Car rentals have played a significant role in facilitating smooth and faster rides in this hyper-connected world. They are filling the gap in transportation for both business purposes and leisure travel. Technology is playing a greater role in facilitating the right communication, and the right features to run a car rental business.
Increasing awareness about going green, and reducing carbon footprint, are the major factors driving the growth of affordable car rental businesses. Although a car rental business appears to be simple, there are several challenges when it comes to fleet management, customer satisfaction, payments, collections, insurance, asset tracking, and much more. The longevity of your car can be affected by how often you rent it out to others. It demands a proper understanding of how to set up a car rental business. Before you kick-start your car rental business, there are a few prerequisites that you should pay attention to.
Types of Car Rental Business Models
- Independent business: Independent car rental business involves a fleet of cars from small to large, and business owners have complete autonomy over the business.
- P2P (Peer-to-Peer) Car Rental Business: If you have a fleet of 2-3 cars and want to earn from it without getting into the business side, then the peer-to-peer car rental business is ideal. All you need to do is to list your cars on a third-party platform with all the details such as make type, color, and transmission. When someone books your car, usually, the third-party platform takes 25-30% commission while the rest comes to you.
- Franchise: In a franchise model, you pay an upfront fee to an already existing car rental service and purchase the rights to use the brand name for the business. The advantage of a franchise is that you don’t need to work hard in reaching customers, and business can be set up easily.
- Purchase existing business: If you are less keen on starting a car rental business from scratch, you can purchase an existing business. The key benefits of buying an existing business are having access to an established customer base and streamlined business processes.
Factors to Consider before Starting a Car Rental Business
1) Analyze market:
You need to research the market first, such as location, target audience, competitors, local rules and regulations, in-demand car models, etc. Car rental businesses can cater to both car & motorcycle drivers by offering a variety of vehicles to choose from. Electric car registrations are going up in recent times. So, anyone in the car rental business can think of investing or choosing a car that supports electric models. You also need to analyze the key issues, risks, and profit drivers in the business. With all the data in hand, it is easy for you to plan the business accordingly and execute the business activities.
2) Get the necessary permits, licenses, and Insurance:
To operate a car rental business legally, you need to get permission and licenses from local regulatory bodies and the government. You need to submit an application to them with proof of insurance coverage, licensing fees, and other supportive documents. Make a checklist of all the documents and permission that you need for the rental car business and gather them one by one. There could be different regulatory laws for different states, so you need to check your local state laws and take permits accordingly.
3) Onboard best car rental software:
Customers face many complications while accessing car rental services, from registration to payment and final checkout. Renting a car should be a seamless process and not a pain-staking job. Car rental software can help you compare prices and availability of cars before you buying a car, which can save you time and money. Car rental software lets you centralize your entire car rental business and manage them effortlessly. It supports features such as digital scanning of documents, automated billing, payment in any currency, online cancellation, automatic check-in and checkout, predictive analytics, customer relationship management, split billing, mileage tracking, contactless inspection, automated notification and alerts, etc. It helps car rental operators to perform business in an organized way and improve the bottom line. In the digital age, car rental software can help to keep pace with evolving market trends and stay ahead of competitors.
4) Find investors and partners:
Setting up a car rental business could demand high capital, and the business could shut up due to a lack of funds. Chasing investors in times of crisis is not preferable, and there is a high chance of making a wrong decision while you are surrounded with difficulties. You need to work out the funding options or the financial aspects as you need them at the start of the business to buy cars, pay location rent, hire mechanics, take insurance, etc. Therefore finding investors during the initial stage of business is more advisable. In addition to that, you can partner with travel agencies, corporate offices, and hotels for a steady flow of revenue.
5) Set up a customer support system:
A customer support system is the core of the car rental business because everything goes through the customer support system, from managing customer queries to pushing a loyalty program. A skilled customer support agent can increase customer experience and add value to your business. So, shortlist the customer support agents before starting a car rental business.
The car rental market size is likely to touch US$ 186.59 billion by 2030, as per a latest research study. If you are planning to be a part of this market, then you need to consider a few factors and be very strategic in your car rental business.
Conclusion
The rise of travelers across the globe and the growing awareness about global warming, along with the demand to have convenient, economical rides have created the need for car rental software services. There is a huge market for the car rental business, and with advancements in technology, it is going to proliferate more. However, there are a lot of things that you need to consider before setting up the business, such as finances, target audience, technology stack, etc. If you are ready to underpin the most critical issue of transportation, that is, providing fast and affordable rides to customers, then you need to plan your car rental business meticulously. Hope the above tips on setting up a car rental business can help you plunge into the idea with confidence.