People will always be traveling, and many of them will need a car while on the road, so a car rental business can be a good way to make money. It is a big and growing business, and if you can get even a small piece of the $100 billion worldwide market, you will do well.
But you’ll have to work hard and have a lot of patience. Before you start working on making your car rental business a success, you need to know the right information, which is laid out in this step-by-step plan.
Step 1: Find Out if this is the Right Business for You?
Like every entrepreneurial endeavor, starting a car rental business has advantages and disadvantages. Before deciding whether a car rental company is right for you, you need to carefully consider these factors.
Positives Vs Negatives
| High Demand: Tourists and people who need their cars fixed are always looking for it. Profitable: A big ship could bring in a lot of money. People pay you to use your cars because they are easy. | Costs at the beginning: Buying a fleet of cars is a big expense. Your fleet needs maintenance to keep running. Damage – Accidents occur. |
Industry Trends
- Size and growth in the past: IBISWorld, a market research company, says that the US car hire business is worth $56 billion because it has grown steadily over the past ten years, excluding the 2020 pandemic economy.
- Fortune Business Insights, a study company, predicts that the global market for car rentals will reach $144 billion by 2027, growing at a rate of nearly 7% per year.
- Number of businesses: There are more than 15,000 hire car companies in the United States.
- In the field, more than 130,000 people work.
Cost of Starting Car Rental Business
For as little as $50,000 or as much as $100,000, you could start a car rental business with five cars. The cars themselves are the biggest cost, so starting with just two or three cars could cut prices by a lot.
Is Car Rental Business Profitable?
The net income of a car rental business is between 5% and 10%, and the average daily rate to rent a car is about $100.
If you rent out five cars an average of 275 days per year and have five cars, you will make $137,000 in income and almost $14,000 in profit, assuming a 10% margin. If your business grows to 15 cars and your name becomes more well-known, you might be able to rent them out for 300 days a year. This would make a profit of $45,000 and bring in $450,000 a year. After that, you could start putting those profits back into the business, grow your fleet to 50 or even 100 cars, and start making real money!
Assuming a 10% profit margin, a fleet of 50 cars that are rented out 300 days a year will bring in $1.5 million in income and a cool $150,000.
Entry Barriers
- Entry Costs and Barriers to Entry – Cars are expensive, so you’ll have to pay a lot of money right away.
- Competition: It’s a competitive business, and it takes time and money to build a name.
Step 2: Create a Strategy
Identify a Gap
Find a chance to look into other car rental companies in the area. Is there a type of car rental business that doesn’t exist or is unusual? It’s possible that neither a cheap car rental service nor an expensive one exists. You can also look for places where there are no car rental companies. You’re looking for gaps in the market that you can fill.
Solutions
- First, you need to decide what kinds of cars you’ll sell. As a deal hire helper, you’ll be able to buy cheaper cars. As an extravagance administration, you’ll require more expensive cars. The next step is to decide what extra services, like pick-up and drop-off, you will offer customers.
Pricing
The average cost of renting a car has gone up recently because there are more people renting cars. It now costs around $100 per day to rent a car. Luxury car rentals can cost up to $250 per day, but cheap rentals can cost as little as $35 per day.
Once you know your costs, you can use this step-by-step profit margin tool to figure out your markup and end price points. Remember that the prices you use at send-off should be open to change whenever the market says so.
Target Market
Whether you choose a low-cost, high-end, or a mix of the two, your target market will change. If you choose a luxury rental service, your target audience will probably be workers and leaders, so LinkedIn could be your best bet.
Location
Choose a good spot for your rental car business. You need to choose a good place for your business if you want it to do well and bring in people. Look for a place close to a major transportation hub, like an airport or train stop, that is good for both work and leisure travelers.
Consider how easy it is to park there and how close it is to public transportation, as well as how convenient it is.
By choosing the right location, you can set up a profitable and successful car rental business that takes care of a lot of customers and works in the tough transportation industry. Sites like Craigslist, Crexi, and Moment Workplaces can help you find commercial space to rent in your area.
Step 3: Write a Business Plan
A plan is essential for any business. This will serve as a manual for your startup to follow as it launches and stays focused on its primary objectives. A strategy likewise empowers possible accomplices and financial backers to more readily grasp your organization and its vision:
- Executive Summary: A brief summary of the full business plan that should be produced when the plan is finished.
- Business Overview: Provides an overview of the organization, including its vision, mission, ownership, and corporate goals.
- Product and Services: Describe in full your automobile rental services.
- Market Analysis: Conduct a SWOT analysis and assess market trends such as variances in demand and development possibilities.
- Analyze your top rivals, analyze their strengths and shortcomings, and produce a list of the benefits of your services.
- Examine your company’s unique selling propositions (USPs) and design sales, marketing, and promotional tactics.
- Management Team: An overview of the management team, including duties and professional backgrounds, as well as a corporate hierarchy.
- Operations Plan: Your company’s operational plan includes how it will get supplies, where it will put its office, what its most important assets and tools are, and other practical details.
- Financial Plan: A three-year plan for money, including start-up costs, a break-even analysis, predictions of profits and losses, cash flow, and a balance sheet.
- Appendix: Add any other papers related to money or business.
Step 4: Create a Marketing Plan
Some of your business will come from people walking by or finding you online, but you should still spend money on marketing! Getting the word out is especially important for new businesses because it will bring in more customers and make more people aware of the brand.
Once your website is up and running, connect it to your social media accounts. Social media is a great way to market your business because you can make posts that are interesting and sell your products.
- Facebook is a great paid advertising network where you can target specific groups, like men under 50 in the Cleveland area.
- Instagram has all the same benefits as Facebook, but its users are different.
- Website: SEO will help your site rank better in search results that are related to it.
- Search engine rankings are a key part of making money. Make sure that the calls to action on your website are effective. Try different words, sizes, colors, and places for calls to action like “Rent Now.” This could cause rental rates to go up by a lot.
- Google and Yelp: Getting listed on Yelp and Google My Business can be very important for local businesses that need to get the word out and attract customers.
- Signage: Make sure the signs in your store and on your website stand out.
- Offer your car rental services in person at bus stations and airports.
- Sponsor events: You can pay for events that your target crowd would be interested in. Post a video: Upload a movie about your fleet. If you use fun, it might become a hit on the Internet.
- Make a blog: Make a blog and update it often. Change your content up and sell it on different sites.
- Press releases: Write press releases about sales, new goods, and other themes.
- Paid advertising through virtual entertainment: Choose places where your target market will be and do specific advertising.
- Pay-per-click marketing: Use Google AdWords to improve your search engine results. Do some research before using a term.
- Testimonials: Let your customers tell you how your car rental services helped them in their own words.
- Make charts, post them, and think about what they say.