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Car Rental Business: Pros And Cons

To start your car rental business, you need to prepare carefully, create your business plan, and decide on the audience, the level of expense, and the income you expect. In words, it’s easy. But it is necessary to back up all the words with actions. So, we will consider in detail the pros and cons of the car rental business.

Pros and cons of car rental business

The business has its advantages and disadvantages.

Pros:

  • Demand availability. A car booking is much more comfortable and economical than the way you own a car – you do not need to spend money on car repair and maintenance. Relatively small investments. The amount of start-up capital required to start is small.
  • Economy of time. This business takes little time, and does not require a large staff. Having made efforts at the start (car purchase, promotion, rental system organization) will only count profits and think about new directions of development.
  • Quick payback. On average, the investment will return after 3-5 years. And in large cities or when buying a ready-made business – in less than 2 years.

For example, you can compare several Los Angeles SUV rental options, their prices, and condition, and analyze what is the best way and which cars are better to buy for your SUV rental business in Los Angeles, NY, or Miami.

 Cons

  • High competition. In big cities, the market has been successfully occupied by large companies that are highly popular and trusted. To compete with them, you need to come up with a unique offer that can interest customers.
  • The risk of serious breakdowns, and theft. The success of leasing a car as a business directly depends on the integrity of the customers, and their driving experience. A reliable system of collateral and insurance should be developed so that in the event of an accident you will not have to use your means to recondition the car.
  • Difficulties in the promotion and finding clients. To compete with the major players in the market, you will need to properly invest in advertising, the development of a site and mobile application, and promotion in search engines and social networks. To do this, you need to clearly define your target audience.
  • Problems of development in small towns. Earnings on car rental as a business is possible only at active demand. Given the low level of wages in small settlements, such a project will not bring income or allow only to recoup the costs. But there are options here as well. For example, to rent agricultural machinery or off-road vehicles, quad bikes for tourists.

These disadvantages of the idea of rental can be excluded if you have a detailed business plan. 

How to start a car rental business

The most important stage is a detailed business plan. It should take into account all possible items of expenditure, including maintenance, the purchase of spare parts, rental costs, utility bills, advertising, and taxes. Then move on to the main stages of launching:

  • Business registration. 
  • Attract investors.
  • Purchase cars – at least 5-10 cars. 
  • Engage in advertising: from the distribution of leaflets to contextual advertising on the Internet.
  • Sign contracts with partners. Consider contracts with travel companies, airports, and hotels to attract customers.

Depending on the city and the difficulty of the idea, a car rental business may include more items. In addition, you will need an office for employees, an area for free cars, and a wash service.

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How much investment will be needed to start the business

The main item of expenditure when starting a car rental business is the purchase of cars. 

The budget should include:

  • Business registration with all the permits;
  • The lease and repair of the office, the purchase of furniture;
  • The salaries of employees for the first few months;
  • The development of the site, a mobile application;
  • Advertising and promotion on the network;
  • Contingencies.

Before you open a car rental business, consider your upcoming monthly expenses. This will include not only office maintenance but also cleaning, car washing, repairs, and ongoing maintenance. To manage the area of the vehicle, and speed and driving style like the way to rent an SUV, it is worth installing special beacons. In this way, you will insure the vehicle against theft.

What are the best cars to choose for rentals?

5 most popular categories of cars can bring profit to aspiring entrepreneurs:

  • budget brands;
  • middle-class cars;
  • expensive executive cars;
  • off-road vehicles, like SUV cars for rent LA or some other big city of the USA;
  • exclusive services for holidays.

The choice of one or another category relies on the funding and the target audience. Not necessary to buy a new vehicle. Consider the aftermarket – save your money significantly. Check the reliability of each car you buy to exclude accidents and rapid wear and tear of parts.

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