Rent-a-Car Business: Is it Worth Starting?

Rent-a-car businesses make a profit from renting vehicles to third parties. Cars are rented for various rates over a specific length of time: daily, weekly, or monthly. Car rentals offer vehicles to third parties for periods less than 12 months. Anything longer than a year can be classified as leasing.

For a car rental business to be considered profitable, the cars in its fleet have to be booked for at least 72% of any given time frame. Annual reports from large, global players like Hertz and Avis, but their average vehicle turn-over at around 92%. In order to achieve this benchmark, a car rental business owner needs to allocate a substantial budget toward marketing. This is perhaps the reason why, instead of starting their own brand, many car rental services opt to instead purchase a franchise from globally established entities from the beginning.

Whether you are considering a rent-a-car business of your own or running a franchise behind a flagship company, it is vital to know what you are getting into.

Is there a Demand for Car Rentals?

Every enterprise aspires for profitability. The first thing you need to assess before acting on your car rental business plan is to assess if the product or service you wish to bring into any market is the levels and prospects of demand. Is this something that consumers in your location need?  Fortunately, the car rental industry has enjoyed real growth in demand. Even before this current global COVID-19 crisis, people are leaning more on renting than buying their own cars.

With rented cars, an individual eliminates the expenses of insurance, maintenance, and the time investment in having to sell the car down the line. Now that we are besieged by the pandemic, fewer people have the spending capacity to purchase vehicles.  Mobility is a permanent necessity in today’s world, and car rental services are projected to stay on track in the coming years.

Is a Car Rental Business Easy to Start?

Business development is a complex endeavor in itself, and so a business idea with simple business models might be a more sensible route for a startup. A car rental service fits this bill as it involves tested clear-cut steps in developing it from the beginning.

Funding

If you don’t yet have the entire amount needed to launch operations from the ground up, there are several banks with sensible payment terms. Select the amortization plan that suits your business model and timelines. Prior to making the financing decision, ensure that you have already outlined clear strategies for profit margins that will allow you to make payments on schedule.

Administrative paperwork

This includes necessary licenses, permits, and other regulations required by your state. It is at this stage that you will need to decide on the best insurance product to cover your company.

Location

Establish your business headquarters in an area with high traffic and good visibility. It goes without saying that you should establish your business in an area where there is a high and regular demand for car rentals.

Online presence

You may start off with impressive, well-maintained business pages on appropriate social media channels. But do plan for your own website which is most ideal for any business. Though this might be a substantial investment in its early stages, your own website will improve returns quickly enough.

Staffing

You do not need a full-force staff in the beginning. Hire a few skilled employees and set their expectations about being required to multi-task, at least for the first couple of years.

Marketing

If you have decided to put up your own brand and not as a franchise of already-existing rent-a-car flagships, you will need to step up on promoting brand awareness. Go through traditional media channels such as radio, TV, or print ads. Utilize your available digital channels as well, such as social media, SMS, email, etc.

Investment returns

For your car rental business to succeed, you will of course need to generate sufficient profit that will cover all operational expenditures and still have substantial gains left over. Even after amortizations, vehicle maintenance, insurance premiums, accountant and experienced car accident attorney on retainer, salaries, and other operational expenditures, you can still turn up a profit in a car rental services business. How successfully you manage this largely depends on your marketing strategies.

Growth Potential of a Car Rental Business

car driving

A rent-a-car business that starts small has the potential to expand quickly, relatively speaking. A fleet of fewer than 10 cars can grow into a car rental business that services multiple locations within the state, or even nationwide. The car rental industry is poised for continued long-term growth that outweighs whatever minor downturns may come along the way, guaranteeing stable profits for the next several years. The possibility of business growth and doubled business profits even during a year into operations is not remote in this industry, as well as the potential to turn your startup into a nationally-known brand or even an actual franchise flagship.

A rent-a-car business startup has the potential for real expansion and profit. Based on available business data, the demand for car rentals is increasing, with no significant downturns expected anytime soon. With the right business plan and strategic development and marketing efforts, your small car rental startup can grow to a real franchise or a nationally-recognized brand.

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