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Car rental as a business. How to start?

Before starting a car rental business, it’s necessary to clearly understand the type of vehicles. Clearly decide on whether it would be economy or executive class cars. This will define the initial investment and monthly expenses.

Initial investment

It’s necessary to spend 3-5 times more money on the purchase of new cars rather than used ones. However, with such specialisation, overhead costs per month, particularly depreciation charges, will amount to about 1% versus 2.5-3% when renting used cars. So, once again, at this stage, you have to decide what exactly you would like to provide to your potential customers. Particularly, whether you will offer them to rent a Ferrari in Dubai, for example, or hire a comfortable SUV for families. You have to provide various options to hire, so start with at least 10-15 rental cars in stock. Otherwise, it’s simply unprofitable to start something.

The idea of doing business

The rental market is constantly growing. Generally, this service is popular with foreigners who don’t want to depend on taxis or public transport and prefer freedom of action. However, more and more people are transferring to a rented car when their car is broken or there are many trips around the city ahead.

At this stage of business formation, it’s crucial to occupy your niche or find a competitive advantage that will distinguish you from firms providing the same service.

It can be obtained in several ways:

  • by providing a discount savings card
  • by setting the price below the price of competitors
  • by equipping the car with extra tools.

Let’s consider the fundamentals for this business:

  • decide on the initial investment;
  • find your “own” class of cars that you will rent,
  • identify potential customers for yourself
  • find something that will set you apart from other companies.

The business idea is ready. Then more pressing issues begin.

How to start?

Stage 1. Many global franchisors specialising in car rental as a business. Foreigners, if they are your target audience, prefer those working under the well-known brand.

However, if you are betting not only on foreigners as your potential customers, then you can start a business yourself without purchasing a franchise.

Step 2. Next, you need to find the area where your business will be located. The car park and office should be located where potential customers will notice them: at airports, train stations, city center, and places near hotels.

Stage 3. And finally, the most important thing is to buy something without which you definitely will not be able to work – cars.

As practice shows, buying a car is not the only right way. Recently, such a concept as leasing has been gaining more and more popularity. With it, the buyer pays 20-30% of the original cost. The lessee pays the remaining amount for 1-3 years in installments. The goods (in your case, the vehicle) become the property of the buyer in 1-2 days.

Why it is worth buying a car for leasing:

  • the initial investment will be significantly lower;
  • after some time, you can return the car to the leasing company and update your fleet. And as you know, a car with less mileage improves the quality of rental services;
  • the income tax at the time of payment of lease payments is significantly lower.

Concluding thoughts…

There can be a lot of options for running your car rental business. No one knows which of the many suits you. There is no universal formula for success. However, before starting any business, you must arrive at a clear understanding of the following points: who will be your clients, how much money you are ready to invest at the beginning and what you wish to receive in the end. Answering these questions will help you to build the proper business strategy and to succeed in this already crowded market.

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