How to Run a Car Rental Company | YourMechanic Advice

How to Run a Car Rental Company

If there’s one thing people need when out of town on vacation or business, it's transportation. A vehicle rental business serves a real need that isn’t likely to wane anytime in the future. While meeting such a demand makes starting your own vehicle rental business sound like a fool-proof plan, there are other factors to consider before you open the doors on your new venture.

Before you ever start scoping out locations or amassing a fleet of vehicles, be honest with yourself about your potential to find success in this industry. While the concept of making money in car rental is fairly straightforward, there is far more to it than handing out keys and collecting cash. What follows should help you make a decision about your venture.

Part 1 of 2: Consider pros and cons

Step 1: Consider pros and cons. Anytime you are thinking of starting something new that will be a major project, you should consider both the reasons for and the reasons against doing it.

Here is a table to help give you a sense of the positives and negatives:

pros and cons chart

If, after conducting research and making your own pro and con list, you are determined to start your own vehicle rental business, it is important to follow the proper steps.

This ensures you have all of your needs met before you meet hurdles, such as a renter having an accident in your car or a customer complaint coming in. Although problems like these are inevitable over time in this industry, you can do your best to be prepared and handle them in a smooth and professional manner.

Part 2 of 2: Create your business

Step 1: Decide on your rental format. There are two primary formats in the vehicle rental industry – daily hire and contract hire.

Daily hire appeals to vacationers or anyone else with short-term transportation needs and usually targets individuals. Contract hire is more long-term in nature with monthly or annual contracts that often fit a business’ needs.

While it is possible to offer both forms of rental, most companies choose to specialize in one or the other. Assess the needs of your area and your competition to aid in making a decision.

Step 2: Decide on a location. Look for available real estate near where your customers are likely to be, such as airports, bus stations, or hotels.

Remember that your clients will have limited ability to get to you, and – even if you provide a shuttle service – the shorter the travel time the better.

Also, take into account the general safety of your potential location. After all, vehicles don’t come cheaply and you want your customers to feel secure as they arrive and leave.

  • Note: Wherever you ultimately choose, you may want to install CCTV cameras or hire a security guard to protect your investment and customers.

Step 3: Build your fleet. Start growing the rental cars and trucks you want to offer for rent.

You can’t offer a vehicle rental service without vehicles, and this is why the start-up costs associated with this business are so high. When you first start out, your fleet, or collection of cars and trucks, may be relatively small and profits may rely on high turnover.

  • Tip: Purchasing your initial fleet outright is the most cost-effective option in the long run, but ironically, you also have the option of leasing the vehicles you plan to rent.

Step 4: Obtain fleet insurance. Before your vehicle rental business goes live, having proper insurance on your fleet is a legal requirement.

This is ultimately for your own protection. Not only could a client damage your property but one of your customers could be harmed in an accident and hold you responsible.

Consequently, do not take your choice of insurance carriers and coverage lightly, and shop around for the best deal before you commit. Some of the top commercial auto insurance companies are likely names you recognize from the private sector, like Nationwide, Progressive, and GEICO.

Step 5: Set up your website. Since much of your business will come from out-of-towners, you need advertising with an unlimited reach.

A website is an invaluable tool to inform potential customers about your services, highlight the vehicles in your fleet, and even allow online booking. It works for you 24/7 and can be configured to automate much of your paperwork and other processes.

In order to keep visitors of your website from going to your competition, make sure you offer at least the same online capabilities as other vehicle rental services in your area, even if it means enlisting the help of a web developer.

Step 6: Prepare for daily operations and proper record-keeping. Once your vehicle rental business has opened its doors, it requires daily attention to function like a well-oiled machine.

Ensure you have enough staff to meet your customer’s needs and a system in place for record-keeping. In the past, such records were laboriously kept by hand on paper, but modern businesses often use a fleet management software.

dossier fleet screenshot
Image: Dossier Systems

Such software may be a costly investment initially, but it will save headaches and money down the road. Some of the most commonly used fleet management software brands are Dossier Fleet Maintenance, RTA Fleet Management, and collectiveFleet.

While there are a lot of reasons not to open a vehicle rental business, such as the high startup costs and possible liability issues, the rewards can outweigh the risks. With proper planning and the right tools, your day-to-day operations can go smoothly, and you will be prepared when accidents occur or you hit a proverbial speed bump. Once your business takes off, you can rest easy knowing you meet a real demand that won’t diminish over time and have a system in place for streamlined operation. As you are building your fleet, be sure to have any vehicles inspected prior to purchase.

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