The car rental industry in the U.S. is a significant business generating more than $23.54 billion in revenue. The number of users is expected to reach more than 35 million in the coming years. Growth is expected to trend up with a 2.4% rate annually. More than 22,700 companies across the country are providing car rental services. The growing tourism industry is also boosting the car rental sector.
If you’re looking into setting up your car rental business, this might be a convenient time.
The Car Rental Industry
The peak of the car rental industry during the last 17 years came in 2007 with more than 1.86 million cars for rent. It declined in the two years that followed to 1.6 million. But by 2012, it was back to the 1.8 million levels.
You need to build a fleet or at least a few units, mainly if you’re servicing a city like Salt Lake City, which serves as a hub to Utah’s tourist attractions, like the national parks and ski resorts.
Starting Your Business
Maintenance work, such as dealing with transmission repair or suspension replacement, is a crucial aspect of the company. But those are issues you will face when your business is already up and running. Here are some of the things that you need to do when starting your car rental business:
- Decide on a business model. The franchise model is perhaps the easiest way to go about it. You don’t have to worry about where you are going to source your supplies or how you’re going to set up your financial system. You will, however, need to pay the rental chain a yearly fee. The other model is to start from scratch. You will assume the financial risk and would need to raise significant capital. If you become successful, however, all the profits are yours.
- Understand the market. Do your research first. This would entail identifying the best locations and understanding what the customers need. Proximity to the airport or other public transportation hubs should be part of your consideration. Go to your local tourism office and get data on tourist demographics that visit your place. You can offer a luxury car rental service if there is a fit within a particular segment of the tourist profile.
- Licenses. You also need to understand the laws and licensing regulations in your state. A related issue, which a government regulatory body might require, is insurance. Note that the type of insurance for a car rental business is different from individual car insurance. Make sure that you go through the details of your policy and its coverage.
- Daily hire or contract hire. You can rent out to individuals on a short-term basis, or you can lease your fleet to businesses for long-term contracts. You can choose to do both, but note that you should have a plan as to how you will manage your units most efficiently and profitably.
- Car fleet. Three to five cars should be a good number to start. You don’t need to begin with several vehicles immediately. Your options to build your fleet is to buy them or rent from a dealer. Both would entail costs, so you need to determine what will work best for you, given your initial study of the market.
Drafting a proper business plan should include all other details like what the competition is like in your area or how you plan to execute your marketing campaign. But these key points will help set you in the right direction.
