Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on November 24, 2021 Updated on November 27, 2023
$48,050 - $97,300
$137,000 - $1.5 million p.a.
Time to build
$14,000 - $150,000 p.a.
People are always going to travel, and many will need a vehicle while on the road, which means a car rental business has steady demand and can be a lucrative entrepreneurial venture. It’s a large and growing industry, and if you’re able to capture just a tiny sliver of the $100 billion global market you’ll do just fine.
But of course, you’ll have to work hard and be patient. It’s crucial that you arm yourself with the relevant knowledge, as detailed in this step-by-step guide, before you set out on the road to car rental business success!
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
Starting a car rental business, just like every entrepreneurial journey, has its pros and cons. You need to carefully consider these to decide if a car rental business is right for you.
High Demand – Steady demand from travelers and people getting car repairs
Profitable – Sizable fleet can mean big money
Simplicity – People pay to use your cars
Startup Costs – A fleet of cars is a huge up-front expense
Maintenance – Need to keep your fleet road-ready
Damage – Accidents happen
Car rental industry trends
The US car rental industry has recovered strongly and surged past pre-pandemic levels.
The broader economy has a direct impact on car rentals, as a recession means fewer business trips and vacations. When corporate profits are strong, companies spend more on business travel, boosting the car rental market.
How much does it cost to start a car rental business?
Startup costs for a rental business with a five-car fleet could be as low as $50,000 or higher than $100,000. The main expense is of course the cars themselves, and by starting with just two or three cars you could cut your costs significantly.
Setting up a business name and corporation
$150 - $200
Business licenses and permits
$200 - $300
$1,000 - $5,000
Business cards and brochures
$200 - $300
$1,000 - $3,000
Initial marketing budget
$500 - $1,000
Fleet of 5 cars
$40,000 - $75,000
Office location deposit
$2,500 - $5,000
$2,500 - $7,500
$48,050 - $97,300
How much can you earn from a car rental business?
The profit margin for a car rental business averages 5% to 10%, while the average daily rate to rent a car is about $100.
If you have 5 cars and rent them an average of 275 days per year, you’ll bring in revenue of $137,000 and see nearly $14,000 in profit, assuming a 10% margin. As your brand gains recognition and you expand to 15 cars, you may be able to rent them 300 days per year. This would mean annual revenue of $450,000 and $45,000 in profit. You could then begin to reinvest those profits, expand your fleet to 50 or even 100 cars and start making real money!
Assuming you maintain a 10% profit margin, having a fleet of 50 cars that are rented out 300 days in a year will bring in $1.5 million in annual revenue and a cool $150,000 in profit.
What barriers to entry are there?
There are a few barriers to entry for a car rental business. Your biggest challenges will be:
Startup Costs – Cars are expensive; you’ll have a large up-front cost
Competition – It’s a competitive market, takes time and $$ to build a brand
Related Business Ideas
If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
Now that you know what’s involved in starting a car rental business, it’s a good idea to hone your idea in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Why? Identify an opportunity
Research other car rental services in your area. Is there a type of car rental business that’s missing or rare? There may be no bargain rental service or luxury car rental service. You can also look for areas that have no car rental business. You’re looking for gaps in the market that you can fill.
What? Determine your products or services
First, you need to determine the types of cars you’ll offer. As a bargain rental service, you’ll buy less expensive cars. As a luxury service, you’ll need more expensive vehicles. Then determine what other services you’ll offer customers, such as pick-up and drop-off.
How much should you charge for car rentals?
Average car rental prices have increased lately due to increased demand and are averaging around $100 per day. Budget car rentals can be as low as $35 per day, while luxury rentals can be as high as $250 per day.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Who? Identify your target market
Your target market will depend on whether you choose a bargain car rental service, a luxury rental service, or somewhere in between. If you choose a luxury rental service, your target market will probably be professionals and executives, so targeting them on LinkedIn might be your best bet.
Where? Choose your car rental location
Selecting the right location for your car rental business is essential for attracting customers and ensuring its success. Look for a spot near a major transportation hub, such as an airport or a train station, that caters to both business and leisure travelers.
Consider accessibility and convenience, ensuring that the location has easy access to parking and is easily reachable by public transportation.
By strategically choosing the right location, you can establish a profitable and successful car rental business that caters to a wide range of customers and stands out in the competitive transportation industry. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
Step 3: Brainstorm a Car Rental Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Short, unique, and catchy names tend to stand out
Names that are easy to say and spell tend to do better
The name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for suggestions
Including keywords, such as “car rental”, boosts SEO
Choose a name that allows for expansion: “DriveNow Rentals” over “Luxury Auto Rentals” or “Sports Car Rentals”
Avoid location-based names that might hinder future expansion
Discover over 300 unique car rental business name ideas here. If you want your business name to include specific keywords, you can also use our car rental business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Step 4: Create a Car Rental Business Plan
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
Executive Summary: A concise overview of the car rental business, summarizing its goals, strategies, and potential for success.
Business Overview: Detailed information about the car rental business, including its mission, vision, and the specific niche it aims to serve in the market.
Product and Services: Clear description of the range of vehicles and services offered by the car rental business, including any unique features or advantages.
Market Analysis: Thorough examination of the target market, including demographics, trends, and potential demand for car rental services in specific locations.
Competitive Analysis: Evaluation of key competitors in the car rental industry, highlighting strengths, weaknesses, and opportunities to differentiate.
Sales and Marketing: Strategies for promoting the car rental business, acquiring customers, and maintaining a competitive edge in the market.
Management Team: Introduction to the individuals leading the car rental business, emphasizing their skills, experience, and contributions to the company’s success.
Operations Plan: Details on how the car rental business will operate, including logistics, fleet management, and customer service processes.
Financial Plan: Projections and analysis of the car rental business’s financial performance, including startup costs, revenue forecasts, and profitability estimates.
Appendix: Supplementary materials such as additional data, charts, or supporting documents that provide further insight into the car rental business plan.
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to car rental.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your car rental business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
Limited Liability Company(LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Personal: Self-fund your business via your savings or the sale of property or other assets.
Bank and SBA loans are probably the best options, other than friends and family, for funding a car rental business. You might also try crowdfunding if you have an innovative concept.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your car rental business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
Business Property: Provides coverage for your equipment and supplies.
Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
Worker’s compensation: Provides compensation to employees injured on the job.
Property: Covers your physical space, whether it is a cart, storefront, or office.
Commercial auto: Protection for your company-owned vehicle.
Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as Chetu, Bluebird, or Navotar, to help you with fleet management, scheduling, and payments.
If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
For your car rental business, the marketing strategy should focus on showcasing the convenience, variety of vehicle options, and exceptional customer service you provide. It’s about communicating how your services cater to different customer needs, whether for leisure, business, or special occasions. The goal is to position your company as the go-to solution for reliable and hassle-free car rental services.
Professional Branding: Ensure your branding communicates ease, accessibility, and quality service, from your logo to your online presence.
Direct Outreach: Establish relationships with local travel agencies, hotels, and businesses to offer partnership deals or corporate rental programs.
Digital Presence and Online Marketing
Professional Website and SEO: Create a user-friendly website that allows easy booking of rental vehicles, clearly displays your fleet options, and is optimized using SEO best practices for search terms related to car rentals.
Social Media Engagement: Use platforms like Instagram, Facebook, and Twitter to post about your fleet, special offers, and customer experiences.
Content Marketing and Engagement
Travel and Vehicle Tips Blog: Share articles about travel destinations, road trip tips, and advice on selecting the right rental car for various needs.
Customer Experiences and Reviews: Highlight positive reviews and stories from customers who have had excellent experiences with your service.
Informative Guides and Videos: Develop comprehensive guides or video content that help customers understand car rental processes, insurance options, and tips for a smooth rental experience.
Experiential and In-Person Engagements
Local Events and Sponsorships: Participate in or sponsor local events, trade shows, and travel expos to showcase your vehicles and services.
Open House Events: Host events at your location to engage with the community, offer test drives, and provide special one-day-only deals.
Collaborations and Community
Partnerships with Travel and Tourism Companies: Collaborate with travel agencies, tour operators, and event planners to offer bundled travel packages.
Community Engagement: Get involved in community activities and sponsor local events to increase brand visibility and community goodwill.
Customer Relationship and Loyalty Programs
Loyalty Rewards Program: Offer a loyalty program that provides discounts, free upgrades, or additional services to repeat customers.
Referral Rewards: Encourage existing customers to refer friends and family with discounts or reward points.
Promotions and Advertising
Targeted Advertising: Use digital advertising on travel and tourism websites, Google Ads, and social media platforms to reach potential customers planning trips.
Email Marketing: Send newsletters with travel tips, new additions to your fleet, exclusive offers, and company updates to keep your audience engaged.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your car rental service meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your car rental business could be:
Reliable discount rentals
The perfect luxury experience
Family owned and operated
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a car rental business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in car rental for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in car rentals. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
Step 12: Build Your Team
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a car rental business would include:
Customer Service – greet customers, make reservations
General Manager – hiring and firing, scheduling, fleet management
Marketing Lead – SEO strategies, social media marketing
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn or Facebook. You can also use free classified sites like Jobs and AngelList. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Step 13: Run a Car Rental Business – Start Making Money!
Car rentals are big business and getting bigger. It takes real money to get started and patience to start seeing significant profits, but you could grow to be the next Hertz! It’s a business that can offer you a nice lifestyle, and – a bonus if you’re a car lover – your choice of vehicles in your fleet. It might be a good idea to create a niche for yourself to jumpstart your word-of-mouth marketing.
You should now know all you need to get started, but there’s always more to learn. It’s time to hit the road and launch your car rental business!
Car Rental Business FAQs
Is a car rental business profitable?
A car rental business can be very profitable, although it can take some time to build a large enough fleet of cars and a good brand to make significant profits. It’s a $100 billion industry globally, so it definitely has potential!
Do I need a special license to run a car rental business?
There generally are no specific license needs for a car rental business, but different states and localities require various licenses and permits. Check with your state and local governments for requirements.
How should I buy cars for my car rental business?
You need cars that are reliable, but buying new cars is expensive. You should find reliable used cars and have them thoroughly checked by a professional to make sure they don’t have issues. Sometimes car rental services sell off part of their fleets, so buying those cars could be an option.
How long does it take to start a car rental business?
It will take you some time to find a location and to acquire enough cars to get started. You should be able to get up and running within three to six months.
How can I handle customer inquiries, complaints, and vehicle returns effectively?
To handle customer inquiries, complaints, and vehicle returns effectively, respond promptly, show empathy, offer resolutions, provide clear policies, and document interactions.
What marketing strategies can I use to attract customers to my car rental business?
To attract customers to your car rental business, establish an online presence, utilize online advertising, form local partnerships, encourage online reviews, maintain a social media presence, implement customer loyalty programs, and prioritize excellent customer service.
How to Start a Car Rental Business
Decide if the Business Is Right for You
Hone Your Idea
Brainstorm a Car Rental Business Name
Create a Car Rental Business Plan
Register Your Business
Register for Taxes
Fund your Business
Apply for Car Rental Business Licenses and Permits
Open a Business Bank Account
Get Business Insurance
Prepare to Launch
Build Your Team
Run a Car Rental Business - Start Making Money!
Car Rental Business FAQs
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