For many, car ownership is more of a burden than a convenience.
Between maintenance, insurance, and parking, it can be a hassle.
This is why car rentals have become increasingly popular.
You might be familiar with the app Turo, which revolutionized the way cars are being rented through the concept of a “sharing economy.”
Imagine a walk in the park - that’s how it is to rent a car in Turo.
The Turo existence shows that people can adapt to change if it's convenient for them.
To back our point, Statista data projects the number of users in car rental will reach 0.64 Billion by 2028.
While the demand is still surging as people are ready to let go of car ownership and prefer a car rental.
With being said, let’s see how you can start your car rental business.
Doing Market Research
Industry Analysis
Imagine you are a traveler who plans to visit a new place without local knowledge or connections.
How can your travel experience be enhanced in such a situation?
Similarly, in the car rental business, understanding your landscape is as important as having a local connection while traveling.
You can be misguided without both.
Learn the industry's health, potential, overall market size, and projected growth in the car rental sector.
Besides; analyze the sector and your competitors.
This lets you understand the competition around you and makes you well-prepared.
While doing so, consider these aspects:
- Number of competitors
- Their fleet size
- Variety of vehicles they offer
- Pricing strategies
Know about your Target Customers
People who wanna rent a car have different goals, problems, and affordability.
You can’t serve them effectively without knowing them.
And be sure whom you’re going to target - that’s your target audience.
Start by analyzing their demographics, such as age, income level, occupation, and travel habits.
Then,
- Know the types of vehicles they prefer
- How long they’ll be on the lot
- Their pain points
- How much they’ll pay
- What services do they like (child seats, GPS, etc.)?
Now, you have a better picture of them.
Competitive Analysis
Analyze your competitors, you’ll end up having many business strategies.
Let’s go one by one.
Pricing: Know the pricing they charge for different car types and duration. That’s how you find the gap and fit in.
Strengths and Weaknesses: Every business has strengths and weaknesses. They would probably hide them from you—to stay at the top.
Unique Selling Proposition (USP): People can choose your rivalries over your business. Find the cause and fix it.
There’s a saying: “Know before you leap.” As an entrepreneur, this relates much to you.
Market research can’t be fulfilled without covering all the aspects (industry analysis, target customer analysis, and competitors analysis.)
Missing one thing could cause huge setbacks.
Choosing Your Business Model
Every business runs on a specific model, and yours should be no different.
A business model outlines how a company runs, delivers value, generates revenue, and achieves its goals.
Types of business models you can consider?
Traditional Model
What exactly does this mean?
In this model, you'll manage the business traditionally. So you will own a fleet of cars and list them directly for your renters.
It is the typical model, where you'll manage the business traditionally. Meaning, that you’ll run your business without an online platform and interact directly with the buyer.
There’s no third party involved. It's just you (the business) and the renters.
Pros
- More control over pricing and brand identity
- Flexibility to target different customer needs with a diverse fleet
Cons
- Needs a larger initial investment to purchase vehicles
- You are responsible for the maintenance, repairs, and depreciation of the fleet
Peer-to-peer Car Rental Model
Turo's business model is a good example.
Don’t know how Turo works?
Turo runs on an intermediary model, where they don’t own any vehicles but help the owner and the renter connect with an online platform.
And they earn a commission out of it.
If you choose this model, you do exactly what Turo does. Owning an online platform, helps the renter and host to connect, and earn commission for the convenience you provide.
However, commission isn’t the only thing to generate revenue.
Pros
- Initial investment is lower compared to the traditional model
- Less responsibility for maintenance and repairs (falls on the car owner)
Cons
- Less control over the quality and variety of vehicles offered
- Reliant on building a strong network of suppliers and renters
Legal Aspects to Consider
Choosing a Business Structure
Imagine your business thriving, attracting investment, building trust with customers, and enjoying tax benefits.
That can only be possible via registering your business.
Talking about business structure, there are several ones to consider - and each comes with its own set of pros and cons:
1. Sole Proprietorship: Simplest to set up, but offers no liability protection for your personal assets.
2. Partnership: Good for co-owners, but also offers limited liability protection.
3. Limited Liability Company (LLC): Provides a balance between simplicity and liability protection.
4. Corporation: Offers the strongest liability protection but comes with more complex regulations.
Obtaining a License and Permit
To operate legally, your business needs various licenses and permits. And that varies—depending on your location (city, state, and country.)
Research the specific requirements in your area.
To give you such examples, such as a business operation license, a sales tax permit, and vehicle licensing.
Insurance
Insurance is crucial; especially for your car rental business.
You'll need comprehensive commercial auto insurance for your rental vehicles.
The types of coverages are listed below with an explanation.
1. Liability: If a renter causes an accident and injures someone or damages property, liability insurance steps in to cover the costs.
2. Collision: Collision insurance takes care of repairing or replacing your damaged vehicle.
3. Other potential damages: Depending on the specific policy, your insurance might extend to theft, vandalism, and even weather events.
Rental Agreement
A well-drafted rental agreement protects your business.
The agreement should clearly outline the rental terms and conditions.
No idea about that? Here’s the tip.
Consider adding the following ones and more:
1. Crystal Clear Rates: Outline your rental fees in a clear and concise way. This includes daily, weekly, or any other pricing structures you offer.
2. Fuel and Maintenance: Specify who is responsible for keeping the gas tank full and for routine maintenance checks.
3. Dispute Resolution: Establish a clear process for handling any disagreements that might arise during the rental period.
Building your Fleet
Confirming your Target Audience
We have seen this before. Could you recall?
If not, worry not.
Start by analyzing the whole market and choose the audience you want to serve.
By understanding who you are gonna reach, you can tailor your approach to connect with them better.
This includes your offerings, prices, marketing strategy, and all.
And if you opt for a P2P model like Turo, you not only need to consider renters, but also hosts (those who list their vehicles).
Fleet Size and Budget
Starting small is just right. You can expand later.
Allocate your budget for car acquisition with operational costs (insurance, maintenance).
Owning vs. Leasing
Owning - It offers long-term cost benefits but requires a higher upfront investment.
Leasing - This provides flexibility and potentially lower initial costs, but you are not the owner.
Choosing the Right Car
Consider factors like fuel efficiency, reliability, maintenance costs, and passenger/cargo space.
A mix of vehicle types (economy, mid-size, SUV) caters to diverse needs.
Note: Skip the last 3 steps if you are looking to start a Turo-like business.
Consider Location, Operation, and Technology
Location Matters
You can’t start off anywhere—if you really consider the customer convenience and your business success.
Before probing about the location, check whether the location you choose has accessibility, visibility, and competition.
Let’s break down further.
Accessibility: Close to airports, train stations, or major highways for easy pickup and drop-off.
Visibility: A central location with good signage to attract potential customers.
Competition: Research existing rental companies in the area to avoid oversaturation.
Pro Tip: Consider partnering with hotels or travel agencies in the area to gain referrals.
Operation for Smooth Running
Without business operations—there is no business at all.
The operation encompasses everything from marketing to customer service for managing your fleet and rentals.
It should go flow without any hassle.
Beyond that, streamline the operation if possible with some tools.
How can you do that?
Fleet Management: Develop a system for tracking vehicle maintenance, repairs, cleaning, and availability.
Rental Process: Create a streamlined process for reservations, agreements, payments, and pick-up/drop-off procedures.
Customer Service: Train staff to provide excellent customer service, address inquiries efficiently, and resolve any issues promptly.
Marketing & Sales: Develop a marketing strategy to target your audience. We’ll see this further in the coming section.
Embracing Technology
It’s not for everyone.
But depending on the model you choose, you certainly need it.
Say for example that you are planning to go for a P2P model, it is irresistible to ignore the online platform (web and a mobile app).
Or if you are inclined to a traditional approach, you can consider software or a basic website - that can be used to manage reservations, vehicle availability, and other tasks.
Identifying who you are and how you want to proceed with your car rental business is the key.
That guides you right?
Market your Car Rental Business
Simply having a car rental business isn’t enough.
You need to make sure your target audience knows you exist and why they should choose you.
That's where marketing comes in.
Marketing can be done in two ways: traditional marketing and digital marketing.
Based on which works, you can cling to any approach.
Wondering where to start? Why struggle when your competitors are on your side?
Know what strategy they are using. This is to give you a better understanding of the possibility - not to copy and paste it.
The other important thing is to target the right audience. So that you get a better ROI (return on investment).
There are two approaches you can go for,
Traditional Marketing Strategies
- Print Advertising (Newspapers, Magazines, Brochures)
- Outdoor Advertising (Billboards, Bus Ads)
- Public Relations
- Networking
Digital Marketing Strategies
- Google Business Profile
- Search Engine Optimization (If you have a website)
- Search Engine Marketing (If you have a website)
- Social Media Marketing (SMM)
- Email Marketing
- Mobile Marketing (If you have a mobile app)
Customer Acquisition Strategy
The customer is the only source to make money. Without them, your business is just an idea yet to be monetized.
To acquire the customers, you need to attract them.
After researching, we gathered some offers that can influence your customer interest.
1. Competitive Rates and Packages: Offer competitive pricing and package deals (e.g. weekend specials, long-term rentals) to attract customers.
2. Loyalty Programs: Offer discounts, free upgrades, or other incentives to repeat customers.
3. Partnerships: Partner with travel agencies, hotels, and local businesses for referrals.
4. Excellent Customer Service: Deliver exceptional customer service and don’t leave any negative impression.
5. Manage Online Reputation: Actively monitor and respond to online reviews, and address customer concerns promptly, this showcases you care about them.
Tailor your Pricing Strategy
Better pricing does its kind of marketing.
We already see about offering competitive pricing and packages, right?
Strategies are infinite if you try to count.
Worry not.
We’ll contemplate this better, and create the best pricing approach.
How much are the renters getting charged?
To know this, for a moment, put yourself in the renter's shoes, and check for the pricing like when they do while renting
This helps you to come up with the right pricing.
Let’s see the strategies you can integrate.
Demand-based Pricing
Whenever there’s a demand, there’s an opportunity. Whenever there isn’t any demand, there lies an opportunity, too.
Can’t grasp it?
During peak hours, demand for car rental goes up. But this sudden demand results in lower supply. In this situation, the renter is ready to pay the price - even if you’re a bit pricy.
This is so-called surge pricing. You earn more when there is a peak hour.
But what if the opposite happens?
Give offers. This ensures all your vehicles are utilized effectively.
Now you get why we say there is opportunity even when there is no demand.
Fixed Pricing
For people renting a car for a long period, offer fixed (daily, weekly, or monthly rates.)
Why specifically?
Since people who rent a car expect transparency and predictability, a fixed pricing strategy works best for them.
Package Deal
Offer more than a vehicle.
Create packages that combine car rentals along with other services (e.g. GPS, insurance, additional driver).
This can incentivize renters and generate additional revenue.
Discount and Promotion
No businesses can get away from this stage.
We’re talking about offering a discount.
Besides, this strategy is a go-to option for many - to acquire users for their business.
Offer discounts for early bookings, on off-peak seasons, and conduct a loyalty program.
Doing this can persuade price-sensitive customers and fill rental gaps during slower periods.
Growth and Expansion Strategy
Expanding your Fleet
People need different vehicles for different purposes. That’s right.
For example,
- Economy cars for budget-conscious travelers.
- SUVs and vans for families or road trips.
- Luxury vehicles for special occasions or high-end clientele.
- Eco-friendly options like electric or hybrid cars attract environmentally conscious customers.
Based on your target audience, expand the fleet with the vehicle your audience prefers.
Scaling Further with Technology
If you’re starting or staying with the traditional approach, technology isn’t a thing to bother about.
But, as we discussed earlier starting a Turo-like business is your way to scale, then this section leads you right.
Like Turo, you have to follow the P2P model.
Apart from the model, you need an online platform, a website, and a mobile app.
What do you need?
- Web app for renters and host
- Mobile app for renters and host
- Admin panel - For you
Building an app involves two processes: custom development and a readymade solution.
Get the breakdown of each process.
Custom Development
It is the process of building an app from scratch (Starting from zero). To make it clearer, let's go through its steps.
- Planning and requirement gathering
- Design and prototyping
- Development and implementation
- Launching and maintenance
There are many businesses providing custom development services. You can inquire and start developing the app.
But you have an alternative to think of.
That is a readymade app solution.
Readymade App Solution
Readymade app solution is a pre-developed app solution that comes with in-built features and functionalities.
So, developing it from scratch is not a need.
Besides, it is cost-effective and offers a quick launch compared to custom development.
Before deciding, know about custom development and readymade solutions and decide further.
If a readymade solution is your option, there are several providers; but don’t waste your time searching for them.
Cause you got us!
Our readymade car rental app solution enables you to launch your car rental app like Turo quickly with ease.
How do we differ?
- Best UI & UX
- Free supports (white-labeling, app launch, server installation, app resubmission support)
- Transparent pricing
- Served 500+ clients
What do you get?
- Web app - Car owners and renters
- Mobile app - Car owners and renters (Android & iOS)
- Admin panel (For effective business management)
Know more about our solution by chatting with us or scheduling a free demo.
End Note
You should decide, whether to choose the traditional way or the peer-to-peer business model to start your car rental business.
Both bring different requirements, budgets, and strategies.
So the choice ultimately depends on your goal.
While writing this blog, we didn’t approach this blog focusing on a specific model - but let you grasp an overall idea and figure out the model yourself.
We hope you understand and choose the model that works for you.
Launch your Car App with Us!