Opening a Rent A Car | How to Start a Car Rental Business?
When you do research on the internet to do rent a car business, old dated articles will meet you. In these articles, you can see comments such as 5 vehicles started 25 vehicles. Or those who entered the car rental business became very rich. So is this the case today? Is opening a rent a car as lucrative as before? I created this article to give you the most up-to-date information about the car rental sector.
If you want to open a rent a car, you need to know that the sector is no longer as lucrative as before. In the last 1 year, there has been an increase of more than 200% in vehicle prices. You can even say that especially 2nd hand vehicles have tripled their value. Of course, in the opposite way, there was a decrease in people’s purchasing power. When calculating car rental prices, price issues that can amortize the vehicle price. For example; The daily rent of a 6000 $ vehicle is 10 $. When the price of 5500 $ vehicle increases to 16500 $, the daily car rental price should be 30 $. In order to amortize your investment. But this is not possible. After the purchasing power of the customers does not meet, you will have difficulty seeing demand even if you make 15 $.
So are things always this bad? In fact, making money with rent a car depends entirely on your business model and location. If you have a car rental company targeting tourists from abroad, you will do business. After all, since they pay in foreign currency, there will be no change in price for them. For this, you need to have an office either in touristic places or at airports. Opening an office at an airport involves high costs. You can also choose locations close to hotels instead. Now let’s explain all the details step by step for those who say how to open a rent a car.
Opening a Rent A Car
First of all, you need to identify the customer base you will address. Tourists, foreign customers, government tenders, companies and daily customers. You need to determine which of these you are targeting. In order to rent vehicles to private and state institutions, you must be providing fleet rental services. For fleet leases, you must have a minimum of 10 zero vehicles ready.
The biggest advantage of fleet leasing is that it includes long-term leases. In this case, many rent a car companies buy vehicles by leasing method and deliver them to the company that wins the tender. Purchased and leased vehicles pay for themselves within an average of 36 to 48 months. The main reason why companies go for leasing instead of buying vehicles at this stage is that it provides advantages in issues such as tax, maintenance and insurance costs.
If the fleet leasing business is not suitable for you and you will enter this business with minimum capital, you can start with at least 3 vehicles. Of course, I assume that you do not know how to move this business rather than starting with 3 vehicles. It is not easy to do business by just opening a shop and putting 3 vehicles in front of the door. Many rent a car companies have determined their customer base at the beginning and entered this business. For example; I have acquaintances who took a police officer, owned a rent a car fleet and left the profession. This person managed to become a company by renting vehicles only between officers at first.
In order to open a rent a car, you must first have a target audience. For example; You can do this job in addition to an existing business. If you have a real estate shop, you can also rent a car at the same time. Apart from that, this idea is valid for many tradesmen. Or if you operate in a certain line of business, you can rent a car for those working in that line of business. The most important issue in this sector is trust.
Now let’s list what you need to do to open a car rental company in subheadings.
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Create a Roadmap
Whatever business you are going into, you first need to plan. Write down your plans on how you will create a target audience and a business model for the car rental business. In this sector, it is very difficult to do business by just buying vehicles and waiting for customers in the shop. Of course, your only option is not to open an individual car rental company. In addition, it is possible to do business by taking a car rental dealership. In fact, for those who have no knowledge about the sectors, the dealership option may be more logical in terms of many processes. I shared the reasons for this at the end of the article.
Determine the Amount of Capital
You need to determine how many vehicles you will start by buying. If the vehicles you buy are new, it is possible for them to lose value every year. There is no rule that the vehicle market will always rise. In addition, you do not only need to allocate capital to buy a vehicle. You should know that there are many expenses such as rent a car insurance, vehicle insurance, annual maintenance fees. Of course, since you open a company, you will have costs such as rent+stopage+income tax. We do not recommend you to do unregistered business in order to get your car insured and avoid big fines.
Make a Vehicle Purchase
You need to buy a vehicle in a way that suits your target audience. Many people think that they can rent old model vehicles. However, there is great competition in the sector. Many rent a car companies put the vehicle up for sale immediately as it is 2 or 3 years old. In summary, customers are constantly waiting for new and new vehicles. Here you should ask the following. Why rent a car from you when there are zero and more affordable vehicles? If you want to buy a 5-6 year old car and rent it out, you should offer affordable rental services. Assuming that purchasing power is decreasing, this option may be advantageous for local customers.
Determine Car Rental Location
Where you do this business will determine how successful you will be and how much you will earn. Touristic regions, airport surroundings, district centers with signage value will ensure your success in terms of location. Especially those who come from abroad for vacation think that it is more logical to rent a car. At this stage, they make online car rental reservations either with the hotel or from abroad. Of course, at this stage, international companies such as Avis, Garenta and Budget are usually the winners.
Establish a Company
After the location phase, you are ready to start a company. Do not make any purchases before completing this stage. Because you need to make the vehicles you have purchased on the company and show the loan costs and interest as expenses. In addition, you will pay lower income tax with the depreciation expense you will deduct from year to year.
Ensure Vehicle Safety
You need to agree with a car insurance company for the vehicles you buy. Insurance companies are generally distant from rent a car companies. For this reason, the number of insurance companies you can choose is limited. In addition, if there is a 120 $ car insurance fee for a normal individual customer, the fee for you will be around 250 $. In addition, some companies apply a quota in vehicle insurance for those who want to open a rent a car. For example; It is guaranteed to cover up to a maximum of 6000 $ damage per year. The expenditures to be made above this are entirely your responsibility.
Use Tracking and Warning System
You need to have a special tracking system installed to ensure the safety of vehicles. In addition, contract a company for remote control systems such as engine blocking, hood opening alarm, satellite tracking, automatic contact closure and engine locking. There are many tracking software companies that provide services in this regard. These companies allow you to get continuous information about your vehicle and follow this whole process from a mobile application.
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It may be easier for you to open a rent a car through companies. What you need to do is to buy vehicles that will meet the needs of the companies and be included in the fleet. Working with big companies will provide you with advertising advantages, customer support, etc.
Suggestions for Those Who Want to Open a Rent A Car
- He started with 3 vehicles and now he has 100 cars, don’t believe the stories like this. Having acquaintances in this business allows money to be earned through tenders.
- You must do everything within the framework of official procedures. Carry out all transactions such as insurance, GPS tracking, car rental contract, obtaining authorization from the customer in a complete manner.
- Remember that you are in a very risky sector. Your 1-year earnings can go in a single day. For this reason, choose the customer carefully when renting a car. Have a driver’s license duration requirement.
- Opening a dealership to open a rent a car will make your job easier in the first years. If you do not have information about the sector, you should talk to companies.
- With the decrease in purchasing power, companies that will offer suitable rental options will come to the fore. In this case, investigate how to provide services to customers at more affordable costs.
- If you do not have enough capital, you can consider options such as renting vehicles from outside or doing contract work. For example; You can rent vehicles such as Megane, Fiesta, Focus or BMW from a car owner between 50 and 150 $. Of course, if you do not have customer circulation, renting a car can make you a loss.
We have come to the end of our article titled “Rent a car, car rental business cost and earnings.”