “great cash position to weather this storm.”

In interviews with Bloomberg, six car owners said they’ve had increasing trouble in recent months getting Getaround to pay for costs related to rentals. In two cases, car owners said Getaround had agreed to pay repair shops directly, but that mechanics wouldn’t release their cars for days because the money didn’t come through even after Getaround assured them it had been taken care of. In another incident, a user said the company has yet to send her the money renters paid to drive her car.

Getaround, most recently valued by investors at well over $1 billion, had been having trouble before the pandemic. Starting late last year, there were noticeable changes in the startup’s responsiveness and willingness to pay for rental-related costs, the car owners said. Like Hauer, they said the shift was particularly stark given Getaround’s reasonable track record before then. In January, the company announced a round of job cuts, which it attributed to being “pressure tested due to rapid growth.” 

“We acknowledge that there is still work to be done to achieve our goals and we are working directly with a small group of owners who have experienced delays in the recent past in having their claims resolved,” a Getaround spokeswoman said in an email. She said the company had brought on new employees and managers to its claims team. Getaround said it rarely pays mechanics directly for repairs, which may have led to delays in those cases where it did so, and that it is unaware of any cases of car owners not receiving rental income. 

But frustrated car owners began to worry that the issues they’ve been experiencing reflected deeper problems at the company. One Los Angeles resident who began renting out two cars on Getaround in early 2019 said she had been so worn down by the difficulties in recouping costs for parking tickets and cleaning costs related to renters smoking that she had just paid for some of them.

This person, who asked not to be named because she works in entertainment and doesn’t want a dispute with a car-sharing company showing up when people search for her on Google, said she’s now concerned about paying her leases without the $900 in monthly car-sharing income she had been making. “Honestly I feel so bad for whoever the founder of the company is,” she said. "At the same time, if they do go out of business, I can’t afford to lose that money.” 

Andie Kantor, a librarian who lives in Hawthorne, California, is just the type of car-owner you might expect to see in a Getaround ad. A single mother, Kantor saw the platform as an appealing way to make extra income. She purchased a Prius last year specifically to rent on Getaround, using the money to cover both its monthly costs and those of her primary vehicle. “My finances are tied up with this car,” she said. 

In February, a Getaround renter got into an accident that left the Prius seriously damaged. It took Kantor more than a week to get Getaround to arrange for a tow truck to take the car to a service shop, she said. Then, when she went to pick it up, the mechanic refused to release it, saying that Getaround hadn’t yet paid him, and still owed him money for a previous job. It took another 10 days of haggling, Kantor said, to get the company to pay. In total, she lost a month of rental income and now can’t rent out the car at all because of the pandemic. 

Hauer, the man whose bumper became detatched, has temporarily removed his car from the platform because he doesn’t think it’s safe to drive. Both he and Kantor said they’re considering selling their vehicles. “It all depends on the virus and how this works out,” Kantor said. “I don’t even know how to sell it at this point, because no one’s open.” 

©2020 Bloomberg L.P.