Of course, you can opt to start with an already successful car rental franchise. Or, you can start your own car rental company. That way, you’ll be able to tweak a proven money-earning small business model into one that best suits your location and desired business scale. In this blog, we will discuss how to start a car rental business.
The Car Rental Industry in 2022
The global car rental market is booming. North America is the biggest player, with the United States leading the way. Overall, the car rental company’s operations are $92 billion in 2021, the majority of which ($57 billion) are related to travel. By 2027, it is predicted that the rental-car industry will be worth $140 billion.
Why You Should Start a Rental Car Business?
Why should you launch a car rental company of your own?
- More and more people are buying fuel-efficient small cars for daily use. These people still need a large truck or van for special purposes from time to time.
- You have always loved cars.
It is profitable.
- You can start small and build. You can start a car rental service with just one car.
- For your chosen activity, you have a lot of options. Vehicle rental companies can specialize, such as truck rentals, classic and exotic cars, luxury car rentals, or vans and delivery vans.
Start a car rental business in 10 easy steps
Purchasing a franchise from a well-established company with a successful brand and business plans, such as Avis, Hertz, or Enterprise, might be considered buying an existing business. Alternatively, you might buy an existing rental company that the owner wants to sell. Alternatively, you may launch your own company and customize that tried-and-true organizational structure to your preferences.
With our chosen steps, you can learn how to launch a car rental business:
Find other car rental companies
As part of your market research, look at other car rental companies and note which aspects of those activities you think are relevant to what you intend to do. For example, if you’re offering vintage or specialty car rentals, you can make changes to the standard lease.
Decide what kind of vehicle rental business you will start
Car rental companies have traditionally focused on serving business customers. However, according to recent data, the fastest growing segment of the industry is tourists. If there is an opportunity to buy into an existing car rental business and take it over, do your homework. Why is the business being sold? How old are the cars? How much revenue does the business bring in? Are they profitable?
Determine Your Target Marketplace
Before starting a new business, think about who you think your target market is. Before starting a car rental business, you need to know who will be in charge most often.
Choose a Proper Business Name
First, check that the name is not already taken. Select a name that match your target market.
Write About a Car Rental Business Plan
Your business plan will share similarities with most business plans, with a few key differences:
- You will need a strategy to implement Covid-level cleaning and disinfection for your fleet, which will be a must for any successful car rental business.
- Your main expense will be transportation. How many cars you can afford will determine your startup costs.
Select a Business Structure
The limited liability company, or LLC, is the business structure of choice for new car rental companies.
Choose a Location for Business
Car rentals must be supported by an active population.
Another factor is the cost of the registered vehicles, as well as the business tax that will be levied on your operation. The Small Business Administration is where you can find this information. With these figures, the Small Business Administration has a fantastic chart.
For example, if you locate your business in Vermont, the state will add a 15% rental tax to your rental fee, plus an additional 9% and 6% state tax. Or, if you choose nearby Connecticut, there’s no rental tax and you’ll pay a state tax of 6.35% and a state tourist fee of $1 per day.
Open Your Business Bank Account
Make a distinct business account and a dedicated business credit card in your company name. Money/assets and personal accounts should never be combined with business accounts.
Fix Your Business Finances
When you start your own business, you will likely need a business car loan.
Many car rental companies are affiliated with car dealerships, where they initiate a purchase or lease agreement. Using local auto dealers makes pick up and delivery more convenient. Of course, the cost of the vehicle (business loan) will be the biggest expense for small businesses in this area. Loans are expensive, but they are a great way to build business credit and support future fleet expansion.
Buy a Business Insurance
Insurance is another high expense. Your company should have general liability, business, and commercial auto insurance at the very least. You’ll also require property insurance if your business owns or rents a space.
Organize your taxes
You’ll need it even if you’re operating a sole proprietorship, as an EIN is required for state tax returns.
This is where you may need to seek the services of professionals, such as accountants and business attorneys. The main taxes you might owe are listed below:
- State tax
- workers compensation tax (if you have employees)
- taxes by locality, such as city and/or county
- Leases of Personal Property – Must be reported on Schedule C as required by the IRS
Build a Website for Your Business
Search Engine Optimization (SEO) is very important for any business website. If you do not have the knowledge or time to do this yourself, hire a professional. Your goal should be to make your site easy to find with a Google search. You can also promote your site on social media sites, such as Facebook, Twitter, LinkedIn, and others.
Market Your Business
In addition to your website, social media platforms, and digital marketing, you can link up with local businesses. For example, a local lumberyard or furniture store can issue your card to customers who need to hire a delivery vehicle, or a vehicle repair shop can do the same to customers who have local short-term or long-term car rental needs. Build customer loyalty but react quickly to issues, especially incidents.
How much does it take to start a car rental business?
Startup expenses can variety from $50,000 to $100,000. There are variations, including the value of the vicinity to lease or lease, and the kind and variety of condo vehicles.
Is a car rental company successful?
Low-end daily mini car rentals are $40 or more, with premium car rentals $100 to $200 per day. You can spend $500 to $1,000 per month on insurance costs. Your monthly fleet costs will vary depending on the number of vehicles you have.
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