How to Start A Car Rental Business in 10 Steps

Do you want to start a car rental business? Find here a detailed car rental business plan checklist with the business model, profitability, and cost.

The car rental business in India is growing at a fast pace for the last few years. The approximate car aggregator business volume is around Rs. 60,000 CR. Experts predict there will be higher growth in the coming years.

If you enjoy an outdoor activity in the automobile industry, then surely it is one of the best alternatives for you. However, the business is not so lucrative for small towns or rural areas. Basically, the metro cities where the population density is high are the most favorable places for starting this business.

Depending on your investment capacity, you will need to determine the business. Additionally, you must prepare the business model and marketing strategy for your car rental business.

One can start a car rental business with a small investment and with comparatively less risk. However, the industry is getting more and more competitive these days.

Here are the 10 Steps to Start a Car Rental Business

Here are the steps to follow to start a car rental and car aggregator business:

1. Understand the Market

Broadly, the industry is categorized into two segments. These are on-airport and off-airport rentals. Generally, the on-airport application includes airport transport. However, the off-airport applications include outstation, local usage, and others comprising primarily leisure activities.

The globally rising disposable incomes together with enhanced road infrastructure are the key factors for propelling the number of leisure and business trips. Hence, it boosts industry growth.

Suggested Read: Understanding Consumer Behaviour: How It Is Used In Marketing

Additionally, the lack of timing and route flexibility exhibited by public transport induce the people for availing themselves of the car rentals services. Also, the increased proliferation of businesses and cultural events in the leisure segment impacts the growth of this segment.

Largely, the increasing number of air travelers along with leisure and business trips, both domestic and international, has led to an increase in the demand for such services.

2. Buy/ Lease Different Types of Cars

Basically, the major investment includes procuring cars. If you want to start a business with a small investment, you can consider buying used cars in good condition. For a small operation, you can initiate the business with three cars. And as your business grows, you can buy more cars. It is better to start with economy cars.

Regardless you are buying a new or used car, you can avail finance facility. Actually, an EMI option will help you start the business with a minimum risk.

There are different types of cars in the industry. Additionally, they come in different price ranges too. The list includes Multi Utility Vehicles (MUVs), Sports Utility Vehicles (SUVs), economy cars, executive cars, and luxury cars.

As a matter of fact, economy cars dominate the overall industry share. Users opting for rental cars for inter-city transport or for a shorter time span generally prefer economy cars over others. Economy cars are comparatively cheaper and deliver higher mileage than others.

It is seen,  executive cars are finding more and more customers. The rising demand originating from corporates is the major reason for the growth. Furthermore, travelers typically demand higher product and service quality as well as reliability in their travel and vehicle. Hence, selecting the target market plays a key role in the long term success of a car rental business here in this part of the world

This rising need among business travelers is predicted to boost the demand for rental executive cars worldwide.  Also, SUVs and MUVs are generating moderate growth in the industry.

3. Do the Market Research

When you are starting a small car rental business, you will need to concentrate on the local market. And to understand the actual demand, you must conduct local market research. There are broadly three types of demand for car rentals as per the demand of customers. They are the following:

  • Small car rental business
  • Luxury car rental business
  • Economy car rental business

The industry is highly competitive. So, the right planning is important to minimize the risk. And with the right planning, it is a great business to make a lot of money.

4. Select the Car Rental Business Model

Fixing the right business model is another important aspect of this business. And it depends on your investment capacity, expertise, and local market demand.

You can also start a car rental business with partnering reputed app-based taxi services like Ola and Uber.

Apart from renting your own cars, you can also allow other car owners to join your business. And you will need to share the profit with them. Practically, there are several ways you can be a little creative in crafting the business model.

Broadly, there are two different types of rental services. One is contract hire for a long duration of time. Another is daily-hire for a shorter period of time. So, you will need to craft the marketing strategy and tariff accordingly.

Crafting a business plan is one of the most important aspects of this business. Consider every detail carefully. In fixing the operating procedures consider the other established company’s operation style. Try to fix a USP of your business.

Probably, as a startup company, you won’t be able to offer cheap prices compared to other national operators. So, think about what you can offer to your clients in a different way.

5. Setup your Car Rental Company

For operating the business, you will need to secure a location. And you must select a good commercial space in a good location. Generally, the locations nearby airports, hotels, rail stations are great options for this business. Additionally, space must have enough parking facilities for keeping your cars there.

One must make necessary space arrangements for parking cars. Another important job to be carried out is hiring drivers. accountant, customer care, and marketing professional. In addition, proper accounting software must be installed for smoothly carrying out day-to-day functioning.

6. Cost of Starting a Car Rental Business

Broadly, there will be two types of investment needed to start and run a car rental company. One is the startup cost and the other is the recurring cost.

The cost of launching a car renting business will largely depend on the size of your taxi fleets and the scale of operation. If you are starting from scratch with say 5 cars. the expected investment of starting a car rental business in India will be Rs. 50,000 to Rs 2 Cr. depending on whether you buy cars or take cars for lease.

7. Register your Car Rental Business

It is essential to register a car rental business in India to run a legally compliant company. There are various forms of business structure that one can choose from. Some of the popular company structures for small businesses are listed below:

Suggested Read: Different Forms of Business Organization in India

8. Car Rental Business Insurance & Tax

In this type of business, insurance is a must. First of all, check the offer and price of several companies and then finalize one. Additionally, you must check the tax and permission criteria of your state.

GST registration is a must nowadays to start and run a  car rental business in India.

Also, cars must have a commercial number. It needs a higher tax payment than the private car registration. Generally, you will need to pay the tax depending on the territory that you want to roam around.

9. Create a Website

These days the website plays an important role in the operational aspects of service-based businesses. So, you must have a business website for your car rental business. On the website, clearly, mention the services you offer in detail. Additionally, mention the specific territory you cover.

For creating a website, you must select a domain name first. And your domain name must be your company name. So, in the time of selecting the company name, check the domain availability first. Basically, a website allows your clients to book the car at any moment of time 24 X 7.

10. Promote Your Car Rental Business

You will need to have a marketing plan and finance for that. Additionally, you will need to have some business tie-ups with other businesses. Basically, you can contact the hotels, resorts, and travel agencies in your area.

Also, contact the business houses who often hire cars for their employees. Moreover, you must aware of the target demographics of your area for your car rental service business.

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