Car rental services not as straightforward as one thinks
Car owners who wish to rent out their vehicles and customers who wish to drive them must be aware of the many hidden dangers involved.
By YS Chan
Moovby is a new mobile app which matches private car owners with customers who prefer to drive instead of being driven around.
Owners who wish to rent out their vehicles and customers ready to drive them should be aware of the risks they are taking, as there are many hidden dangers.
As for the owners, it may be the last time they see their cars after handing it over to customers who do not return the vehicle. Even a delay of a few days or a few weeks can be a harrowing experience.
Should 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 the own damage claim, meaning insurance companies will 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 businesses.
All their enforcement officers need do is act like customers 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 nationwide. In Sabah and Sarawak, these permits are issued by the Tourism and Culture Ministry.
As for the customers, they are also at high risk. Should they be involved in a road accident where others are injured, they are not insured for third party injuries caused by them.
Should the injured victims or their families file large claims through the court, the drivers would have to pay compensation as insurance companies would repudiate cover when terms and conditions of the policy are breached.
It gets trickier when it comes to vehicle damage as those who have rented from roadside operators 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 can be successfully made with the insurance company.
It may appear simple enough but in order to understand the complexities involved, 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 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 the rented vehicle to another person who had other ideas instead 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.
The difference in motor premiums is enough to cushion the loss of several cars a year and pay for all accidental damage repairs.
But car rental companies have something up their sleeves as customers may not fully understand the terms and conditions of the rental agreement after reading it.
I should know as I have drafted such agreements without engaging the services of lawyers. The terms and conditions in rental agreements differ among car rental companies, unlike the hire-purchase agreement which is standardised.
For example, the agreement can be written in such 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 chooses to pay for “car insurance”, which is different from personal accident insurance.
There are many terms for these types of “car insurance”. It started with CDW (collision damage waiver) and later the “non-waiverable excess” was introduced.
However the various terms used are not important. Customers need to be sure exactly what their liabilities are and the cost of 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 rental 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 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 difference between market and book values for five-year-old cars was 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 is an FMT reader.
With a firm belief in freedom of expression and without prejudice, FMT tries its best to share reliable content from third parties. Such articles are strictly the writer’s personal opinion. FMT does not necessarily endorse the views or opinions given by any third party content provider.
Stay current - Follow FMT on WhatsApp, Google news and Telegram