Out-of-State Registration for Car Renters: What's on the Table?

Over the past decade or so, technology has created an explosion of new peer-to-peer services that have flipped traditional service industries on their end. Airbnb and VRBO have revolutionized short-term rental; why stay in a hotel when you could rent a house instead?

Lyft and Uber have utterly wrecked the taxi industry (although some have questioned their authenticity, too). 

Lastly and more interestingly, there is a growing movement of car-sharing platforms where you can rent out your car to other drivers. This can be a creative way to get your payments covered and pay off your car or a cool way to secure your dream car (sports cars, Jeeps, and other interesting cars drive a high premium) while having your payments offset by rentals.

But what about insuring and registering your car(s)? Is there any incentive to tagging and title a car-sharing car in a state other than your own? Let’s find out.  

Can You Use Your Car For Car Sharing?

Of course! That’s the whole point of car-sharing! The real question is whether or not you’ll want to use your daily driver. Just like Airbnb and VRBO were originally envisioned as a way to make residual income off of property that’s unused, car sharing was envisioned as a way to use underutilized cars. However, just like Airbnb and VRBO, the sharing community has been largely commercialized for better or worse. 

There are still plenty of individuals who have no plans on operating a commercial fleet on a car-sharing platform and just want their payments covered, but it is becoming common for owners/operators to invest in a fleet of cars and pursue car sharing as an investment opportunity. 

Whatever you choose is totally up to you. However, we might suggest that if you are thinking about starting a car-sharing empire in a state with high sales tax and state inspections, it makes a lot of sense to title and register your cars in a state with no sales tax and no inspections. Like, say, Montana, for instance. 

Tell Me Again What Car Sharing Is

Ok, so it’s pretty easy to confuse ride-sharing with car-sharing, but they are not the same. Not by a mile. 

Ridesharing is one of the suites of apps where you use your own vehicles as an ad hoc taxicab. The paying passenger never drives the vehicles; they are strictly along for the ride.

Car sharing is sharing the actual car, not yourself, as the service. Since your car is being rented, there are some things you need to consider along the way:

• Does it need to be registered as a commercial vehicle?

• What kind of insurance do you need? 

So, in summary: car sharing is owning a car and using a third-party service (Turo, Kyte, and Avail are prime examples) to rent out your vehicle. Oh, and it isn’t limited to just cars; there are also motorcycle-sharing platforms like Rider’s Share and a handful of others. 

What Kind of Insurance do You Need For Car Sharing?

Ok, so obviously, there are a lot of questions floating around about car sharing. I mean, it’s kind of a big deal. You are handing over your private property to a complete stranger and hoping they don’t roast a blunt in it, leave questionable stains, or otherwise defile it. 

Every company will have its requirements for the insurance carried by the owner. We’ll use Turo as an example since they are by far the most well-known car-sharing platform. 

Turo mandates that you choose one of their insurance policies which is tacked onto the rental. They have varying degrees of cost, which is based on a risk/reward scale. The higher the deductible, the lower the cost. But, of course, you have to cover a much larger deductible and vice versa. 

Now, here’s the thing: this is the requirement from the car-sharing service. These aren’t necessarily the same requirements that your insurance provider will demand of you if your car is being used for car sharing. So basically, you need to check:

• Your automotive insurance provider’s requirements.

• Your state’s insurance requirements for car sharing.

We can’t force you to do anything, so this is just our $0.02, but please follow your insurance policy. If you don’t disclose to them that you are car sharing and your car gets destroyed, you could easily get stuck holding the bag on that deal. And that would not be cool. 

Where Should You Register Your Car(s) For Rent?

Well, it could behoove you to check out your state’s laws and see if there are any hard and fast rules about this. However, if there aren’t any rules about registering your car in your state of domicile (and maybe even if there are), I know what I’d do, especially if I had more than one car to rent: I’d register the fleet in Montana. Double down on this if you live in one of those states that need to charge you sales tax in the ballpark of ten percent and mandate annual smog inspections. 

Think about this in tangible terms: you are building up your fleet of Turo rental cars. Nothing crazy, just some reliable little cars that you can get into for cheap, put 30k-40k on, and sell while they still have some residual value. Honda Civics & Accords, Toyota Camrys and Corollas, and a few others fit the bill. So, you pick up five Civics at ten grand each. If you’re in sunny California, you'll pay upwards of $750-$1,000 per car to title and register them, depending on location. But also, depending on the car's age, each one will be required to have a smog check done. 

If a car flunks the smog check, that car has to be repaired with smog parts and retested. Yes, we know that there is no way around repairs, especially on rental cars, but smog checks tend to be some of the more costly repairs, and items that might flag a failing smog test may not have much to do with the overall reliability of the car. 

SHOULD You Use Your Personal Vehicle For It?

This one is up to you. Obviously, if you are going to plan on doing a fleet of rentals, there’s no need for your daily driver to be on the list. And if you are just doing this for spare change when your car is just sitting anyway, you probably won’t have much reason to register it out of state. 

But anyway, if it were me, it would totally depend on my situation. As a full-time content writer who works in my living room, my cars only ever get a few miles, so the thought has crossed my mind to throw them up on Turo. But if you commute every day, using your daily driver might not be a great idea. It’s really up to you. 

Registering a Rental Car Out of State

There are a few options for registering a carshare vehicle out of state. For registering a fleet of cars that all have clean titles, the most sensible option is going to be our Montana LLC. The caveat with Montana is that you must have some sort of residence in Montana, but fortunately for you, an LLC is sufficient. And, since the vehicles will be used commercially, having them in an LLC makes sense anyway. And there is no cap on how many assets you keep in the LLC, so as your fleet grows, the LLC can continue to accommodate it. 

If you decide to build up your fleet with higher-end vehicles down the road (or at the beginning, for that matter), our Montana LLC registration program reaps even more rewards. Thinking about renting out a late-model vehicle like a Jeep Wrangler Unlimited? The linked example rents for $119 a day on Turo, which is pretty great if you can keep it rented for at least 10-15 days per month. Of course, with an MSRP of nearly $75,000, that tax bill will really weigh on you. But registering it in Montana will take your taxes on that Jeep from up to $7,500 right down to $0. That’s right. Zero.  

The Dirt Legal Advantage

For the busy, business-savvy entrepreneur striking out to build their car-sharing empire, Dirt Legal is the obvious choice. Imagine not needing to deal with sales taxes, smog checks, and burdensome state inspections on your car-sharing fleet. Wouldn’t it be great if you could instead put $7,500 back into your business instead of the state’s pockets?

Perhaps even more important is that you never have to leave your office; we do all the leg work. Here’s what we need from you:

1. Proof of ownership:  You must have a Title or MCO (Manufacturer’s Certificate of Origin) to qualify. This is the documentation we need to show the vehicle is yours. If you only have a bill of sale, we can do that with additional steps involved.

2. Checkout:   Click Add to Cart and complete the checkout process. You’ll receive an email confirmation with your receipt and order number.

3. Vehicle information:   Fill out the vehicle info form that appears after you checkout. As long as you have proof of ownership and a Vehicle Identification Number (VIN), we can legalize any vehicle regardless of state.

4. Documents:   Keep an eye on your mailbox. We’ll send you a checklist for the materials we need to handle the conversion on your behalf, including your proof of ownership, copy of ID/social, notarized power of attorney, and sales tax (if not already paid)

5. Send it in:   Mail everything to us using the pre-paid envelope we’ve provided to make it as easy as possible for you. Congrats, your part’s done! Now simply wait to receive your license plate in the mail! We will email you a tracking number once it's on the way.

In return, you’ll receive

• Montana license plate and registration in 1-2 weeks. If your vehicle is 2011 or older, the plate is permanent, so you never have to renew it. If your vehicle is 2011 or newer, you must renew the plate online each year.

• New proof of ownership-you will receive a new Montana title for your vehicle in the name of your LLC that we will set up on your behalf.

• Dedicated agent support to guide you through the process and answer any questions about paperwork, state-to-state transfers, required parts, etc.

Wrapping Up

You know the advantages of registering out of state but don’t know where to start. Why should you have to spend hours upon hours on research, mountains of paperwork, and the headaches of dealing with DMVs when you don’t have to? 

Instead, click a few buttons, fill out the paperwork we need, and we’ll do the rest. Oh, and once it’s up and running, don’t forget to subscribe to the Montana LLC annual report and agent renewal. Once subscribed, you never have to think about it again. And you can turn on auto-renewal for your annual vehicle registration, too. We make it easy so you can focus on growing your business instead of tagging your whips. So don’t wait; get started today and start racking up those fat stacks!