How to Start a Rental Car Business

A car rental, hire car, or car hire agency is a company that rents automobiles for short periods of time (generally ranging from a few hours to a few weeks). It is often organized with numerous local branches (which allow a user to return a vehicle to a different location), and primarily located near airports or busy city areas and often complemented by a website allowing online reservations. With airline prices soaring through the roof, more people than ever are turning to the rental car industry to help with their transportation needs. That means this could be a very lucrative area for a would-be entrepreneur. However, you can't just wake up one morning and open up such a business. You need to do some careful planning and preparing. The nicest part of such a business is that you don't necessarily need a lot of capital to get started. With just a couple of cars, a website and a phone number, you can get your business off the ground, especially if you follow these steps.

Rental Car Business Instructions:

Things Needed

Vehicles
Decals
Bright paint
Business license
Commercial driver's license
Insurance
Marketing materials

Business models: Car rental companies operate by purchasing or leasing a number of fleet vehicles and renting them to their customers for a fee. Rental fleets can be structured in several ways – they can be owned outright (these are known as ‘risk vehicles’ because the car rental operator is taking a risk on how much the vehicle will be sold for when it is removed from service), they can be leased, or they can be owned under a guaranteed buy-back program arranged directly through a manufacturer or manufacturer’s financial arm (these are known as ‘repurchase vehicles’ because the manufacturer outlines the exact price of original sale and of repurchase at the end of a defined term) In the UK, the registration of rental cars can be concealed by using unfamiliar initials or subsidiaries, which can increase the resale value via manufacturer or third party dealers. In North America, it is common to see rental companies with their own branded second-hand car dealers where ex-rental stock is sold direct to the public. Alternatively, auctions are often used such as Manheim Auctions in the USA.

Types of vehicles: Most car rental offices offer a range of vehicle sizes to suit a variety of budgets and space requirements and some additionally offer specialized vehicles to suit its location such as convertibles, prestige models, hybrid/electric vehicles, or SUVs and passenger vans. At major airports or in larger cities, some independent car rental agencies offer high-end vehicles for rent. Some specialized companies such as Rent-a-Wreck offer older vehicles at reduced prices. To allow for a uniform classification and easy comparison of car rental prices, the Association of Car Rental Industry Systems and Standards (ACRISS) has developed theACRISS Car Classification Code coding system. This describes the size, door count, gearbox type (manual/automatic), and whether the car is air-conditioned, encoded into four letters. Additional classifications based on seat numbers and trunk volume were also set by the Belgian Rent a Car association in order to provide a unified system for assessing the car types in online reservation systems such as Amadeus or Sabre.

Price Disclosure: Numerous jurisdictions require car rental companies to disclose the total cost of renting a car -- post taxes and fees -- in their advertising and bookings. The City of New York, for example mandates that when advertising, companies list in fine print of a prescribed size, the breakdown of additional fees beyond the advertised rate and the final estimated total for rental. California does not require these things to be disclosed in advertising, but rental car company websites and other travel booking sites must disclose the total rental cost.

GPS Monitoring: As GPS technology became more affordable, car rental companies began installing tracking devices in their fleets to help them locate lost, stolen or missing vehicles. However, some companies, such as now defunct American Car Rental of Connecticut, began tracking customer movements and charging them for "wear and tear" if they exceeded the speed limit for more than two minutes or if they went out of the states covered by their rental agreements. Lawsuits led to the end of this practice in Connecticut and legislation in states, including California and New York, quickly followed.

Taxes: Many car rental companies have a difficult time keeping prices as competitive as they would like. One reason advertised prices don't match the final invoice is that many states, counties, cities and airports add on car rental taxes which car companies have to collect. For example, on top of its standard sales tax, Washington State asks rental car companies to collect an additional 5.9 percent and renters in King County (Seattle) pay another 2 percent.

Liability: Most states, including Florida, hold rental car companies partially liable for accidents, injuries and wrongful deaths cause by renters driving their cars. Rental car companies need good liability insurance to cover them, even if the renter is insured. States consider it the rental car company's responsibility to screen drivers responsibly.

Decide on the type of car rental business you want: While that may seem like a silly first step, there are several options to choose from. You could be mostly interested in the travel market where you would rent cars to travelers who don't want to add mileage to their own vehicles. Another option is to become an event rental car business, meaning you would rent out your fleet for weddings, prom nights and other special events. A more recent entry is the exotic car business. As the name suggests, you rent cars that most people would never otherwise be able to afford.

Create your fleet: As mentioned earlier, you don't need a lot of vehicles to get started. Just remember that the more you have, the more potential earnings you have. Additionally, you need to select cars that will be appropriate for your type of rental business. Hummer SUVs are popular with event rentals while vans and sedans would be better choices for travel rentals. Because your clients are going to expect a nice vehicle for their money, you should always purchase new vehicles and keep them well-maintained.

Purchase insurance: All of the cars need to be covered by insurance. You can discuss with your agent the specifics of the policy, but you want to have sufficient coverage to pay for any damages to the vehicles and to the drivers if the cause of an accident is mechanical. Generally, you'll also want to be able to offer drivers optional insurance coverage. Remember that this is going to be one of your primary expenses--it's not something you want to skimp on.

Budget for maintenance: Another important part of running a car rental business is keeping those cars up and running. When one is out of commission, you are going to lose money. If you can't afford to have your own maintenance staff yet, consider working out an arrangement with a repair shop you trust. Because you may be bringing them a lot of business in the future, they may be willing to reduce your labor costs on repair jobs. Regardless, you have to set aside a decent sum of money so that you can cover the maintenance costs, including oil changes, tire replacement and tuneups.

Choose a safe parking area: Whether your business is beginning from your home or a small office, the cars in your fleet need a safe parking area. Consider renting space in a guarded parking garage if you don't have an area of your own. You should also think about investing in cameras and alarm systems to protect your vehicle investments.

Tips and Warnings:

Safety and security is important in this business. Hire security or get security systems for all of your business lots so that should anything happen, you will be notified immediately.

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