How to Open a Car Rental and How Profitable is It

Starting a car rental booking system is a very responsible business that requires a sufficient amount of knowledge and financial investment. But on the other hand, this business is in huge demand now, and with a competent business plan you can get a stable profit. If you have ever thought about starting your own business, which would surely bring more benefits and, accordingly, more income, this article is exactly for you. On this page all needed information about the car rental business will be uncovered in detail, what might be useful while drawing up a plan.

Main Customer Groups

The first thing you have to do is to evaluate the market and define the groups of clients which will use the service of car rental. To organize your business properly, you need to assess the demand for the service and which types of cars are actually required. Most often, people rent a car for the following reasons: 

  • Drivers temporarily don’t have their own car (it is under repair, for example);
  • During the holidays;
  • For a business trip.
  • In order to show oneself in a favorable light with the help of the car. 
  • More rarely cars are rented before buying a car to test the convenience and other properties of the vehicle. 

Having finally defined a certain sector of the market, you need to imagine yourself a customer and try to understand which type of a car you’d like to rent. It always depends on the financial capacity and personal preferences, so be ready to satisfy the main demands of your targeting audience. 

Choice of Cars for Rental 

Any client who decides to rent a car wants to have a lot to choose from. Ideally, the company should offer models of different configurations: from economy class to luxury. As usual, there are 4 classes: 

  1. Middle class. Among the key advantages of such cars is low fuel consumption. This choice is relevant for those who want to save on fuel when renting. The advantages include: compact dimensions – increased maneuverability on the highway and city streets, so there are more options for parking spaces; affordability – the middle class is distinguished by its price attractiveness, so that motorists with a limited budget can afford to rent a car.
  2. Business class. Business class car rental is relevant for people who are not able to drive their own car. The rental of such cars is no less popular among top managers if they need to make a spectacular appearance at business meetings. For such people the quality of service is important.

By renting a business class car, people will be able to demonstrate their self-sufficiency and prove that they are able to realize themselves by driving a rather prestigious car.

  1. Executive class. Such cars are also called luxury or premium, and this is not surprising. Premium class is immediately noticeable on the highway. Such cars stand out favorably with rich equipment, high level of safety, leather interior, wood and metal trim. Among the additional advantages is a high power reserve, acceleration to 100 km is carried out literally in a couple of seconds. However, it all depends on the model and brand. Rental of these cars is usually more expensive, and fuel costs are also increasing.
  2. Limousines. Limousine rental is charged per hour. This is even quite satisfying with the customer: most customers need a limousine only for a special event, such as a wedding, birthday.

Registration of Car Rental Business

An essential point of starting your own car rental business is that it is impossible to conduct it without registration. After all, you need to document the lease agreement, provide insurance that allows you to receive compensation, even if the car was not driven by the owner. In fact, the particular registration procedure will differ according to your country or state you live in, but generally it can be accomplished through these main steps:

Step 1. Filling in the corresponding forms and payment of a nominal fee.

Step 2. Further, you will probably be required to apply for the appropriate business licenses and permits through state and local authorities.

Step 3. Fleet insurance is a good idea because it protects your business in case of financial failure. And moreover, it covers your fleet of vehicles in case of any physical damage.

In addition, these steps can be partly omitted if you choose the option of a franchise. All you will need to do is to purchase the rights to the brand and business model of the existing rental business. But, on the other hand, you will not have independence over your business and will be under the influence of other bodies.

Project Start-Up Costs

Car rental booking engine requires a fairly large amount of money, as it’s necessary to purchase at least several cars. What’s more, the cars will require a separate service station where you can wash or carry out any repair work.

Regular expenses also include:

  • Utility bills;
  • Taxes;
  • Payment for the services of a security and insurance company;
  • The price of several parking spaces. 

In summary, under the business plan for car rental software, it turns out that rather large initial investments are compensated by low monthly expenses, which positively affects the overall payback of the entire project. Anyway, be ready to count all the necessary investments due to the pricing policy in your country. 

Possible Risks and Their Minimization

With any new business you must be ready for some risks and troubles, because the human factor affects the development of your business and can sometimes cause unpleasant situations. But if you’re aware of these possible risks, you can easily minimize them, and you won’t worry about it anymore. 

Bear in mind the next aspects and learn how to cope with them:

  • Downtime of cars;
  • Theft of cars;
  • Factory defects of new cars;
  • Accidents caused by drivers and other traffic participants; 
  • Costly repairs, which can be partially avoided by regular maintenance.

All these situations sound very unpleasant. But it’s possible to avoid them or at least to minimize their effect on your business. For instance, you can:

  • Perform regular technical maintenance;
  • To establish a deposit to be paid by the tenant when drawing up the contract and before handing over the car;
  • Limitation of daily mileage, violation of which the lessor has the right to deduct a certain amount from the temporary deposit.

As you can see, many terrifying situations can be avoided if you take them into account. That’s one more reason why a car rental booking system can become a fascinating idea for your future business, if you’re ready for investments and paperwork. Focusing on the quality of service, you will quickly gain the respect of your customers and reputation in the field.