If cars are your passion and you want to connect your life with them, renting vehicles out to others is an option to consider. You can achieve two goals: You will be around cars of all types all day long and you will help others get what they need. People want to rent cars for various reasons, from getting to work on time to having a thing to brag about. Anyway, car rentals don’t seem to disappear any time soon, so it can be a promising opportunity for you to start a business connected to cars.
However, even though it’s an idea worth the gamble, you need to know all the drawbacks and risks to make an informed decision. One of the factors that will influence your decision is the cost of starting such a business. Every step of the way will cost you a certain sum of money to complete and it’s better to know your odds before everything happens. We will go through the process of starting a car rental and count how much money you need to open your own car rental.
Step #1: Get some experience
It may seem like an unnecessary step that will only take your time, but it actually can be very beneficial. It often happens that a person who wants to start a new business has no idea what the industry looks like. Taking hours as a rental worker or going to special classes can give you the basic knowledge of how cars work and how the industry works.
The work will mostly take your time, not money (you can even earn something), but classes can cost anywhere from $1,000 to $20,000 depending on the program.
If you are already experienced with cars and car renting, you can move to the next step right away.
Step #2: Do the research and choose your type
Knowing the business is not the only thing needed for a successful start. The next step is completing market research.
First of all, you define and take a closer look at your target audience. They will be different for a Range Rover rental and a minibus rental. The necessary characteristics will include the potential clients’ interests, goals, pain points, and demographic metrics like age and income level.
Then, move to your direct competitors. What they offer, why people rent cars there, how they attract clients. It will help you see what they do well and learn from it and what they do bad and don’t make the same mistakes.
Technically, these operations will cost nothing but your time, but you can hire a professional agency that will do it for you. But be ready to spend $20,000 and more on them.
Step #3: Make a business plan
Whatever your niche is, you need to have a business plan. It’s not just a summary of what you are going to do and how much money you are going to spend. It’s a detailed map that will guide you through creating and supporting your business. It may include:
- Executive summary
- Key performance indicators (KPIs)
- Market research
- Marketing plans
- Funding request
- Financial projections
Since it’s one of the most important papers for your future car rental, it’s better to delegate it. The average cost of writing a business plan is about $3,000-$6,000 but can get higher depending on a specialist.
Step #4: Prepare the documentation
Now, when you have completed all the previous steps, you can start legal stuff. First, you need to officially register your business. Thanks to technological progress, it’s easy to do online.
The real question here is what structure you need to choose: LLC, Sole proprietorship, or Partnership. The most common choice is the first one, but you will need to consult an attorney to figure out what will work best for you. Also, don’t forget about all the required permissions and licenses.
The average hourly rate for a business attorney is between $150 and $400 per hour.
Step #5: Get your cars and inventory
Here comes the most important part of your car rental business: cars. You have two main options to acquire them:
- Purchasing. It will take a lot of money (especially if you plan on targeting the lux sector) and a lot of time. You can buy your fleet from a local dealer, other people, or at auctions.
- Leasing. Make sure the terms of the lease include your right to rent cars out so there are no legal consequences.
This step’s cost entirely depends on what cars you want to rent out, how many of them you are going to acquire at once, and how much the insurance costs.
Step #6: Marketing strategy
Now, sell yourself! The most common marketing steps for a car rental will be local advertising, a website, social media marketing, and word of mouth. Build up a trustful relationship between you and your clients and they will become your best salespeople.
You can start small by making a landing page and setting up social media accounts and then adding more based on users’ feedback.
To sum it all up: The total cost
Building up a car rental company from scratch will require around $30,000 to $100,000 without the costs of the fleet itself. If you want to follow your passion and your budget allows you to, then you are good to go.