Buying A Car Rental Business
A low-end daily rental for a small vehicle is $40 and up, with a higher-end vehicle renting for $100 to $200 daily. You can expect to spend from $500 to $1,000 monthly in insurance costs. Your monthly fleet costs will vary according to your number of vehicles.
buying a car rental business
Of course, you could opt to start with an existing car rental franchise. Or you could start your own car rental business. That way, you can tweak a proven money-making small business model into a setup that best fits your location and desired business size.
The global car rental market is booming. North America is the biggest player, with the US leading the way. Overall, the car rental company business was $92 billion in 2021, with the bulk of that ($57 billion) linked to tourism. The car rental business is predicted to reach $140 billion by 2027.Why You Should Start a Rental Car BusinessWhy should you start your own car rental business?
Opening a car rental company as part of a car dealership is another option to explore. In this style of business, your company rents to customers who brought their car in for bodywork or other repairs.
Franchises can also help find a suitable location for your business and finance some of the startup costs. It always helps to have support that will relieve the burden on your pocketbook when starting out.
When investing in a franchise, the owner loses autonomy over the business, and there are other costs associated with owning a franchise. For example, a franchisee will pay ongoing royalties to the franchise besides the initial fees.
Also, a sense of creativity in the business is lost as you lose control over your advertising and marketing decisions. Franchises also determine the range in which you can set prices, so there is little leeway in running deals or specials.
Coined in 1944, this chant is still on repeat in the real estate and business worlds. And for a car rental startup, the location is the lifeline of the business and links to your target market (see the next section).
Before starting a car rental business, you must determine your target market. In most instances, your target market is contingent on your location. This will help you determine several market factors, such as:
With key elements in place, you can now take the steps needed to create a legal company. You must register your business at the federal and state levels and establish a legal structure. Registering online is easy and will save time.
The business plan you created comes in handy at this stage of your enterprise as it is a requirement to apply for SBA loan programs and other funding programs the administration has available for small businesses.
There are also business loans, like equipment financing or a business auto loan, you can use to fund specific aspects of your business. These loans are easier to acquire as the equipment acts as collateral.
Insurance can be tough to acquire for a new business, but here is a roadmap you can use to secure it. However, expect it to be one of your highest startup and ongoing expenses. For Legends, Ronnie stated,
The most important document, aside from a business plan, in the rental car industry is the rental contract. This document is an agreement between your company and the customer and explains the responsibilities of both parties.
You can use this car rental template as a base for creating or reviewing your contract. However, we strongly advise that you work with a qualified legal professional as this is the most important document protecting your business.
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So you've seen the news. You know that rental car giant Hertz filed for Chapter 11 bankruptcy in May. You know that, due to the ongoing COVID-19 pandemic, things aren't great for the other rental car companies, either.
But you're also aware that this might be the time to potentially snap up a used rental car, especially if you're fortunate and have some money to spend. Industry experts, according to CNN Business, estimate rental companies to offload 1.5 million cars in their US fleets over the course of the coming weeks and months, thus inflating the already bloated supply to potentially overwhelm the currently weak demand. Translation: You as the consumer might be about to receive even more buying options.
And despite commonly held public beliefs, Business Insider reported that rental cars aren't always minefields chock-full of quality and maintenance nightmares. In fact, they might be an option for you to pick up a used car at a discount, provided you do the proper research.
How does one go about actually buying a rental car? Do you just pull up to the desk at your closest airport location and demand to buy something off the lot? How do test drives work? What about financing?
"It's always advisable to test drive a car before you buy it, but often rental car agencies will allow you to rent that vehicle for a few days so you can really see if it works for you or not," McParland advises.
Hertz has something called a Rent2Buy program. With it, you're able to test out a car that's for sale over a three-day rental period for a small fee. If you wind up buying the car, Hertz will waive the fee. Just be sure the program is available in your area.
Avis, too, has a similar program called the Ultimate Test Drive. Customers can choose their cars and test drive location and book everything online. Then, they can go and pick up the car and test drive it for free for two hours. After that, customers can hold onto the car for up to three days for a fee. And again, if you decide to buy the car, Avis will reimburse the rental fee.
Rental car companies such as Enterprise, Avis, and Hertz all advertise no-haggle pricing for their sales. It means the price you see is the price you pay. Don't get turned off by the "no haggle" aspect, though. Typically, used rental cars are priced below similar cars on the market.
"One of the upsides to the [rental car]-buying process is they don't have any bogus charges like 'reconditioning fees' or inflated 'dealer fees' as some dealers do," says McParland. "Usually, it's just the price of the car, plus your tax rate, and reasonable charge for DMV and paperwork."
The tradeoff to that low, no-haggle price and all the other promotional accouterments is that the rental car you've just picked up will almost always come with way more miles from many people driving it. Though rental companies do follow strict maintenance schedules, it's still important to make sure everything is in good working and mechanical condition.
While it's recommended to get an independent inspection anyway when you're shopping for a regular used car, you can perform your inspection after you've bought the rental car because you get that extra window of time to return it if the results don't come back the way you'd like.
"Use this time to take the car to a trusted mechanic to have it looked at," says McParland. "While most rental cars are well maintained, there have been instances where some rental cars were crashed and fixed without that accident appearing on the vehicle history report."
Vehicle rental is a very competitive industry that can also be quite lucrative. To start a business, you will need to decide on a business model, find an ideal location, and build your fleet. Also, follow all insurance and regulatory requirements, such as obtaining business permits, before renting your first car. If you can handle the risks involved while setting up your business for day to day operation, you may find renting out vehicles to be very rewarding.
Long-term car rental allows renting a car for a specified time, whether one month or one year. The minimum rental period is 30 days, and there is no limit to the duration of the contract. There are times when small business car rental makes more sense than buying or leasing a car. Whether it is due to the seasonality of the small business (like operating only in summer), a significant employee turnover, or the need to maintain the cash flow, car rental comes with multiple benefits. Find out how it works and what are the main advantages below.
Another critical advantage of a car rental includes the convenience it brings. Instead of dealing with all the responsibilities associated with car-owning, all the user has to do is pay the monthly installments, refuel the tank, and take good care of the vehicle. SIXT sorts all the other issues like insurance, car registration, regular servicing, towing costs necessary in case of breakdown, and even the seasonal tire change!
Another great thing about long-term rental? The possibility to terminate the rental contract at any time, without incurring high penalties! Many small businesses operate on a seasonal basis, which means there is often no need to pay for a car all year round. Moreover, some have a significant employee turnover and do not require an entire fleet at all times. By renting a car, the company can decide how long they want to rent the vehicle for, be it a month, a season, or a year!
Unlike large corporate clients, small businesses may not have a number of staff dedicated solely to operations management, and often, the business owner themselves must ensure all deadlines are met. Owning or leasing multiple cars means that any additional responsibilities like keeping the servicing dates and paying for repair costs can lead to headaches and confusion. Long-term car rental takes away all these worries. At SIXT, we take care of the annual car servicing, all the repairs, and ensure the car remains safe to use. This leaves the business owner free to focus on the most important things: running the company. 041b061a72