If you’re looking for a business idea, there is one that has flexibility with how it’s set up and run, can see huge profit margins, and can even be passive.
We’re talking about starting your own rental car business.
That’s right — you can be your own Budget, Enterprise or Hertz.
Just how profitable can starting a rental car business be?
After seeing a void in the marketplace, Gretchen Bayless and Taylor Hood founded ROAMERICA, a company that specializes in adventure vehicle rentals. After jumping into the business full-time in 2018, the pair now makes $10,000 in revenue monthly.
In this article, we’ll break down everything you need to know about how to start a rental car business, from the advantages and disadvantages to licenses you'll need, how to get your car rental company off the ground and more.
What is a Rental Car Business, and Why Should You Start One?
A rental car business is a company that provides customers with a temporary vehicle.
This could be for many different reasons, including:
- their main car needs repairs
- they need a vehicle for traveling long distances
- Tourists looking for transportation
Advantages of Starting a Rental Car Business
First and foremost, starting your own rental car business can be profitable.
For example, let’s say you rent out a 2017 Honda Accord for about $45 per day. This means this car will bring in around $1,100 per month.
After expenses, this number will likely sit around $800. So, the Accord will bring in $800 per month in profit alone. If you double or triple the number of vehicles you are renting out consistently, this profit can grow exponentially. There’s truly no limit to how much you can make with a rental car business.
Another enticing advantage of starting a rental car business is that you can decide on which business model you select. We’ll talk more about this later on in the article.
Also, a rental car business — from the paperwork to how to make monthly cash flow — can be quite simple to understand and execute, compared to other small businesses.
Disadvantages of Starting a Rental Car Business
Starting a rental car business does come with its fair share of disadvantages.
Start-up costs can vary, depending on what type of business model you choose.
The initial cost — the cars themselves — will require some financial management. (But if you already have a few cars sitting around your property, you’re already on your way!)
Plus, with the rental car business, you’ll be required to pay for things like maintenance as well as insurance.
How to Start Your Own Rental Car Business in 5 Steps
Before you jump in, we’ve created this guide to help you prepare yourself for the journey towards starting not just a rental car business, but a successful rental car business.
Step 1: Determine your type of rental car business
Before you can start doing business, you will want to determine what type of business you are going to want to own. Some different types of rental car business options are:
Option #1: Franchise
When you operate as part of a franchise, you will have purchased the rights to use the brand name that you are operating under.
This could be an existing rental car company, such as:
Many new business owners turn to operating under a franchise because it is simple to set up their business model, since most of the heavy lifting is done for them.
Due to the brand name already being known in the industry, this can also help to propel growth.
However, a franchise does have its disadvantages.
The initial franchise fee can vary per company and may pack a punch.
You may also not have as much decision-making power as you would like while operating under a franchise.
Option #2: Working with a Dealership
Working alongside a dealership is also another option for starting your own rental car business.
Contact and draft up an agreement between you and dealerships in your area for when customers need a car rental.
This would likely be when customers come in for vehicle repairs.
Option #3: Small Business
Starting your own rental car business means that you can make most of the decisions on your own that will benefit your business.
Since you will be starting from the ground up, you will need to:
- develop your own brand
- spearhead marketing efforts
- drive business to your location
If you are wanting a more passive approach, you can set up a system, and hire someone to monitor it while you turn your attention elsewhere.
Step 2: Find Your Customers
Who are your ideal customers?
They may differ depending on a few different factors, including a personal preference for your business model.
You will first want to assess what type of market for car rentals is in your general area.
A target audience might include:
- those looking for loaners due to repairs
- consumers looking for short and long-term rentals for business
Your target audience should be influencing major decisions you make, such as your business plan, which we’ll discuss next.
Step 3: Create Your Business Plan
A business plan helps you clearly outline your rental car business, as well is great to have if you plan on working with any business partners in the future.
Your business plan should describe how you plan on making your rental car business profitable, as well as what services you will offer your customers.
This plan should also outline how much money you are planning on spending, as well as making, and any funding you plan on using.
Your business plan will essentially act as your roadmap from day 1 of the business to the day you decide to move on from it.
Step 4: Register and License Your Business
Now it’s time to legally create your business!
Choose a business entity and register it within the state where you will be operating your business.
Keep in mind that registration processes will vary depending on the state.
Step 5: Launch!
This is where you put all the details from your business plan into action.
For example, if you’re following the franchise model, you’ll pay the initial fee, secure a location, and begin your marketing to attract clients. Or, if you’re following your own small business model, you will enact your own marketing strategy to bring clients to you.
Frequently Asked Questions: Rental Car Business
Next, we’ll take a look at a few of the most commonly asked questions associated with starting a rental car business.
Q. Do you need a rental car business license?
All businesses will need to be licensed and registered, depending on the state you are conducting operations.
See your state’s business office for more information.
Q. Do you have to pay taxes on your rental car business?
Like any business, you will have to pay taxes. Taxes for a rental car business will vary, depending on your business model and state.
The Bottom Line: Starting a Rental Car Business
Like any business idea, starting a rental car business has its advantages and disadvantages.
But if done the right way, it can be a profitable business endeavor for you now and in the future.