How to Start a Car Rental Business


Of course, you can choose to start with an existing car rental franchise. Or you can start your own car rental business. This way, you can adjust a proven small business model to make money in a setup that best suits your location and the desired business size.

The car rental industry in 20222

The global car rental market is booming. North America is the most important player, with the United States leading the way. In total, the car rental company’s business was $ 92 billion in 2021, with most ($ 57 billion) tied to tourism. The car rental business is expected to reach $ 140 billion by 2027.

Why You Should Start a Car Rental Business

Why Should You Start Your Own Car Rental Business?

  • More and more people are buying small, fuel-efficient vehicles for everyday use. These people will still sometimes need a truck or a large van for special purposes.
  • You’ve always liked cars.
  • It is profitable.
  • You can start small and build. You can start a car rental service with a single vehicle.
  • You have many options for your type of operation. Car rental companies can specialize, such as renting passenger vans, classic and exotic cars, a luxury car rental service, or delivery trucks and vans.

Starting a car rental business in ten easy steps

Buying an existing business may involve purchasing a franchise from a proven brand and business model, with an initial franchise fee, such as Avis, Hertz, or Enterprise. Or you can buy an existing rental business that a landlord wants to sell. Or you can start your own, which would take this proven business structure and build it the way you want.

Learn how to start a car rental business with our chosen steps:

Investigate other car rental companies

As part of your market research, look at other car rental companies and write down the aspects of these operations that you think fit into what you plan to do. For example, if you plan to offer classic car rental or specialized car rental, you can make changes to the standard rental agreement.

Decide what type Vehicle Rental business you will start

Historically, car rental services have catered to business travelers. But according to statistics, the fastest growing segment of the car rental company is tourism.

If there is an option to take over an existing car rental business, do your due diligence. What is the reason for the sale? What are the ages / mileage of rental vehicles? Is the business profitable?

Determine your target market

Before you start your new business, brainstorm what you think will be your target market. Before you start a car rental business, you need to know who will most often be in the driver’s seat.

Short and / or long term customers? Delivery or special vehicles? Luxury vehicles?

Choose a business name

First, check that the name has not been taken. Choose a name that reflects your target market.

Write a car rental business plan

Your business plan will have similarities to most business plans, with some key differences:

  • You will need a strategy to implement the cleaning and disinfection of your Covid-level car fleet, which will be a mandatory standard for any successful car rental business.
  • Your main cost will be the vehicles. Your initial costs will depend on how many cars you can afford.

Choose a business structure

Most initial car rental companies choose the Limited Liability Company or LLC. These business structures protect personal assets.

Choose a business location

Car rental must have the support of a vibrant population. This is an important factor to consider.

Another factor is the cost of a vehicle license, as well as the business taxes that will be charged on your transaction. You can find this information with the Small Business Administration. The Small Business Administration has an excellent chart with these figures.

For example, if you locate your business in Vermont, the state will add a 15% rental tax to your rental fee, plus a 9% surcharge and a 6% state tax. Or, if you choose to get close to Connecticut, there would be no rental tax and you would pay a 6.35% state tax and a $ 1 state tourist tax per day.

Open a business bank account

With your business name, start a separate business account with a designated business credit card. Business accounts should always be kept separate from money / assets and personal accounts.

Order the finances of your business

When you start your own business, you probably need a car loan.

Many car rental companies are affiliated with a car dealership, where they initiate a purchase or rental agreement. The use of local car dealerships makes picking and delivery more convenient. Of course, vehicle costs (commercial loans) will be the highest expense for small businesses in this field. Loans are expensive, but they are a great way to generate business credit and support the future expansion of your fleet.

Buy business insurance

Insurance is another important expense. At a minimum, you will need comprehensive civil, commercial, and commercial auto liability fleet insurance. If you own or rent a location, you’ll also need property insurance.

Put your taxes in order

You will need an employer identification number, or EIN, to set up a legal business entity. You will need this even if you operate a sole proprietorship because the EIN is required to file state taxes.

This is where you may need to hire the services of a business professional, such as an accountant and a business lawyer. Here are the top taxes you may need to pay:

  • state tax
  • workers’ compensation tax (if you have employees)
  • tax rates by localities, such as cities and / or counties
  • Personal property rentals: must be reported in Appendix C as required by the IRS

Create a website

Search engine optimization is important for any business website. If you do not have the knowledge or time to do so, hire a professional. You want people to be able to find you easily with an internet search.

You will also need a presence on various social media accounts, such as Facebook, which is another source for potential customers.

Market your business

In addition to your website, social media platforms, and digital marketing, you can join local businesses. For example, a local wood or furniture store may give your card to customers who need to rent a delivery vehicle, or a car repair shop may do the same for a customer who needs a short-term local rental or long term. Retain customers but respond quickly to problems, especially breakdowns.

How much does it cost to start a car rental business?

Initial costs can range from $ 50,000 to $ 100,000. There are variations, such as the cost of the location to rent or lease, and the type and number of rental vehicles.

Is a car rental business profitable?

A low-end daily rental for a small vehicle is $ 40 or more, and a high-end vehicle is rented for between $ 100 and $ 200 a day. You can expect to spend between $ 500 and $ 1,000 a month on insurance costs. The monthly costs of your fleet will vary depending on the number of vehicles.

Image: Depositphotos


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