Tips for opening a car rental agency

If you plan to open a car rental agency, it is possible! But you will have to think carefully about your project, differentiate it because the competition is strong, and prepare a solid business plan to finance it…

 

It is an obstacle course, for which we have prepared this practical guide in which we review each of the main steps to create a car rental agency.

 

Car rental: a resilient market

 

Cars are rented, even in times of crisis. But this same crisis has accentuated competition, to the detriment of people who are launching self-employment.

 

Opening a franchise car rental agency: less risky than independent

 

In this context, launching yourself as a self-employed person is risky, unless you are specialized in a niche, setting up a competitive car rental agency may prove to be very complicated.

 

A less risky alternative is to create a franchised car rental agency. By joining a network, you will benefit in particular: recognition of the latter's brand, prices negotiated with suppliers, support, and promotional tools.

 

Of course the franchise at a cost, financial (entry fee, royalty), but also in terms of the freedom you will enjoy to manage your business (you can only offer vehicles selected by the brand, and must respect the rates imposed by it).

 

Freelancers: your car rental agency will have to stand out

 

If you opt for the creation of an independent agency, it will be essential to find a differentiated value proposition to face competition from networks and new practices (rental between individuals, in particular).

 

For example, you can specialize in car rental without a license, in the rental of utilities, or in the rental of luxury or vintage cars.

 

Market research: a must before opening a car rental agency

 

Whether you choose an independent agency or a franchisee, you will have to go through the market research box anyway.

 

The purpose of the market study of a car rental agency is to allow you to verify that there is indeed a commercial opportunity in the area of ​​establishment.

 

To do this, you will need to:

 

Assess demand: is there a large flow of tourists or business customers likely to be interested in renting a vehicle (from a station or an airport for example)? Is there a need among the local population (urban population without a vehicle, and potentially interested in temporary rental for holidays, for example)? What are customers' expectations both in terms of services and prices?

 

Evaluate the existing offer: how many car rental agencies are already established in your city? What services do they offer? Are your competitors' vehicles waiting on the parking lot or all on hire? Are the big names in the sector already established in your town? If not, why: lack of attractiveness or coming soon?

Find suitable commercial premises to open your car rental agency

 

Whether you are operating as a franchise or independently, you will need a commercial space suited to the exercise of your activity.

 

For the creation of a car rental agency, you will need:

 

Commercial premises to accommodate customers, ideally this should be located near an area with a good flow of potential customers (train station, airport, hotel, etc.)

 

An office for the administrative and marketing part, this can possibly be located outside the commercial premises if the surface of the latter is too small (counter or reception desk at an airport for example)

a parking area for parking vehicles, possibly with a technical room for servicing and maintenance of vehicles.

 

Note that the presence of competitors near the commercial premises should be qualified depending on the segment in which you have chosen to position yourself. For example, if you specialize in the rental of luxury cars, the presence of utility rental companies is not a problem for your business.

 

Car rental agency: the legal structure

 

Opening a car rental agency involves choosing a status for your business.

 

There are a multitude of them, each with its own advantages. Schematically you will have to choose between:

 

·         a partnership: with this type of business, the assets of the company are not dissociated from that of the entrepreneur, which implies that you are responsible for the debts of the business in the event of bankruptcy, the method of taxation is generally that of income tax

·         a capital company: with this type of business the responsibility of the entrepreneur is limited to the capital invested, the method of taxation is corporate tax

You can find more information on the different legal statuses in our guide.

 

The material and human needs to open a car rental agency

 

The amount of the initial investment for the creation of a rental business depends mainly on the size and method of financing the vehicle fleet.

 

To estimate the size of the fleet, you will need to rely on your market research. That said, be careful: if you lack vehicles, you can always get more. But if you plan too broad, you may have to resell part of it, possibly with a loss.

 

In addition to this, you will need to develop and equip your premises with offices and IT. Renting your cars may require specific IT tools. For example, if you want to be able to relocate your vehicles in real time. This will require the intervention of professionals. For all this, ask and compare quotes.

 

It will also be necessary to plan the creation of a website allowing to publicize the agency and to take online reservations.

 

In terms of human needs, you will especially need staff to welcome customers, take orders, carry out inventory of vehicles during rental and returns. It can be good here to plan at least two people per time slot (one person at the reception and one to take care of the delivery of keys and inventory).

 

You will also need staff to manage the marketing part (search for partners, development of website traffic), and the administrative (fleet management, pay, accounting, management of timetables, etc.).

 

 

Create the marketing plan of a car rental agency

 

If you create a franchised car rental agency, you can rely on the distribution strategy implemented by the network. Conversely, putting together a marketing plan for an independent car rental agency is not an easy task.

 

The main difficulty stems from the fact that most vehicle reservations are made remotely, especially when planning a trip.

 

In fact, although communication near the point of sale can help you capture part of the local demand and part of reservations at the last minute, to reach the heart of the market you will have to succeed in creating partnerships with travel agencies and reservation centers used by large companies.

 

At this level, the self-employed are strongly disadvantaged compared to the national networks:

 

·         your brand is unknown and it is difficult for a travel agency to recommend you to its customers without having reliable information on the quality of your service

·         For online travel agencies, such as voyages- for example, a partnership with a national network is attractive because it allows very quickly covering the whole of France with a range of services and standard prices (which is easy to integrate on their site). Conversely integrating freelancers on the site, would require adding a catalog of prices and different services for each company / city, which is much more complex and therefore less attractive.

 

However, you can consider the following actions:

 

·         Prospecting of SMEs likely to have needs during business trips

·         Canvassing of independent travel agencies

·         Internet advertising (rental related searches on Google and Bing for example)

·         Price Comparison Site Marketers

·         Etc.

 

Write the business plan of a car rental agency

 

Once you have gathered all the information mentioned in the previous parts, you can move on to writing the business plan of your car rental companies in Jamaica. 

 

A business plan is a complete document describing your project in detail: it contains a written part aimed at highlighting the strengths and risks linked to the creation of activity, and a financial forecast highlighting the need for financing and the profitability potential of your business.

 

Your business plan must not contain any flaws. It must show that your project is viable, from all points of view. And this is very important, because the business plan is used to convince the founders to follow you in the project.

 

Seek funding to open a car rental agency

 

Once your business plan is ready, you can tackle the last step to create a car rental agency: seeking financing.

 

You will first need an equity contribution (i.e. the money invested by the shareholders), you can then seek additional financing from a bank or a specialized establishment (especially if you wish to finance fleet by LLD or leasing).

 

Finally, also remember to find out about aid from the public authorities, depending on your situation, you may be able to benefit from a subsidy, a tax credit, or a reduction in charges.

Read also: THE WEDDING CAR: 5 RENTAL TIPS