Do you own a car hire business and need ideas to manage and grow it? If YES, here are 20 tips on how to run a successful car rental business and make money.
Transportation is indeed a big deal for people who have things to do outdoors. You need a form of mobility to get from point A to B, especially when you are new to a town and don’t have your own ride. As a car rental business, your primary duty is to rent cars out to visitors and even residents who for one reason or the other cannot use their vehicles at the moment.
A car rental business can be indeed tough to start as you need to factor in location, and the finance required to amass a fleet of vehicles. After spending all the money and going through the stress of setting up your business, you need to make sure that your cars are actually getting rented and that you are maximizing profit.
This is now where the problem lies. There is far more to this business than handing out keys and collecting cash. There are other considerations to make if you want to have a fighting chance in this industry where they are other big contenders. Some of the things to take into consideration are as follows;
How to Run a Successful Car Rental Business and Make Money
- Craft a Business Model for Yourself
For any business to be successful, it needs to possess a workable business model. Same is also applicable in the car rental industry. To be successful in the car rental business, you need to get yourself a workable business model, and then take out time to review the business model to see if it is profitable or not.
You need to review and change it according to new challenges, market trends and competitors. After planning a business model, be consistent in following it. Fix a regular meeting with your management team and appreciate employees who are performing well.
- Understand the Fleet and your Customers
Every business succeeds if it has a happy customer base that is always willing to come back, and this scenario applies in the car rental business too. Try to find out what kind of vehicles your customers flow with and what limits they would never cross.
Some customers would not mind renting a used car as long as it serves their purpose, while others would never be caught dead inside one. Finding out these peculiarities in your customers would enable you run a better business that can serve more customer base. Also, find out the condition of every vehicle in your fleet and analyze what a customer can happily pay for a fleet.
- Make Sales and Marketing a Priority
You cannot neglect the importance of the marketing as it is the engine room of your business. Without good sales and marketing plans, you are just an ordinary company. You must allocate a reasonable budget to the marketing of your business.
Distribute that budget on every field of marketing. For example, for the car rental industry you can attract customers offline as well as online. Promote your business in the real world as well as in the digital world. Always look up for new business opportunities to grow your business.
- Go Where Your Competition Doesn’t
Opportunity is a critical driver of growth, particularly in the car rental industry. For example, Enterprise Rent-A-Car built its reputation as America’s largest auto renter by catering to drivers who needed replacement vehicles due to accidents, repairs or theft.
Similarly, Zipcar netted $100 million in profits for its membership-based business model during 2008 by aggressively pursuing college students, another population long under-served by car rental companies due to concerns about liability issues.
These companies dared to serve a customer base that their competitors neglected, and they hit it big. This could be you too if you are able to find an under-served niche in your community, city or state.
- Fight For Every Dollar
With so much money tied up in fleet, gas, labour and insurance costs, paying attention to profitability is crucial in the car rental business. You should note that every 1 percent that you are able to shave off your fleet finance interest rate would boost your bottom line.
For this reason, you have to keep a running tally on items that affect your business, such as the average profit per car. If you don’t do this, you run the risk of running at a loss without even knowing it.
- Avoid Rental Firms When Going For Insurance
Purchasing rental insurance from a rental agency (typically a collision damage waiver, or CDW) tends to be a relatively poor bargain. Rental firms typically will charge you several times the actual value of the insurance.
For more cost-effective coverage, you should obtain insurance through a corporate or personal credit card. Many gold cards offer auto insurance coverage to rentals made with the card. Larger firms may want to add collision and liability insurance as part of their standard insurance package, or negotiate insurance coverage as part of a rental agreement.
- Imbibe the habit of regular analysis
Regular analysis is one of the most important factors for the success of a car rental business. Look up for various reports for the performance of vehicles, see the revenues and margin of profit. Find out which plans are working perfectly for the company and analyze the customer’s behavior during seasons and set your prices accordingly. Doing this would always keep you abreast with the health of your car rental business.
- Keep It Simple
Consumers often criticize car rental logistics as complicated and cumbersome. This is because of the paperwork and other demands made on customers. One of the ways to simplify things in your car rental business is to incorporate a membership-based service. This model keeps human interaction to the barest minimum, as users can reserve their preferred vehicle models online. Nobody likes complication these days.
- Keep Your Prices Updated
Pricing is something which plays an important role in this business. You cannot use a constant price for every vehicle and every season. You must change your rental prices based on the factors like peak season or dull season, new vehicles or used vehicles, long term or short term rentals, etc.
Rental rates vary depending on the size of the car, availability, and the rental agency. Most rental firms offer several sizes of automobiles, ranging from compact through intermediate and full-sized. Moving up a size is generally not very expensive, but specialty cars and vans/trucks often cost much more.
Local supply and demand also has an enormous effect on rental rates. Leisure areas are usually very inexpensive, since the major rental agencies compete with dozens of smaller firms. Cities tend to be very expensive, since space is limited and demand is high. Know where your location falls and adjust your prices accordingly.
- Offer High-End Experience
Building a business around luxury cars that customers fantasize about driving offers another way to distinguish your business in a sea of standard model competitors.
If you can afford it, you can include topnotch models like the Viper, the Porsche and the Hummer. If you are able to do this, you should make sure to advertise the cars extensively online. Such tactics offer experiences that drivers can’t get elsewhere, and raises the odds of turning them into repeat customers.
- Beware of Underage Surcharges
If you have many employees under the age of 25, negotiate ways to eliminate underage surcharges or waive an underage exclusion policy. If you do not do this, you may be losing valuable money that should have going into the running of your business.
- Take Note of Mileage caps
If most of your firm’s rentals cover a fairly limited area, you may be able to obtain a 100 miles/day cap in exchange for lower daily rates. In this case, you can get $4 to $5 per day off the standard corporate rate. This could add up to a lot of money for your business.
- Make Corporate Allowances
In the car rental business and even other businesses, there are times when things don’t just go the way they are planned. In this business, you have to make sure to negotiate what will happen if your retail rate is available for less than your corporate rate. Some agencies will allow you to default to the lower rate (or even less) under the corporate plan, while others will only let you switch if you agree to give up your corporate benefits.
- Offer Hourly rentals
One way to maximize profit in your car rental business is to include hourly rentals to your offerings. There is good value in offering hourly rentals in this business. A traveler in town for a brief business meeting can pay as little as $1.59 per hour to rent a car, instead of having to pay a full day rate. This would ensure that money keeps flowing in even on dull seasons.
- Your Location Matters a Lot
When it comes to business, your location matters a lot. To be successful in your car rental business, you need to look for available real estate near where your customers are likely to be, such as airports, bus stations, or hotels. Remember that your clients will have limited ability to get to you, and – even if you provide a shuttle service – the shorter the travel time the better.
Also, take into account the general safety of your potential location. After all, vehicles don’t come cheaply and you want your customers to feel secure as they arrive and leave.
- Set up a website
Since much of your business will come from out-of-towners, you need advertising that is guaranteed to reach them. A website is an invaluable tool to inform potential customers about your services, highlight the vehicles in your fleet, and even allow online booking.
This would work for your business 24/7 and can be configured to automate much of your paperwork and other processes. In order to keep visitors of your website from going to your competition, make sure you offer at least the same online capabilities as other vehicle rental services in your area, even if it means enlisting the help of a web developer.
- Prepare for daily operations and proper record-keeping
Once your vehicle rental business has opened its doors, it requires daily attention to function like a well-oiled machine. Ensure you have enough staff to meet your customer’s needs and a system in place for record-keeping.
In the past, such records were laboriously kept by hand on paper, but modern businesses often use a fleet management software. There are very affordable and even free version car rental software out there that you can use for your business. The deal is to find the one that suits you best.
- Make Plans to Change your Fleet From Time to Time
Your auto fleet is the heart of your business, so you must not neglect it. Novelty is a crucial part of stimulating customer demand, so plan to move vehicles out of your fleet on a 12-month basis, or on any basis that is suitable for you. The rule of the game is to keep it fresh, that way, you can keep drawing customers to the business.