Tech 101

How To Start a Car Rental Business

Jun 21, 2022

Starting a car rental business might just be easier than you think. Check out our car rental startup guide to help you each step of the way.

Shelby VankirkGuest Contributor
How To Start a Car Rental Business

By now you’ve probably considered the pros and cons of starting a car rental start-up. For example, high demand from car hire users, steady income, and big profit potential are some pros. On the other hand, cons may include stiff competition, as well as high start-up costs, recurring maintenance costs, and the potential impact of vehicle damage.

But overall the car rental business can be very rewarding if you plan properly. Car rental business predictions indicate that there will be over 600 million car rental users worldwide by 2026. If you are trying to tap into this robust market and struggling to find information on where to begin, then this step-by-step guide will help.

Start your own car rental business

Starting a car rental business entails more than just acquiring business permits and having a fleet of cars—both of which are expensive. Like in any business venture, a thoughtful plan will go a long way. Read on for help on devising your plan.

Step 1: Conduct market research

Market research is essential for determining how to start a car rental business because it allows you to avoid common pitfalls that might hinder essential early growth.

When it comes to your car rental start-up, you need to consider the following:

  • Research other car rental businesses within the area where you want to establish your car rental start-up. By identifying your competitors and understanding how they run their businesses, you will have a good idea of how to ensure your business succeeds and how it can stand out from the competition.

  • Conduct a survey to see if people in your area need car hire services and if your car rental company will be beneficial to them. Interviewing your target audience will also help you improve upon what’s available to users in the market. For example, you might offer something unique that existing car rentals do not offer.

  • Identify and understand car rental industry trends—i.e., high peak (seasons when large numbers of users rent cars) and low peak seasons (fewer car users rent cars).

Step 2: Decide which car rental type is best for you

There are a variety of car rental businesses, and before making any decisions about your car start-up, you first need to understand all the types of car rental businesses and identify which one is suitable for you.

Car rental business categories

Franchise: Identify an existing car rental business and then buy the rights to use their brand name and business model.

  • Pros: It’s the simplest way to start your car rental business, and you will get the support of an already successful brand.

  • Cons: Franchise purchase fees are quite high, and you won't have total control of your business. Your franchisor will dictate your practices and general business model.

Dealership: Make an agreement with a car dealership and offer rental services to customers whose cars are brought in for repairs.

  • Pros: You won't need as many available vehicles to get started with your business.

  • Cons: Naturally, your customer base will be limited.

Independent small business: You’re flying solo. You won't have any sharing agreements with anyone, which means that you will fund yourself, build your brand—and set out to compete with already existing brands. You can also choose to buy an existing car rental business or start your own business.

  • Pros: Maximum control over your business model and practices, with an opportunity to truly shape your brand. If you take over an existing business, you’ll have access to that customer base.

  • Cons: You’re solely responsible for all start-up costs and will be held accountable for any business issues that arise.

Step 3: Pick an audience

How to start a car rental business highly depends on your target audience. What type of customers are you targeting? Are they short-term or long-term? Elite or middle-class? All these people have different needs when it comes to car rental services.

Identifying a target audience is crucial in your car rental start-up since it enables you to understand what type of services you will offer them. For example, if you are targeting the elite, you need to focus more on purchasing luxury cars and offering them state-of-the-art services to suit their luxurious lifestyle. You also need to focus on a specific target group that is most likely to use your car hire services.

Picking your audience, or business niche, helps you in creating effective marketing strategies, especially since you will be able to identify a specific demographic that is most likely to use your car rental services. If you’re targeting the luxury car niche, then your target audience could be celebrities or business elites.

Once you have established a specific demographic you will then need to channel your marketing efforts to them; this will help you avoid unnecessary spending on an uncertain audience. The easiest way to identify a target audience is by understanding the population's needs in your area and knowing the population demographic in your business locality.

Step 4: Choose a location for your business

The location of your business determines whether starting a car rental business will be successful or not. Several factors you have to consider when finding your location include:

  • Proximity to other businesses. For example, having your rental business in touristy areas might be profitable since you will rent out to both local and international tourists.

  • A flexible lease, i.e., can the lease be extended as you continue growing as a business?

  • A space that doesn't need major renovations or repairs.

  • Size of the property. You should consider if the property will be able to accommodate your fleet of cars.

  • Your operating costs in relation to your desired location. How will your car rental work in your desired location? How much will your car rental cost in your desired location? What’s your operation formula for calculating charges? You will need to determine cost per hour, cost per day, cost per mileage, cost per car model, or use of a matrix that combines all these aspects.

Step 5: Create a car rental business plan

Your car rental business plan should entail details of your business objectives and how you plan to achieve your short-term and long-term goals. When creating an online car rental business plan, it is essential to include the following:

  • Your business name

  • A summary of your business plan

  • Mission, vision, and goals

  • Describe the type of car business, products, and services you are offering

  • An online car rental business financial plan, i.e., financial projections, funding, estimated profits and losses, and cash flow

  • Any additional financial and business-related documents

Step 6: Register and license your car rental business

Now that you already have your online car rental business plan set up, your car rental business needs to be legal. This means that you will need to register your business with the state where your business operations will take place. Your car rental business license requirements will typically include:

  • Business entity or structure (sole proprietorship, partnership, Limited Liability Company (LLC) or corporation)

  • Business location

  • Business licenses and permits

  • Business insurance

Note that depending on the state you live in, regulations and business requirements will be different. Ensure you check with your relevant local agencies or relevant state department where your car rental business will operate.

Step 7: Finance your car rental business

The start-up cost of each car rental category may differ. For your business to fully start its operations, you will have to fund it. Here are some options you may consider to secure your finances.

  • If you are funding yourself, open up a separate business bank account or credit card

  • Bank loans

  • Government grants

  • Crowdfunding

Step 8: Ensure your business offers outstanding customer service

Your car rental business will not be a business without your customers. When planning on how to start a car rental business, keep in mind that you are doing it mainly for your customers. And the best way to attract customers and retain them is through exceptional customer service.

Customer service is crucial since it helps build trust with your customers, which cultivates loyalty and value addition for your business—retaining customers is cheaper than acquiring new ones.

Car rental essentials

  1. Car rental software: Prioritize purchasing car rental software when thinking of how to start a car rental business. Having a software system helps you track your finances, assets, payrolls, and even store your business data so you don’t have to do it all manually.

  2. Business operation tools: Start-up solutions enable you to focus on growth rather than paperwork and administrative formalities. The right solutions will help create more efficient systems by taking care of fleet management processes and offering crucial information about new and potential car rentals. For example, software can automate tasks that would otherwise take up valuable time.

Another good example is the use of a custom-made website for your rental business. It will not only attract potential clients but also exude professionalism.

Importance of having a car rental start-up guide

The above steps might seem overwhelming at first but keep in mind that starting a car rental business can be quite exciting. Our guide will help you to easily navigate the car industry as you gain trackage. You will keep learning more about your business, and how you can keep improving it, one day at a time.

How GetApp can help

At GetApp, we offer a variety of services that will help you if you're wondering about how to start a car rental business and how to easily manage your car rental start-up. Want to discover more about car rentals and be successful in your business? Connect with us and learn more with these additional resources.

About the author

Shelby Vankirk

Guest Contributor
Shelby is a technical writer and content consultant with over seven years of publishing experience. She is an expert on artificial intelligence, machine learning, software, information technology, business, internet of things, spirituality, travel, and lifestyle. Shelby has worked with a variety of clients – from small businesses to top-notch publications. When she's not writing, Shelby enjoys spending time with her two cats and dog, binge-watching shows on Netflix, and practicing calligraphy.
Visit author's page