I Can't Make a Profit With This Car

One Of The Saddest Turo Stories I've Heard

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This was one of the saddest Turo stories I’ve heard yet.

Several times a week I have hosts message me and ask if they can schedule a call to talk through a problem they’re having with their Turo business. Yesterday I had a brief conversation with a young woman in a large city who is in a very bad spot. It has nothing to do with overall market saturation or bad guests, or anything outside of her control. It has everything to do with her own series of wrong moves entering the business with the wrong vehicle, the wrong daily rate, the wrong business practices, and a monthly payment that will never allow her to make a profit.

She laid out her problem by saying she needed help pricing her vehicle that had been listed less than a week and got three bookings, one of which she decided to cancel because it wouldn’t generate enough earnings. At first I was impressed that her newly listed Toyota Corolla had already gotten three bookings in less than a week, until I learned that she had to price it so low just to compete against the other 38 Toyota Corollas in her market, in the middle of a late summer slump.

First Bad Move - Wrong Vehicle

One of the first questions I asked was how she chose a Corolla as her first Turo vehicle. She responded by saying that her choice was based on better reliability, better fuel mileage, and lower insurance.

Now, if you’re choosing a vehicle for personal use, all three of those are solid criteria. They make sense. But, if you’re choosing a vehicle to build a Turo business with, your first criteria always needs to be based on market research to determine which vehicle will be booked the most at a daily rate that generates the greatest monthly profit with the least competition in the market. She had done none of this research to understand her market and ended up choosing an economy class vehicle that would need to be priced at a daily rate under $40, alongside 38 others just like it in her city.

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Second Bad Move - The Cancelled Trip

As soon as she told me she cancelled one of her first three bookings since listing the vehicle I knew she had dug her hole deeper. That one cancellation would trigger the search algorithm to drop her vehicle in search results in a city with almost 2,000 vehicles.

Turo takes cancellations very seriously because they disrupt guest plans and create a bad customer experience with the potential of turning people away from Turo all together as a dependable rental car option.

I asked why she chose to cancel and she explained that the booking wouldn’t generate enough earnings. I had to dig a little deeper to learn what she meant by this which I’ll get to next. But, before we get to that, I told her that the better option would have been to simply let that trip proceed, with lower earnings than she wanted, let it be a learning moment, and protect her search ranking. When you list a vehicle, do not cancel a booking within your first twenty trips or so!

Third Bad Move - The Monthly Payment

Clearly my list here is not in chronological order because this, chronologically speaking, was actually her first bad move. I asked her to explain why she felt the earnings on her first booking were too low to proceed with the trip. Her answer made me do a double-take and think, “Wait…what?"

She responded by telling me that the monthly payment on her 2021 Toyota Corolla is $627. For…a…Toyota…Corolla. I think I actually did a facepalm. How in the hell does someone have a $627 monthly payment on a 2021 Toyota Corolla? I asked that question, but in a much nicer way. She explained that her poor credit score forced an 18% interest rate. But wait, there’s more. She also had negative equity on a Dodge Charger trade-in that got rolled in on top of the Corolla financing.

I feel bad for this young lady. When all operating expenses are accounted for (payment, insurance, maintenance, cleaning, and, God forbid, claim deductibles) she will likely never generate a profit with this specific vehicle in this market. In fact, she will likely be in the red every month. In her market, the average daily rate for a Corolla is around $39. Even if her vehicle was booked 30 days a month (which it won’t be) and she’s on the 75 plan, her earnings will be around $877.50. After the payment that leaves only $250 for insurance, cleaning, maintenance, etc. all before any profit is realized. Some basic market research would have made this financial scenario clear before the vehicle purchase was made.

And she’s stuck with this vehicle. She was upside down the moment she drove it off the dealership lot.

She wants to scale her Turo business and pay cash for a second vehicle with the profits from this first car. There will be no profit. There will be no second car. And this new host will, most likely, be another casualty of her own poor planning and operational mistakes.

Follow This Six-Step Sequence

I don’t want this to happen to you or any other new host. This was painful to listen to. There are six steps that will get you moving in the right direction as an aspiring Turo host and you’ll find them here. Please, do not begin a Turo business without following these first six steps.