AllCar Rent-A-Car launched the hourly car sharing company Carpingo in Brooklyn, N.Y. in mid-August of this year. Currently, the service has 38 vehicles including models such as the Chevrolet Malibu, Fiat 500 and Toyota Rav4, according to Gil Cygler, founder of Carpingo and president of AllCar.

As of late September, Cygler and his team have built the service up to a modest base of 100 members. “There’s definitely a need for a smaller, neighborhood car sharing program that customers might want to turn to if the big name programs are all out of cars or too expensive,” Cygler says. “We could appeal to [renters’] loyalty to a local company.”

While operating a traditional car rental company for more than 30 years gave Cygler a leg up in the car sharing world, he found that opening Carpingo came with a set of challenges unique to car sharing.

Securing Parking

Securing adequate parking spots in New York City was one of those challenges. All of Carpingo’s vehicles are parked on private lots, which Cygler says can be fairly costly compared to other cities. He says that while a traditional car rental lot might rent for $3,000-$4,000 a month, he’s paying $200-$400 per spot for his Carpingo cars.

And in some areas, Zipcar, the dominant car sharing company in New York and largest in the country, had already negotiated exclusive parking arrangements.

With cars spread throughout 12 Brooklyn neighborhoods, Cygler has had to tactically choose his parking locations. “We’re constantly on the lookout for spots and figuring out where customers want us to be,” he says. Among Carpingo’s criteria are well-lit and well-populated areas with good public transportation — a strategy aimed at allowing customers to easily get to and from the car.

But with those 12 locations come as many as 12 different landlords each with a separate bill, insurance certificate and security deposit.

Installing Technology

Each Carpingo vehicle is installed with hardware that connects to the reservations and operations system, which tracks the vehicle, calculates time and mileage, and locks/unlocks the car.

While the device may appear similar to a GPS tracking unit, the installation, maintenance and costs are much greater. For example, AllCar’s traditional GPS tracking units cost about $160 each and took about 20 minutes to install. But the car sharing device, by Metavera Solutions, costs about $1,200 per unit and takes three to four hours to install.

In addition, each car model has slightly different wiring and configurations. Cygler says that synchronizing the cars and the units proved to be a challenge, and some cars did not initially respond to the transponders. “Getting the units installed is a complicated process — more complicated than expected,” he says.[PAGEBREAK]

Controlling Rates and Costs

Carpingo rates run from $4.50 to $14 per hour, which is about 15-20% lower than Zipcar’s, according to Cygler. The membership fee is waived for a limited time.

“We need to be highly competitive as the new guy on the block and the smallest guy on the block,” says Cygler, who believes the lower rates will remain sustainable so long as there’s a high enough customer volume.

Cygler figures each vehicle needs to generate at least $1,500 in revenue per month to be comfortably profitable. That may seem high in light of a business model in which all transactions are performed online and, as Cygler points out, won’t be augmented by the traditional ancillary opportunities such as additional insurance, navigation or other upsells.

He also brings up the unique costs to a car sharing service: maintaining a distributed fleet.

To service the cars, each must be picked up and brought in. Because locations are both outdoor and indoor, and multi-level or underground, cleaning regulations vary by location and might necessitate purchasing a waterless cleaning system, for instance.

Costs are also incurred as a 24-hour business. Similar to traditional car rental, the car sharing company must worry about after-hours roadside service and issues involving overbookings, late returns, missing vehicles, lockouts, website reservations problems and more — at any time of day.

Managing Fleet and Customers

The Carpingo fleet will operate separately from AllCar’s, though Cygler will use the AllCar fleet in the event of breakdowns, late returns or unacceptably dirty cars. “Doing this without a car rental backup would not be as easy,” he says, adding that he has cross-trained several AllCar staff members for both services.

Carpingo maintenance staff visits each vehicle at least once per week, and then as needed. The company tries to get the bulk of repairs done when business is slow, while an outside vendor is contracted for nighttime repairs.

In terms of managing customers, “The same rules apply,” Cygler says. “Take clients with good credit and don’t set up shop in problematic areas.” Carpingo has spotted a handful of applicants who’d be considered “problem renters” and were previously turned down by other programs.

While none of his customers have trashed a car yet, Cygler says he has had instances in which renters tried to beat the system and take a car. As well, he says he’ll be closely monitoring any abuse of the gas cards that come with the vehicles.

Gaining Renters

Cygler and his team are working to decipher patterns in consumer car sharing to identify which days and months are the busiest, along with the best areas to place more cars.

In that vein, the biggest challenge so far has been to identify demand. “We’ve had cars in spots where there’s no demand for two to three weeks,” Cygler says. “You have to wonder, are you in the slower season, or is this a dud of a location?”

Marketing car sharing is different than traditional car rental, Cygler adds. “Like one of those microbreweries, you have to really market to your community,” he says. “It’s hyper-local marketing.” For example, Carpingo has teamed up with another local company called Bai, a manufacturer of healthy fruit juices, and has placed samples of the juices in some Carpingo vehicles.

Likening his marketing efforts at this point to “throwing darts,” Cygler also looks to market the Carpingo’s service for businesses. “We’re still exploring to see where everything is going to pan out,” he says.

A Market Shift?

Cygler hopes that Carpingo can capitalize on the trend toward “on-the-spot” consumerism, such as how Redbox and Netflix transformed how people rent movies. The shift is based more on convenience than as a benefit to the environment, he says, also noting that people don’t necessarily want to own a car today.

“The market is going toward car sharing, or at least the concept, and then this will become the future of car rental,” Cygler says.

Car Sharing by the Numbers

1.2 million car sharing members worldwide in 2010

31,665 vehicles in car sharing fleets worldwide in 2010

755,000+ car sharing members in the U.S. so far in 2012

11,500+ vehicles in car sharing fleets in the U.S. so far in 2012

25 car sharing companies operating in the U.S. as of January 2012

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