How to Start a Car Rental Business

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For residents of a large city who use a car only occasionally, it is much more profitable not to buy their own vehicle, but to use carsharing. That is why the demand for car rental is constantly growing, leaving free niches despite the huge number of companies involved in car rental as a business. You can easily join this direction, even with a small start-up capital.

Pros and cons of car rental business

Like any line of business, car rental has its advantages and disadvantages. Main advantages:

• The presence of demand. Renting is in many ways more comfortable and economical than maintaining your own vehicle – you do not need to spend money on car repairs and maintenance. In addition, many simply do not want to burden themselves with a vehicle. Relatively small investment. The amount of start-up capital required to launch is small. Depending on the size of the fleet, you can open if you have less than 1 million rubles.
• Saving time. Car rental as a business takes little time and does not require a large staff. Having made efforts at the start (buying a car, promoting, organizing a rental system), then it remains only to calculate profits and think over new directions for development.
• Fast payback. On average, investments will return in 3-5 years. And in large cities or when buying a ready-made business – in less than 2 years.

But the direction has its drawbacks. The entrepreneur must consider:

• High competition. In large cities, the market has been successfully occupied by large companies that are highly popular and trusted. To compete with it, you need to come up with a unique offer that can interest customers.
• Risk of serious damage, theft. The success of renting a car as a business directly depends on the conscientiousness of customers and their driving experience. It is necessary to develop a reliable system of collateral and insurance so that in the event of an accident you do not have to restore the car with your own funds.
• Difficulties in promoting and finding customers. To compete with major market players, you will have to invest heavily in advertising, website and mobile application development, promotion in search engines and social networks. To do this, you need to clearly define your target audience.
• Difficulties of development in small towns. Earnings on car rental as a business is possible only with active demand. Considering the low level of salaries of residents of small settlements, such a project will not generate income or will only make it possible to recoup the costs. But there are options here too. For example, to rent agricultural machinery or SUVs, ATVs for tourists.

The listed shortcomings of the rental idea can be eliminated if a business plan is worked out in detail. It is important to determine exactly what your target audience needs and offer them a solution to the problem.

Read more: Business health checklist

Business plan

Like any other direction, this type of entrepreneurship requires a detailed development of the concept. It is important to understand who and what you are going to offer. First define your target audience:

1. the middle class, in need of short-term rentals several times a month;
2. tourists visiting the city and renting a car to travel to nearby attractions;
3. taxi drivers, for whom hiring a transport is more profitable than buying their own car;
4. corporate clients – large companies that need a fleet of vehicles for urgent or regular trips, customer service;
5. customers looking for an exclusive offer, such as a limousine for a wedding or prom, a vintage car for a photo shoot.

When thinking about making money by renting a car to taxi drivers, take this idea critically. Although it may seem promising at first due to high demand and lack of downtime, long-term rental will not bring high profits, but the machines will wear out a lot.

In a small city where there is no strong competition, you can try to reach all potential customers. But for this you need to create a fleet of vehicles with models for any request.

Steps to start a car rental business

The most important step is drawing up a detailed business plan. It must take into account all possible items of expenditure, including maintenance, the purchase of spare parts, the cost of renting a room, utility bills, advertising, paying taxes.

Then proceed to the main launch steps:

1. Register a company.
2. Attract investors.
3. Buy cars.
4. Get into advertising.
5. Sign contracts with partners.

Depending on the city and the complexity of the idea, the organization of car rental may include more points. It may be necessary to develop an application using which you can quickly book the right car.

Additionally, you will need an office for employees, a platform for free vehicles, and your own car wash.

Steps to start a car rental business

How much investment is required to start a business

The main expense item when starting a car rental business is the purchase of cars. Large companies are investing tens of millions of rubles in this. Due to constant price fluctuations in the automotive market, it is impossible to calculate the exact amount of investments.

You should also budget for:

• registration of an enterprise, obtaining permits;
• rent and repair of office, purchase of furniture;
• salaries of employees for the first months;
• development of a website, mobile application;
• advertising and promotion in the network;
• Unexpected expenses.

Before you open a car rental, consider the upcoming monthly expenses. This will include not only the maintenance of the office, but also cleaning, washing cars, their repair and ongoing maintenance.

To control the location of transport, as well as the speed limit and driving style, it is worth installing special beacons. So you insure the vehicle against theft, and you can also fine unscrupulous drivers who put your property at risk.

How much investment is required to start a business

What are the best cars to rent

There are 5 most popular categories of cars that can bring profit to novice entrepreneurs:

1. budget brands – Daewoo Nexia, Chevrolet Lanos, Renault Logan are suitable for starting car rental as a business;
2. middle-class cars with automatic transmission, electronic heading stabilization systems and a media center;
3. expensive executive cars – give preference to the flagships of BMW, Mercedes, Porsche;
4. off-road tourist models – if your area is popular due to extreme tourism, buy several off-road vehicles;
5. exclusive options for the holidays – often a car rental business makes a profit thanks to white limousines for wedding processions, Cadillacs, retro cars.

The choice of one or another category depends on the budget and target audience. Keep in mind that it is wiser to start with a small fleet, gradually expanding it at the expense of the profits.

It is not necessary to purchase a new vehicle. Consider the secondary market – so you can save a lot. However, be sure to check the reliability of each car you buy to avoid accidents and rapid wear of parts.