How to start a car rental business

You need to choose the type of car rental business you want to start, determine your target consumer base, and register and license your business in order to start a car rental business. For details on each of these steps and others you can take to start a car rental business, use this guide:

• Choose the type of car rental business you are going to start. You have a few options in this area, and we will go over all of them.

  Franchise: If you are looking to start a car rental business using an existing franchise, you will purchase the rights to use the brand name and business model of one. Options of car rental franchises include Hertz, Dollar Thrifty, Enterprise, Budget, and many others. There are pros and cons to franchising that you should take into consideration before choosing this option.

  A major pro of starting a franchise car rental business is that setting up the business is a lot simpler than starting from scratch. While there is likely going to be a higher cost to do this, what you get is the support of an already established and successful car rental brand.

  You also get to receive guidance from your brand as you launch your business and set up and grow your location. Franchise financing options also help relieve some of the financial difficulties that exist with other avenues.

  The main downside of doing the franchise option is that you lose some control over your business. The franchisor has a certain degree of control over your business because its franchises are run on the same type of business model.

  If you value autonomy, this might not be the right choice for you. The other major con is that initial franchise fees can be as high as tens of thousands of dollars.

  Dealership: The next option you should consider for starting a car rental business is to set up an agreement with a local car dealership that will offer car rentals to the dealership's clients whose cars are being repaired.

  The downside of this option is that it presents a very limited customer base, as you will be at the whims of only the customers who frequent this specific car dealership. The upside is that it won't cost as much as a franchise, and you won't need a massive fleet of cars to rent to get started. This can really help you lower the cost of starting a car rental business.

  Independent Car Rental Business: Your third option is to start an independent small business. This option is great for people who like to have autonomy and near-total control of their business operations. You have the ability to make the decisions you think are best for your business and yourself.

  However, this also means the buck stops with you. You are accountable and responsible for all problems, major and minor, that can occur while running your car rental business.

  You also have a steep hill to climb in terms of building a brand for your business, finding customers, beating out competitors, and you need to have a significant amount of start-up capital to do this, as well as some emergency savings.

  Buying an Existing Car Rental Business: If building a business from scratch seems like too much work, and you don't like the limitations of the franchise option, you may want to think about purchasing an existing car rental business.

  The biggest benefit here is that purchasing an existing business means that you automatically have most of what you need to operate the business; this includes a fleet of cars, a commercial location, and many other essentials. Here you are also likely to have an existing client base and won't have to spend as much money on marketing your car rental business.

  The downside of this is it usually requires a lot of research, and of course, you have to find an owner that is ready to sell. These two aspects can take a significant amount of time. You also need to do market research in the local area on your competitors, their client bases, and pricing and see how it all lines up with the existing car rental business you are considering purchasing.

• Determine your target consumer base. This is a very important step; you need to know who your car rental business is going to serve and if there's adequate demand in your local community.

  Most customers of car rental businesses are either tourists, customers who need a loaner car because theirs is in the shop or dealership, long-term car rental customers or short-term car rental customers who are business travelers.

  Making sure that at least one, ideally several, of these markets exists in the community you want to start your business in is of paramount importance. You can also determine your target audience by taking a close look at your communities demographics.

  Doing this research will help you immensely in the long run and is crucial to performing the next step, which is devising a business plan.

• Devise a business plan. Your business plan should cover customer research, competitors, a startup budget, and financial projections for your car rental business.

  Other things you should add include the problems you will be solving for clients and customers, what sets your business apart from the competition, the resources your business will depend upon, and your business's mission statement and vision for the future of the company.

  Your business plan is a critical document for yourself, especially if you are looking to get a small business loan or investors in your company. You also need to figure out exactly what services you are going to offer. Are you going to offer any other products or services in addition to car rentals?

  Providing more products and services can help you stand out from competitors and create multiple revenue streams within the business; however, it is also going to increase your operating costs. Weigh your options closely with the startup budget you are working with.

  You also need to thoroughly go through the costs of starting a car rental business and include these in your business plan as you see fit.

  Different types of businesses require a variety of startup costs, but a car rental business is likely to have very high startup costs.

  You need to consider all the purchases you need to make, including a fleet of cars, leasing a car lot and commercial space, employing mechanics and rental associates, and insuring your entire car rental operation.

  Just be sure to think all of these important issues through when starting to develop your business plan. At this stage, you should also choose a name for your car rental business if you're not purchasing an existing car rental business or a franchise. Try to name your business with a short, catchy, and memorable title.

• Register your car rental business, and get insurance plans and an EIN. You need to register your car rental business and obtain an EIN. Also, you should familiarize yourself with the legal requirements for a small business in your city or state.

  This step is mainly for those building a brand new car rental business from the ground up; however, some of the information may also be pertinent to those buying existing car rental businesses or franchising.

  You might want to consider applying to become a limited liability company (LLC). If you operate as an LLC, your personal and company information is entirely separate. While this changes your tax status, it does protect you from personal losses based on the company's performance.

  An LLC is also a good option because once your business starts to grow, you'll be able to hire employees to help you. Requirements will vary from state to state, so it's important to do your own research into your specific state's requirements.

  Business insurance is necessary to protect your LLC from liabilities and other possible claims. This is another cost you should look into. Business insurance policies come in all sorts of types and sizes and are designed to help protect small business owners. When running a business, you automatically open yourself up to some risks.

  There are also safety concerns, such as a customer slipping on a wet floor or Acts of God, such as a hurricane, earthquake, flood, or tornado. Having a good business insurance policy can help you recover from all of these unfortunate scenarios.

  The cost of business insurance depends on what policy you elect to purchase. Commercial property insurance, which covers fire and water-related damage, vandalism, and theft, typically costs somewhere between $1000 to $2000 per year.

  It is strongly encouraged that you seek the advice of an experienced insurance agent to determine all the necessary insurance policies you should get for your car rental business.

  Once you have this determined, you'll also want to get a Federal Tax ID number. This helps you get a license to run your business. This is also referred to as an EIN or Employer Identification Number.

• Determine the appropriate location. You need adequate commercial space to start a car rental business; this includes a car lot, a mechanics garage, and a storefront for customers.

  Another extremely important factor to consider is your car business' location in terms of how close it is to your target audience. If you are trying to get a lot of business travelers as customers, you need to be located relatively close, and ideally very close, to an airport.

  This holds true for tourists as well; however, in addition to airports, you can also set up shop in an area of your community that has a lot of hotels or resorts in the immediate vicinity to attract tourist customers.

• Develop a car rental contract. This is one of the most important documents you must create when starting a car rental business.

  The rental contract, or rental agreement, is a document that represents the deal between a car rental business and its customer. This contract covers many important things, such as liabilities, what will happen in the event the customer gets into a car accident, and, most importantly, what each party is responsible for.

  You should consult the advice of a legal professional when designing your car rental contract.

• Hire an operations team. The next step is hiring employees to help you run your car rental business. It is possible to wear many hats early on, but most car rental businesses have a considerable amount of in-house staff.

  Roles to think about include mechanics, rental associates, accounting employees, and possibly security professionals.

  You need to find qualified professionals for these roles to ensure that your car rental business operates smoothly.