Carpooling to save money while travelling to work? Read this first

Carpooling can help consumers to save money on travelling to work, but if you consider this way to save a few bucks it is important to know that there are rules about carpooling when it comes to insurance and tax because you get paid for giving others a ride.

South Africa’s roads are some of the most congested globally. According to the 2024 INRIX Global Traffic Scorecard, which analyses transportation data and trends among 946 urban areas across the globe, residents in Cape Town lost a staggering 94 hours per year sitting in traffic, making it the seventh most traffic-congested city in the world.

Add to this the high cost of petrol and the case for carpooling to save money looks increasingly attractive, Marius Kemp, head of personal underwriting at Santam. “The benefits of carpooling are far-reaching, but you must also be prepared.

“Apart from combatting the boredom of being stuck in traffic and decreasing your carbon footprint, apps such as JustGo and Ugomyway help you to share a ride with people who are travelling the same route as you to enable you to offset some of your running costs.”

However, he says it is important to understand the effect this can have on your car insurance.

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Various ways of carpooling

There are different types of carpooling and Kemp says before you hang up your car keys, you must decide which carpooling setup works best for you:

Specific driver carpool: In this case there is a designated driver and car and passengers pay a weekly or monthly rate for petrol, parking and maintenance. Kemp recommends that this amount should not exceed the Sars Reimbursement Travel Allowance, otherwise you will pay tax on any profit you make. “Passengers should also know that they will be unable to claim from you for bodily injury if you are involved in an accident but instead claim from the Road Accident Fund.”

Alternating carpool: In this case, everyone takes turns to drive with their own cars on a daily, weekly or monthly basis. “Simply put: when you drive, you pay and when you are a passenger, it is free. In this case, no money changes hands and each driver is responsible for their own insurance and maintenance costs. Passengers should know that they will be unable to claim from you for injuries due to a car accident but instead claim from the Road Accident Fund.”

Side hustle carpool: With apps like JustGo you can use your car to earn some cash on an upcoming trip, accepting cash from strangers to share a ride with you. However, Kemp recommends that this amount should not exceed the Sars Reimbursement Travel Allowance where you do not make a profit to avoid paying tax on it. In this case passengers are also not able to claim from you for injuries if you are involved in an accident and will have to claim from the Road Accident Fund.

Employer carpool: Some employers offer staff the use of company vehicles to encourage carpooling and they then pay a fare to cover petrol, insurance and maintenance costs.

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How carpooling affects your car insurance

Regardless of the kind of carpooling you choose, Kemp says it is a good idea to let your insurer know if anything changes in your regular driving set-up as this can affect insurance premiums.

“For example, if the designated driver of your car is not the ‘regular driver’ quoted in your insurance policy documents and is involved in an accident, your claim may be affected in terms of the cover and premium applicable.”

Kemp says if money changes hands, things get a more complicated as well. “An insurer could view it as a commercial transaction, especially if the money you receive is more than what is necessary to cover petrol, maintenance and parking. You would then potentially need business insurance, or a special permit if you transport children or more than 12 people at a time.”

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Various definitions of lift club

In addition, insurers have different definitions of what defines a ‘lift club’. “At Santam, one of the vehicle exclusions is carrying passengers for hire or passengers who pay a fare, except in the case of vehicle sharing to conserve fuel,” Kemp says.

He warns that if you are the owner of a carpool vehicle it is imperative to ensure you have comprehensive insurance from a reputable provider.

“It is a good idea to speak to your broker or insurer about relooking your insurance cover for useful extras such as roadside assistance, tyre and rim cover, or windscreen protection.”