This Turo Host Used an Auto Line of Credit to Finance His Fleet

Stephen Carter isn’t your typical car owner. Not only does he own five vehicles, but he rents them out on Turo (think Airbnb for cars).

But last fall, Carter didn’t qualify for auto loan approval for that fifth vehicle. The other four were on his personal credit report, which meant that his debt-to-income ratio was out of whack.

Eventually, Carter learned about a lender that offers a unique product: an auto line of credit. 

“When Carputty came along, it was a godsend,” says Carter, who’s based on the Gulf Coast and financed a 2019 Mercedes-Benz Sprinter van last October. He adds: “My business year to date is almost twice what I did last year with just an additional vehicle.”

Whether you need a fleet for your business or prefer multiple sets of wheels for your personal life, Carter’s journey might help you understand alternative financing options.

An accidental small business

Before the COVID-19 pandemic arrived in 2020, Carter got into Turo “by accident.” His car was giving him problems, and a friend suggested he trade it in for a Mercedes Sprinter. The large vehicle could be used for his transportation and logistics gig for his government contractor work.

“Then, the pandemic hit, all government contracts kind of froze,” says Carter, who also worked as a car salesperson for 10 years earlier in his career. “And I was like, ‘Now, what am I gonna do with this car note on the vehicle?”

A friend suggested that he list the vehicle for rent on Turo as a way to generate income.

“And 240,000 miles later, it’s still — I think right now it’s in Tennessee somewhere,” Carter says. “So yeah, I just fell into it.”

The Turo business has proven lucrative enough for Carter to keep at it, continually adding to his fleet of vans, which are routinely rented by large groups.

“That typically is my clientele, the family that’s going somewhere… the church group that’s going to a baseball game or a football camp or a water park,” Carter says. “I get those calls regularly.”

Carter previously used auto loans to finance the purchase of each new vehicle in his Turo fleet. But with four such debt accounts on his personal credit report, his debt-to-income ratio made lenders wary of funding a fifth vehicle.

Finding the right financing

When Carter encountered auto loan lenders that didn’t want him as a new or repeat customer, he considered alternatives. After all, his rental business was thriving, and he wanted to reinvest in it.

One realistic option was an unsecured personal loan from a reputable national lender.

“With American Express, I would basically only get enough to do maybe one or two cars, three really cheap cars… and AmEx was at 10 percent [interest], almost 11 percent for a third of the money,” Carter says.

Eventually, while browsing a Reddit forum for Turo hosts, Carter came across a mention of Carputty, which requires a minimum credit score of 680 and operates nationally (except in California, Mississippi, Nevada and Washington). The nature of its auto line of credit — up to 15 cars and as much as $250,000 for personal use and $800,000 for LLC operators — gave him the flexibility to avoid another lump sum debt on his credit report.

Carter was thrilled to secure an interest rate below seven percent. The only issue he experienced was skepticism among car dealers. No one had heard of Carputty, a fintech that was founded in 2020.

“Craziest name ever… I had at least two dealerships just hang up on me, just saying, ‘I never heard of it, click, it sounds like a scam,’” Carter recalls.

Carter says his goal is to refinance all of his vehicle loans to house them on the Carputty line of credit, which can be used to buy new or used cars, refinance auto loans or buy out leases.

As for the Sprinter van he most recently financed through Carputty?

“I couldn’t even tell you where it is,” Carter says, “but it’s been gone [rented] since October.”

Financing a vehicle when auto loans don’t work

In most cases, if you’re looking for an auto loan and having trouble qualifying, it’s likely a sign that you’re not ready to borrow. After all, traditional car loans are the best way (besides paying in cash) for most of us to finance our vehicles. And their eligibility criteria are meant, in part, to keep you from borrowing a loan you can’t afford to repay.

But if you’re in a situation like Carter’s, where you have strong credit and still can’t find the ideal loan, consider being flexible about the type of financing you’re seeking.

Carputty’s line of credit is a unique option — you can finance multiple cars on one account, even if you’re not a small business owner — but this company doesn’t have a monopoly on atypical financing.

Some lenders offer commercial auto lines of credit (Ally Financial and National Business Capital, for example) or business auto loans. The keys are to consider your options, shop around with various types of lenders and prequalify to limit any impact to your credit.

What’s your next step?

As Carter did, it’s wise to consider all of your options, including auto loans and lines of credit as well as personal loans for cars. Consider the pros and cons of various financing types. A line of credit might give you more flexibility, for example, while a loan might carry a lower interest rate. Once you find the right product for your situation, you can spend more time on finding the right vehicle and calculating your potential loan repayment.