How to Start a Vehicle Rental Business

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Vehicle rental is a competitive industry, but if you learn what to do to maximize your odds of success before entering the business, it can also be quite lucrative. To start a vehicle rental business, decide if you want to run a contract or daily hire operation, build up your vehicle options, set up at an ideal location, and follow all insurance and regulatory requirements for running this type of business. If you can handle the risks involved with vehicle rental, this sort of business can be very rewarding.

1. Carefully consider the various options available. Vehicle rental is a highly competitive industry, but with the right planning and forward-thinking you can greatly minimise your risk. The old mantra “if you fail to prepare, then you prepare to fail” could not be more relevant. It’s incredibly important that you do your research – and so this article is a good starting point! With thorough research, it’s entirely possible to make good money providing a service that will always be in demand!

2. Consider the type of rental operation you’ll run. The two main types are contract hire (where customers – typically businesses, lease vehicles for a set time), or daily hire (where customers – typically individuals, hire vehicles for a shorter period of time).

3. Amass your fleet. The important consideration here is whether you will outright purchase your fleet (can be costly) or instead lease the vehicles. Initially your fleet doesn’t need to be large, but bear in mind that the greater your fleet the greater your earnings. As a guide, always put yourself in your customers’ shoes – your fleet must be well maintained and enjoy a high turnover. Employing your own maintenance staff can work out expensive for new start-ups, so it’s worth considering making arrangements with a local repair shop.

4. Choose the location of your operation. This is a key consideration. Do some research on the type of market in your area and find out as much as you can on your competition. For independent start-ups you will need to develop your USP. National operators like Hertz and Avis can hire vehicles out cheaply, so what can you offer to differentiate yourself and build-up a local customer following? Locations near airports, hotels and train stations are great options. Don’t forget to research your location security – it’s not a bad idea to invest in CCTV cameras and alarm systems.

5. Have Insurance. Perhaps the most important issue for vehicle rental companies. It goes without saying, but it’s illegal to trade without some form of fleet insurance. It’s worth shopping around to find adequate cover at the best price. Some companies like Tower Gate Insurance offer ‘pay as you go’ insurance solutions that offer all the benefits of an annual policy, with greater flexibility.

6. Manage your day-to-day operation. In the past it was common for an entire operation to be run from massive paper diaries and logbooks. This may work in the immediate short term, but the disadvantages of a manual system far outweigh any positives. Manual systems leave you liable for inefficiency, with lost time and often lost paperwork! It can quickly become confusing what vehicles are due out and in, and managing your invoices is often a nightmare. To boost your efficiency and steer clear from these pitfalls, it’s vital that you invest in fleet management software.

7. Have a website. This is an absolute must if you wish to receive a decent flow of business. The Internet has afforded customers with greater flexibility – and most now turn to Google when shopping around for products or services. A website will allow people to do this 24/7, effectively extending your opening hours. The simple fact of the matter, especially for new start-ups wanting to establish themselves, is this: If you don’t have a website, potential customers will go with someone who does. Try to avoid the trap of simply posting your contact details with a few prices and then hope for the best. The 21st century customer is impatient and expects to be able to book and pay online when convenient for them. It’s therefore important that you fully utilise your website (your shop window) to its maximum potential by having a proper online booking engine. It may seem tempting to opt for some bespoke web-developer work, but this can turn-out very expensive. This route allows you to have a complete web booking system on your existing website in under an hour! All you would need to do is insert a code into your website and that’s it! It’s easy to set up tariffs and groups. You can set up availability rules which ensure that you never lose control over your vehicle availability. Your customers also receive automatic booking confirmations and email reminders, saving you the hassle.

8. Channel management. Since nowadays people are searching for car rental online, many of them are using online travel agencies to make a reservation in advance. If you have more than ten new cars in your fleet it could be worth considering partnership with such a booking website. Advantages are that you can increase your utilisation, online booking engines can send you new customers whom you would not be able to reach by yourself. In case of car rental you can consider partnering with or CarTravler. If you also have a motorcycle or scooter rental you can add your company on Online travel agents will require a commission from sales. Usually it is around 10-20% and it is worth it, because your marketing costs are the same, but in case of bookings from agents you don’t spend time on advertisement. Always remember – if you have a large fleet partner with as much distribution channels as possible to guarantee that your cars will be always rented.

  • Is it important for my rental vehicles to be fitted with car tracking devices?
     Yes. This way you can trace the whereabouts of vehicles not returned, stolen, etc.
  • Is one vehicle enough to build and start your own business?
     It depends on the type of rental car business. If it is an exotic vehicle rental service, then one car is good for the time being. If it is a standard rental car business, then at least 5 cars is a good starting point because more cars could be rented out.
  • What are the risks of car rentals?
     Losing money, someone running off with your car, your car getting smashed up, etc.
  • Can l start a rental car business with cheap used cars or do the vehicles have to be brand new?
    You can start a car rental business with cheap used and brand new cars, it doesn’t matter.
  • What permits and licences do I need to start a car rental company?
    Outside of state-specific regulations, there are no special requirements to run this type of business. Standard rules apply, but insurance is required.
  • How many vehicles should I start out with?
     Start small and grow big–5 cars is a good start. Research your competitors. Balance your circumstances and what you can afford against the standards for vehicle rental businesses in your area. Make sure you have a backup plan, fully research the industry and have a detailed and organized business plan.
  • Where do I lease my cars from for my rental business?
     You can get your fleet leased by banks or financial institutes that provide business loans.
  • How do I get software for a rental car service?
    You could build your website using ASAP Rent expertise with a complete web reservation system integrated.
  • No I need to have a license in my state to open a car rental company?
    Not unless your state specifically requires it, and that answer would depend on your individual state. You can look up your state’s requirements online. (You must have insurance though.)
  • What are the average daily rental rates?
    $30 a day, but usually there are discounts for weekly or monthly rates.

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