I have a business proposition for you: It's a rental agency with little overhead and no brick-and-mortar operations to worry about. The fleet is varied. The startup fees are negligible. The system borrows elements from eBay and the social networking phenomenon. Rate wars are a non-issue. It's "green," and it works well in small towns where no car rental company has gone before.

Welcome to Whipcar, the world's first "neighbor-to-neighbor" or peer-to-peer (P2P) rental service. In short, Whipcar connects car owners with car renters in their neighborhood in more than 300 towns and cities in the U.K. If your first inkling is that this is a car-sharing service, yes; there are similarities. But understand the beauty of this business model before you groan.

An Instant Fleet

There is no capital outlay to purchase a fleet, as the system relies on individuals with underutilized cars. The service suggests a rental rate based on local market conditions, though the car owner is free to charge what he or she wants per reservation. The service-free to join-takes 15 percent of that rate, yet the business doesn't have to turn around and shell out for counter employees' salaries or a rented store.

On top of the rate, the driver is charged a transaction fee of £2.50 per booking, as well as insurance, which is one of the genius components of the service. Whipcar founders Tom Wright and Vinay Gupta worked with Lloyd's of London to create "the world's first integrated insurance policy that allows a private owner to rent out his or her car," Wright told Auto Rental News. The Lloyd's policy underwrites each rental, similar to a collision damage waiver and supplemental liability coverage.

The insurance fee is calculated based on the profile of the driver, the type of vehicle rented and the duration of booking. That rate is about £4-5 a day, which is slightly cheaper than any other option in the market, said Wright. "It is a seamless and automatic process," he said.

Giving your car to a stranger and, conversely, stepping into a strange car can be scary propositions. Indeed, "The biggest challenge is getting people comfortable with the phenomenon," Wright told Auto Rental News.

Checks and Balances

Car owners supply a license plate and zip code. The system checks a number of third-party databases to ensure that the car is free of legal troubles and fits into an acceptable insurance category. Drivers must be 21 or over and have a clean driving record. Rental cars must be less than eight years old.

Comfort levels are enhanced by an eBay-style rating system of both the driver and renter on each transaction. This grade stays with participants and is accessible on their WhipCar profile, which is similar to a social network page. Owners are free to decline any rental.

When the driver picks up the car, the owner and driver perform a walk around and annotate any existing damage on a form. Owners are asked to have at least a quarter tank of gas at the onset of the rental and renters are asked to return the car with the same level. The system has tools to remedy any discrepancies, Wright said. The owner-renter agreement suggests a cap of 100 miles per day, though longer trips can be worked out with the owner.

Hi, Neighbor

Generally, though, both renters and drivers are respectful of the process. "We're seeing lots of hyper local, neighbor-to-neighbor, peer-group-to-peer-group rentals," Wright said. "And as a result, people are far more respectful to the cars. We've all heard the horror stories of abuse of rentals, because it's someone else's car. But in this case it's a real human being. We've been pretty blessed in that regard."

Wright said the feel-good stories are more common. "Someone had their car rented for a wedding and it came back with a magnum of champagne," said Wright.

Without the significant capital expense, daily utilization is less of a factor. Therefore, the service is not dependent on a large pool of potential renters. "With the existing car-sharing model there is an efficiency of scale that necessitates placing the service in densely populated areas," said Wright. "What's great about our model is that you can be the only car in the village."

Wright mentioned glowing emails from villagers in the far reaches of the U.K. saying, "Historically there was no car rental for a couple of hundred miles. Now we have mobility we didn't have before."

And, unlike the urban-yuppie-techie-first adopter crowd that uses car sharing services, P2P owners and renters are cut from a wide swath of society. Car owners are stay-at-home moms, retirees, students and even professionals who "make intellectual leaps that their car is costing them a lot of money and this is a way of paying its own way," said Wright. 

Whipcar drivers use cars for traditional neighborhood (non-insurance replacement) rental applications such as shopping and taking the kids to school on a regular basis. But where traditional car sharing gets expensive, such as weekend getaways and even week-long trips, P2P transactions work just as well.

Growth, Vision

The company launched this March in London after 10 months of planning and an infusion of venture capital. Growth has been fast. "Our goal is to get the size of fleet in six months what the U.K.'s largest car sharing service [Zipcar] has attained in six years. That's a thousand vehicles. We're on track to comfortably do that," said Wright, who comes from a background of web development at satellite broadcaster BSkyB and as creator of gurgle.com, the U.K's "first pregnancy social network." Whipcar's cofounder, Vinay Gupta, comes from New York with experience at Amex and AT&T.

Wright has no immediate plans to start in the U.S., though the idea is on the table. (RelayRides is up and running in Boston, with a few more services scheduled to launch in 2011.)  "We're deliberately trying to launch a service that is internationally scalable," he said.

Nonetheless, Wright has big plans for this new type of neighborhood rental. "Our vision for the business is that whenever you walk outside in the U.K., there is a car within walking distance for rent."