There is a lot of demand for car rentals for a whole variety of reasons, so a car rental business fills that frequent need for customers that includes everyone from vacationers to business travelers who are unable or unwilling to use their own vehicles to transport themselves around a particular area for a period of time.
With such high demand, a car rental business can be very lucrative when handled and managed accordingly. If you have a great idea for such a business and are wondering how to get a car rental business off the ground, we have done the research and put together this helpful guide that will ensure that your venture can be properly started, legally compliant, and fully registered. Let’s go over the 10-step listing of what needs to be covered for you to start a car rental business.
HOW TO START A CAR RENTAL BUSINESS
Step 1: Business Plan
Any entrepreneurship worth its salt must start with a comprehensive business plan. Among other things, a business plan covers the startup and operational expenses of a business, its name, the target market it seeks to cater to, and how much customers can be charged.
What Are Some Of A Car Rental Business Startup Costs?
When it comes to start-up costs, a car rental business has quite a few. They include an office, computers, high-speed internet connection, printers, and a vehicle fleet. Beyond that are incorporation fees, auto and business insurance, employee salaries, maintenance tools for vehicles, a closed-circuit video monitoring system, and a variety of marketing costs.
What Are Some Operational Expenses Of A Car Rental Business?
While the startup costs are substantial, the operating funds necessary for a car rental business are just as significant. They include:
- Employee salaries
- Insurance payments
- Various utilities
- New vehicles to add to the fleet
- Servicing the existing vehicle inventory
- Rent payments for the parking lot and office
- Marketing efforts
- Dues and upkeep expenses of a business website
In terms of salaries, the absolute lowest that a business can pay employees is between $8 and $12, though in some states it’s higher than that. Mechanics on the staff will earn anywhere between $35,000 and $70,000. If you also employ a marketing professional, an accountant, and a web designer, their salaries in that sphere range between $30,000 and $65,000, though likely at the higher end for all three. Another $500 to $1000 (at a monthly minimum) should be dedicated to insuring automobiles and the business itself.
High-speed internet and various other utilities will cost at least a few hundred dollars monthly. Your vehicle fleet will also need to be updated periodically (about every couple of months) with new vehicles being added (which will require between $20,000 and $30,000 on-hand, so for a year, you are looking at least about $100,000 in expenses.
The vehicles will need to be serviced and cleaned to keep them in operational shape and considering that they will likely be used at least once a month (but probably more), the upkeep for each will likely be between $500 and $1,000, though that really depends on how much business you are doing.
You will need to pay rent for your office space, as well as your parking lot, which will be around $700 for the former on the low end, and several thousand for the latter. About $500 per month should be dedicated to marketing, and $500 to $1,000 allocated for website maintenance and improvements.
Who Is The Target Market For A Car Rental Business?
There are a handful of client types that a car rental business thrives from. One group is business travelers who need a vehicle for transport when they are traveling and are away from home. There are also businesses looking to set up steady partnerships with car rental businesses to assure that their employees can rent a vehicle when necessary.
How Does A Car Rental Business Earn Revenue?
The earning model of a car rental business is pretty straightforward. They rent vehicles to those who require a means of transportation to clients from other areas that need a vehicle, those taking trips, and those who need loaner vehicles while their own are receiving service or repairs.
How Much Can Car Rental Businesses Charge Their Customers?
The location of the car rental business and the quality of the car being rented will determine the rates that can be charged. Basic, low-end vehicles will collect a daily rate of about $35 to $50, while upscale, luxury rentals can garner between $100 to $200, and sometimes more.
What Is The Profit Earning Potential Of A Car Rental Business?
The profits, much like revenue, are highly dependent on the business’s location, as well as vehicle selection, and rates. If the first couple of years of operation a business can earn between $50,000 and $100,000, though as the business continues to grow, mid-6-figure profits are certainly not out of the realm of possibility.
How Can A Car Rental Business Grow Profits?
One way to earn additional funds is to sell older vehicles from your fleet stock. Some vehicles become outdated in style, reducing the number of willing renters, but they can be a great get for someone who simply needs a vehicle. If the vehicle is no longer desirable, sell them or trade them in. Additionally, most car rental businesses offer a variety of auto-insurance tiers to their clients.
To generate more business, it is a great idea to partner with other local car dealerships. They can then send customers to your location while their vehicles are being repaired or serviced at the dealerships’ body shops.
Choosing A Car Rental Business Name
One of the most important aspects of any business is choosing the name. If you don’t have a name in mind, try a Car Rental business name generator after reading some ideas for naming a business effectively. If you are running your car rental business as a sole proprietor, make sure that your business name is not your name, but something distinct.
Make sure that you review federal and state trademarks, state business records, web domains, and social media platforms for businesses with similar names to avoid the possibility of them siphoning your clients away. Once you land on a solid name, make sure you scoop up a web domain before someone beats you to it.
Step 2: Set Up Legal Business Aspects
LLCs or corporations are some of the most common business types in this sphere, over other possibilities like sole proprietorships and partnerships because they protect owners from personal liability in case of a lawsuit against their business. Securing an LLC registration is easy and inexpensive. Even if you were to hire an LLC service to take care of the legal setup, it would not be at a high cost.
Step 3: Tax Registration
Every legally operating business must register for a variety of state and federal taxes before it can initiate operations. For tax registration, your business will need an EIN which can be registered easily through a variety of methods.
Depending on the business structure (LLC, corporation, etc.) you choose as the one for your car rental business, you will have various options for taxation. LLCs get taxed as S corporations, for instance. Some states are likely to have tax codes that could apply specifically to a car rental business operating within their borders, so consult local tax guides for that information.
Step 4: Set Up Bank And Credit Card For Your Business
Every responsible business owner needs to protect his or her business, as well as their personal assets. This is done by piercing the corporate veil, a term that applies to keeping personal and professional assets separate. To accomplish this, a business should have its own business bank account which will contain financial assets specifically for the company, rather than tying them into personal assets. This helps to keep accounting and taxation simple, as well as serving to protect the owner’s personal assets.
Net-30 accounts, which permit owners to pay off their credits after 30 days of spending money on services and products, are particularly popular. This is particularly helpful when inventory restocking is needed without cash on hand. These account types also help build vendor relationships and get reported to the major business credit bureaus, allowing businesses to build their credit and make them more likely to qualify for credit lines in the future.
Similarly, a business credit card keeps business expenditures separate from personal ones, while building the company’s credit history, which is helpful when future loans or lines of credit need to be secured.
Step 5: Accounting For The Business
Tracking your numerous costs and sources of income is crucial to assessing your company’s financial status. Maintaining precise and thorough accounting also makes yearly tax filing much easier.
Step 6: Securing All Necessary Permits And Licences
Failing to get appropriate permits and licenses can result in significant penalties or possibly the liquidation of your company. To run a car rental business, certain state permissions and licenses may be required. If you need to learn more about your state’s licensing requirements, the SBA reference guide is a great place to start. You should also check your town, city, and county ordinances, or the US Small Business Association directory for additional information.
A car rental company is most often operated from a parking lot. A Certificate of Occupancy is typically required for businesses that operate from a physical location (also known as a CO). This certificate of occupancy certifies that all building codes, zoning laws, and government requirements have been satisfied.
CO obtainment responsibility falls to the owner if he or she is purchasing the business locations. The responsibility of reviewing all zoning and building codes for the location of the business to achieve compliance will also fall to the owners. For those who lease an operation location, the landlord of the property is generally responsible for CO acquisition, and leasing parties should assure that language in the agreement protects them from needing to obtain a valid CO for a car rental business.
When the property calls for significant upgrades or renovations, a new CO should be issued to ensure the compliances are still in check.
Before initiating a rental, car rental companies should ask consumers to sign a service contract. By defining payment conditions and terms, service level expectations, and intellectual property ownership, this agreement should clarify client expectations and reduce the likelihood of legal entanglements in the future.
Step 7: Insure Your Car Rental Business
Similar to how a business requires licenses and permits to function legally and safely, insurance is also necessary. The financial stability of your business is safeguarded by business insurance in the case of a covered loss. For various company types with different risks, there are many insurance policy types available. If you’re not sure what risks your company could encounter, start with general liability insurance. It’s a smart place to start for your company because this is the coverage that small companies require most frequently.
Workers’ Compensation Insurance is a prominent insurance program that many businesses require. There’s a significant likelihood that your state will mandate you to carry a workers’ compensation policy if your firm employs people.
Step 8: Brand Your Business
Your business’s brand is what it stands for and how the public views your firm. Your company will stand out from rivals with a strong brand. Check out our Design Guides for Beginners if you’re unsure how to create your small business’s logo, which is the visual representation of your company’s brand. This will offer you useful hints and suggestions for coming up with the greatest, most distinctive logo for your enterprise. (you can use Fiverr or Canva)
Promoting And Marketing A Car Rental Business
You should leverage multiple diverse media platforms to advertise your car rental business. Use brochures, flyers, introduction letters, magazine and newspaper advertisements, SEO pushes, local and online directories, and search engine optimization. It is good to develop connections with the critical decision in neighboring companies. You can even attempt to secure business from enterprises, government organizations, and the aviation industry.
Your mobile app and website’s quality are very important to your car rental business’s success. To draw and retain consumers, make sure the automobile reservation procedure is simple and intuitive. Find out what nearby rivals are charging for their services, then equal or offer slightly below that price point. Provide several different automobiles that suit different types of drivers luxury cars, affordable cars, sport utility vehicles, sports cars, compact cars, and midrange vehicles as part of your fleet’s selection. Make sure your cars are always tidy and in excellent condition.
Step 9: Build A Website For Your Business
The next step and one of the most essential is to create your business’s website. Though it is pivotal, some owners hesitate to take action, fearing that they are not technically savvy enough to set one up. However, we are not living in pre-2015 days of website building, as web technology has advanced by leaps and bounds in the last decade or so, allowing anyone, even with minimal web-building skills to be able to put together a great business website.
Between some basic website-building guidelines, and website builders including WIX, Squarespace, Shopify, WordPress, Weebly, and GoDaddy, anyone can have a website built in under 3 hours.
But what if you have a LinkedIn account or a Facebook page, you may wonder? Well, while those are great supplements they do not carry the legitimacy and authority power of a business website. Without a business website, prospective clients will not fully trust in a business’s legitimacy since having a website is pertinent for any modern business.
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Step 10: Setting Up Your Business’s Phone System
One of the easiest methods to maintain privacy and distinction between your personal and professional lives is to set up a business phone. Not only that, but it also helps you automate your business, secures its validity, and makes it simpler for potential clients to locate and get in touch with you. Entrepreneurs that wish to install a company phone system can choose from a wide range of services that specialize exactly in helping businesses set up phone systems.
Is The Car Rental Business Right For You?
A car rental business is a good fit for someone who has a true interest in cars, their upkeep, and a driving experience.
What Is A Typical Day Like For A Car Rental Business?
The usual owner of a car rental firm spends time exploring and researching new automobiles, considering options regarding their fleet of vehicles, deciding on marketing techniques, assigning tasks to staff members and forging partnerships with other businesses.
What Are Helpful Skills To Have For An Owner Of A Car Rental Business?
It’s essential to figure out the wants and needs of your target market. You should eagerly learn everything there is to know about cars, vehicle trends, travelers, businesspeople, branding, and marketing. Also, having exceptional people skills will be helpful if you want to influence decision-makers at companies that need rental cars for a variety of purposes.
What Is The Growth Potentiantial In A Car Rental Business?
Your fleet’s quality, marketability, and your business’s location all influence how quickly your vehicle rental company could grow, though the latter is certainly the most pivotal element. If your car rental company is in a location where there are many business travelers and other people who might require an interim means of transportation, your business might grow rather fast.
With enough growth, the company can become large enough to support various locations across a region, such as a large city, or state, and for those who succeed at maximum growth, even nationally.
Taking The Next Step To A Car Rental Business
If you have decided that a car rental business is something you are passionate about and want to take a very real look at starting and expanding such a business, there are a few key factors to consider.
An effective business mentor is one of the best resources an entrepreneur can have. Connect with a free business resource in your area as you start organizing your business to find the expertise you need to help you in achieving your goals. For young company owners, having a solid support system in place to depend on in trying times is imperative.
Women may also feel a passion to get into a car rental business, but since this, like many other business ventures, has been largely a male-dominated industry, women may need additional resources to help them succeed and thrive in securing a healthy business position. Such resources are widely available in various locations, but we recommend the Women in Business series from Startup Savant as a great guide to acquiring information about funding, support, events, and many other aspects of a successful businesswoman.
Are There Any Helpful Inside Tips On Starting A Car Rental Business?
Choosing a good niche for your business’s area is a key method of learning what specific target demographic to cater to. If your area has a lot of business travelers, look for those vehicles that appeal to them. While you should market in mediums of your primary target audience, make sure not to ignore other customers like those traveling for pleasure. By having a variety of vehicles for rent, you can more easily appeal to a wider net of potential customers from a host of backgrounds and with a variety of interests.
Never shy away from marketing partnerships either, as these can only help your business grow. Perhaps your business is located near a hotel. This is a place that is likely to have customers for your car rental business. In return, you could offer other customers to the hotel. Such relationships can be communicated effectively through brochures that detail the partnership between your business and its allied entity, and the brochures can likely point visitors to the hotel to your business in the hotel’s brochures as well.
Perhaps more important than those tips is the critical nature of having a website that is not only informative and appealing but also optimized for search engines (SEO), as well as having both browser and mobile browser versions since many customers will be looking up businesses like your car rental company on their phones. Don’t try to save a few bucks at the expense of your site. It is pivotal to your business being discovered, researched, and used.
When And How To Build A Car Rental Business Team
To start a car rental business, you will need at least a couple of employees. There should be someone available to answer questions from walk-in customers, as well as address email and phone inquiries about your company’s services and rates. Additionally, you will need to have a mechanic on staff whose job it will be to service the fleet of cars on your lot assuring they are in good shape for future customers.
Vehicle detailers are also good to have on hand to make sure that when a vehicle is returned it is effectively cleaned before renting it to another client. As your business grows, you can add additional employees to the staff, especially in the capacity of performing administrative duties when the person normally responsible for them is overwhelmed with work or is out.
Frequently asked questions:
how to start luxury car rental business?
To start a luxury car rental business, you’ll need to research the local market, obtain the necessary licenses and permits, secure funding to purchase or lease high-end vehicles, and create a comprehensive marketing plan. You’ll also need to hire a team of experienced and knowledgeable staff to manage the rental process and provide exceptional customer service.
how to start exotic car rental business?
To start an exotic car rental business, you’ll need to research the market demand and competition, secure financing and insurance, obtain necessary permits and licenses, and build a fleet of exotic cars. You’ll also need to establish a strong online presence and market your business effectively to attract customers.
is a car rental business profitable?
A car rental business can be profitable if managed efficiently. However, profitability depends on several factors, such as location, competition, fleet size, pricing strategy, and demand. Adequate research and planning can help identify potential risks and opportunities, enabling business owners to maximize profits and minimize costs.