The development of the car rental market is gaining momentum. Trying to please consumers, company owners offer a wide variety of car rental formats. The reason for this is simple: with the right approach and the availability of start-up investments, car rental can become a successful and profitable business.
Such a rapid development of the car rental industry is not accidental. More and more consumers do not consider buying their own car cost-effective. For example, in big cities it is sometimes faster to get to your destination using public transport, and a private car may not be needed as often.
Therefore, if you decide to rent a car, you have every chance of making a good profit in this niche. But newcomers to the car rental industry should know how to do it right, because in the car rental business there are both advantages and pitfalls.
One of the initial stages of starting any business is to analyze the market and determine your target audience. Based on the number, class and specifics of cars, you can determine who your potential customer is.
The target audience can be divided into several categories:
- Individuals. This category of customers often needs a car for personal purposes. They do not consider it cost-effective to buy a personal car. Renting a car for these people is more profitable than the constant use of taxi services, and more comfortable than traveling by public transport.
- Companies and legal entities. First of all, this applies to the companies whose activities are directly related to vehicles: taxi services (mainly middle-class cars for rent) or cargo transportation companies (if there are trucks in your fleet).
- Businessmen. Most often for such customers you will need to have premium and business class cars in the fleet. Businessmen may be interested in both short-term (for example, in the event of an important business trip or meeting) and long-term rental (to use the car as a company vehicle).
- Large car rental companies are another way to profitably rent a car and make a profit. The advantage of working with large companies is their reliability, as reputable market players have a clear and understandable system of car rental and payments for car owners.
Possible risks and ways to prevent them
In order for the car rental business not to become unprofitable, it is worth knowing about the potential risks and actions that help to avoid unpleasant incidents. Consider the key details that you should definitely pay attention to:
Agreement. Make sure that the contract clearly states the subject of the contract, the data of the car, the details of the parties, the terms of the contract, and signatures. In the rental conditions section, specify the terms of payment, the responsibility and procedure for the parties in case of damage, the main items of expenses. The contract must be notarized.
Insurance. You must take care of the valid insurance and arrange it correctly. In case of any unpleasant incidents, this will help you recover the damage without extra costs from your own budget.
Car deposit. Sometimes the contract also provides for the amount of collateral that the remter provides to the owner of the car. This deposit can be used as a payment for rent (in case of late payment), as well as in the event of unforeseen expenses (fines, minor repairs, violation of the mileage limit).
Driver verification. Make sure you rent a car to a reliable driver. It will not be superfluous to set restrictions on age and driving experience. In order not to run into scammers, check the history of the driver’s fines and whether the future renter has a criminal record.
Costs and profits
Before starting a car rental business, it is worth putting together a basic spending plan. The plan should include monthly and annual investments. This category of expenses should be calculated especially carefully in order to more accurately predict the net profit from car rental. Here are some of the most important expense items:
- registration and insurance;
- purchase and renewal of equipment (cars, their equipment, tools for minor repairs);
- car maintenance;
- rent (parking lot and office space);
- salary for employees;
- marketing activities to promote the service;
- car rental booking software).
The annual and monthly profit from car rental depends on many factors, including the location of the cars. To calculate income, you need to take into account how many cars are in the fleet, what classes of cars are represented, and what their specific features are.
The easiest way to rent a car
Today, there are many services that can automate many business processes, which can help to increase the profitability of the company in the future. These are convenient car rental applications and CRM systems that greatly simplify the car rental booking engine.
Car rental software from RentSyst is an example of such a system. Thanks to the use of a CRM system, you can automate the car rental booking system, organize all orders, documents and reports, make all payments online and collect a customer base. All this in one system with a user-friendly interface, so you will have access to all important information around the clock.
In addition, using car rental booking software will help you monitor the status and location of all cars, control the work of departments, and keep accounting in an orderly manner. As a result, following all these rules, you can not only open a successful car rental business, but also scale it.