The Basics of Carsharing Programs

Learn about joining an established carsharing program or starting your own.

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Many large cities and college towns have established carsharing  programs, such as City CarShare and Zipcar, which have  hundreds or thousands of members, centralized administration, automated reservation and billing systems, and other technologies that make the system efficient and keep costs low. Small carsharing clubs (of five to 30 members) can benefit from their size, too. A small group can keep things simple, do without the fancy automated systems, and let members do the administrative work.

Joining an Established Carsharing Program

If you want to share a car occasionally but don’t want to start a group from scratch, consider joining an established carshare. Typically, these programs keep cars in designated spots throughout the city. Almost anyone can sign up for a membership, which allows them to reserve and use cars. Most programs use an automated system to give members access to the car and track and bill usage.

In contrast to renting a car, carsharing is typically for short-term use of a vehicle, such as to run errands. If you plan to use a car for more than ten hours, it’s likely cheaper to rent a car. Another difference between carsharing and car renting is that most carshares are set up so you can reserve and access the car yourself, without going to a central office and getting checked in by staff. This makes carsharing more convenient and easier to use.

Carsharing programs are already having an impact on our environment and attitudes about car usage. According to a 2008 survey by Innovative Mobility Research, 279,000 people share nearly 6,000 vehicles in these programs across the United States, and these numbers are growing rapidly. Research has shown that for every car in a sharing program, eight cars are taken off the road. As carsharing programs grow, this could significantly change our landscape and free up a large amount of space currently dedicated to parking.

To find out whether there’s a carsharing program near you, check out www. CarSharing.net, which keeps track of cities that have carsharing programs.

Starting Your Own Carsharing Program

There's a lot to think about when you start a carsharing group. Fortunately, in smaller towns and cities, grassroots organizations are already paving the way for carsharing by developing the necessary organizational models, car access technologies, and so on. You won't have to reinvent the wheel if you start a carsharing club; you'll be able to draw on the experience and knowledge of existing carsharing organizations, large and small. You can also check out the resources available from CityCarShare, which offers guidance to start-up carsharing programs, including a manual on starting carsharing in your community.

The major difference between sharing a car with a neighbor and forming a carsharing club is in how you own the cars and distribute liability. If you plan to share a car with more than a few people, liability becomes a concern, and nobody should be expected to bear the risk for the whole group. In addition, without an intermediate entity, title to the car would have to change every time a member joined or left.

Forming an intermediate entity, such as an LLC or nonprofit organization, solves many concerns about liability and ownership. The entity owns and insures the vehicles and administers the sharing program. If one member gets in an accident, the entity's insurance is the main source of compensation; other members of the carshare generally won't be liable. As members come and go, title to the car remains in the name of the entity.

The intermediate entity may take a variety of forms, including a nonprofit organization, for-profit business, or cooperative. There are benefits and disadvantages to each. Forming a nonprofit and obtaining tax-exempt status under section 501(c)(3) of the tax code,  is a lengthy process, yet it can help you get grants, donations, and even free parking. At the same time, forming a for-profit company, such as an LLC, can encourage people to invest money. Creating a cooperative allows you to raise capital by selling shares to members.

For details on the different types of business entities, see the Business Formation: LLCs & Corporations section of Nolo.  For information on starting a nonprofit, see the Starting a Nonprofit section of Nolo.

Another option is to find an existing organization to sponsor your carsharing program, which spares you the trouble of forming a new entity and a great deal of administrative legwork. Suitable sponsors might include your local transit agency, an urban development organization, or an environmental organization. For example, the Center for Neighborhood Technologies, a nonprofit that promotes sustainable communities, sponsors I-GO, a large carsharing program with more than 200 cars in Chicago.

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