Are you starting a car rental business and you want to know how much to charge clients to hire your cars? If YES, here are tips and strategies to help you.
Car rental businesses make money through one major avenue, and that is the renting out of cars to clients. Rentals are generally made on a daily, weekly or monthly basis depending on the needs of the renter. The car rental business is also associated with a car that is hired for a period of 12 months or less. Rental of cars for a longer period is commonly referred to as leasing.
When an entrepreneur sets up a car rental business and acquires his cars, the next thought on his or her mind is what to rent out the cars for so that the business would draw in good profit, and equally so that it won’t drive away customers.
It should be noted that vehicle rental prices can fluctuate based on certain factors which may include, the age of the vehicle in question, type of car, time of week, pick up and drop off location, the age of the driver, added services and so much more.
Putting all these factors into consideration in your business would help you come to an average of what you can rent out each car for. And of course you should know that all cars don’t go for the same rate.
What is the Industry Average Rate for Hiring Cars?
A car rental business rents vehicles at affordable daily and weekly prices. These businesses make money from renting out cars to those who require a means of transportation while away from home or as a substitute for a vehicle that is being repaired. The rate charged by these businesses can differ by the quality of vehicle and the location.
Generally, low end cars such as a Nissan Versa, rent for around $35 to $50 per day. Upscale cars like a Mercedes-Benz or Lexus will run upwards of $100 to $200 or more per day. To successfully run this business, your ongoing expenses will include employee wages/salaries, utilities, insurance, the addition of new cars to the fleet, servicing the fleet, office/parking lot rent, high-speed internet, marketing, and website maintenance.
Your ideal customer is a business that requires numerous car rentals for employees. Another customer base will be travellers who are willing to spend a considerable amount of money on car rentals while away from home.
Car Rental Business – How Much to Charge Clients to Hire your Cars
Like we said before, the amount you charge your customers for renting your cars depend on variables that are peculiar to you and the person renting your car. But of course there are national averages. To know these averages, you have to check out what popular car rental businesses around your area are charging for renting out their cars. This would give you an idea on how to proceed.
Average cost of car rental based on popular can rental businesses in the United States
Enterprise car rental
- Economy Car: 1 Day rental- $67. Week Rental – $288
- Compact Car: 1 Day rental – $68. Week Rental – $297
- Full Car: 1 Day rental – $76. Week Rental – $335
Thrifty car rental
- Economy Car: 1 Day rental – $62. Week Rental – $276
- Compact Car: 1 Day rental – $64. Week Rental – $280
- Full Car: 1 Day rental – $74. Week Rental – $316
- Economy Car: 1 Day rental – $93. Week Rental – $228
- Compact Car: 1 Day rental – $94. Week Rental – $234
- Full Car: 1 Day rental – $101. Week Rental – $29123
As a new car rental business, these figures should give you an idea on how to craft your own car rental charges. Note also that your figures must not correspond to the above.
Factors That Determine What You Should Charge for Renting Out Cars
Here are factors that you should put into consideration if you are trying to figure out what you should charge for renting out your cars.
- Time of booking
The time a booking was made usually determines what the charges would look like. Car booking has severally been described like buying airline tickets. The earlier you buy, the cheaper you get it. A car that is to be used today but was booked yesterday would be charged more than if the car was booked a week before.
- Vehicle Type
Every car rental service has a different way of classifying the vehicles they rent, but in general, the fancier and larger the vehicle, the more the car is charged for. An Economy vehicle, usually a small car, is typically the cheapest option. A fancy sports car usually costs more, with rates sometimes going as high as 50 percent. Even a minivan can cost nearly double to rent as a standard economy car does.
- Age of the vehicle
The age of the vehicles in your fleet also determines what they should be rented for. It is a fact that some customers may not want to rent vehicles that have been driven over a certain miles, or cars that have a certain kind of look. If you are renting out such vehicles, know that you have to slash the cost to make it more appealing to people.
- Time of the week
The time of the week a booking was made is also another determinant of what the vehicle charge will be. Most car rental services in small cities make their money primarily on the weekdays with business travelers who need a car to get around. So you can charge your rental cars a little bit higher on this period.
However, if your car rental business is in a tourist location such as NYC, rates might be higher during the weekend when tourists are more likely to be in town. Another great opportunity for rental car companies to make money is around the holidays. Car rental rates are quite high in this period.
- Pick up location
The location where the rental deal was made is also another huge determinant of what you are to charge for renting out your cars. One very expensive place is the airport. Renters are usually made to pay for the convenience. But you need to do a few registrations for you to be able to rent out your cars in airports.
- Drop off location
Yet another factor that can influence the price of renting out a car is the location of drop off. If a client offers too drop off a car at a location other than the one where he picked it up, it can make the cost of the car rental to increase. Though this is charged as additional fees.
- How long the booking is to last
Generally, the longer a car is booked for, the lower the per-day rate will be. Keep in mind that most places do not allow rentals that last fewer than 24 hours, so even if a client only needs a vehicle for a few hours, they will still be required to pay for at least one full day of use. You can decide to toe this route, or be flexible in you operations like some car rental businesses do.
- The age of the driver
Young drivers are termed high risk, so car rental companies charge more to rent out cars to them. For renters that are under 25 years of age, rental companies usually charge them $20-$70 per day, depending on type of car. If there are two drivers listed for the car and one is 25 or under, the charge will still remain high.
- Any extras demanded
Extras cost more, so if clients demand things to be added to the car, they would have to pay more for it. One of the most common is extra insurance. Another is baby car seat, a ramp on top of the vehicle for carriage, etc.