How to start a car rental business (A 10 Step comprehensive guide)

If you want to delve into the auto industry, there are a lot of options, including setting up a car rental business. Here we will see how to start a car rental business without money.

But what do you require in order to get this kind of business off the ground?

There are numerous aspects to consider. However, if you take sufficient time to get ready and you follow your local and state guidelines, your path to a lucrative car rental business will be plotted out for you.

Starting a Car Rental Business

To assist you in starting a car rental business, we have created this comprehensive guide. Let’s dive in.

starting a car rental business in california
starting a car rental business

Step-1: Select a type of car rental business

Before you set up your car rental business, you have to determine the kind of business you want to start. There are several kinds of car rental businesses that you can set up including:

Own a franchise

  • Build your brand
  • Buy an existing business
  • Collaborate with a car dealership

Each of these options has its advantages and disadvantages. You need to find the model that works for you. Let’s take an in-depth look at each of them.

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If you settle for a car rental franchise, it means that you will buy the rights to leverage the brand name and business model of an already existing car rental business.

Options you can pick for a car rental franchise include Enterprise, Hertz, Dollar Thrifty, Budget, plus many others. There are pros and cons to franchising that you’d want to factor in before you make the leap.

One of the perks of an existing franchise is that it makes it easy to set up the business. While the cost of entry may be a bit steep, you benefit from the added support of a renowned and successful brand name.

There’s also counsel as you launch and expand your location. Furthermore, there’s the benefit of franchise financing options that will aid you in bearing the burden.

The downside to owning a franchise is that you give up some autonomy over the business. You also face some steep costs, that is, the initial franchise fee could be tens of thousands of dollars.

Additionally, the franchisor has some degree of control over your business moves, as each franchise location will most likely follow the same model. This means that the rules in New York are pretty much the same in Los Angeles with very little wiggle room.


The next option for starting a car rental business is setting up an agreement with a car dealership. This agreement will enable you to offer rentals to customers when they are having their cars repaired.

This kind of car rental business presents a very constricted pool of clients to work with. However, you also don’t need a fleet of cars to start off. This can reduce the initial cost of funding your business.

Independent small business

One of the perks of setting up your own small business is not being bound to anyone. You have the freedom to make decisions that seem fit to you and your business.

However, with this additional freedom comes more responsibility. When you are the sole owner of a business, you are the one on the line for all the problems that the business may have.

In this option, you’ll have to set up your brand from scratch and draw in customers. This is while battling it out with the big names. Furthermore, you require a sizable cushion of cash to enable your initial purchases and operations.

Existing business

If you don’t fancy the idea of building a business from scratch, but don’t want the restrictions of a franchise, then consider purchasing an existing car rental business. This is of course if the owners are selling.

The advantage of purchasing an existing car rental business is that most of the fundamental business structures will already be in place. There’s also going to be a loyal customer base.

One of the drawbacks of buying an existing business is the research that it calls for. Furthermore, you’ll need to determine whether the business is successful because it meets a market need in an underserved market, or whether its success relied on relationships set by the previous owner.

How to start a car rental business
How to start a car rental business

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Step-2: Find out your target audience

Another factor that you’ll need to figure out when considering setting up a car rental business is the kind of customer that you intend to serve.

Your rental car business’s target audience could be:

  • Tourists
  • Loaner cars for auto mechanics or car dealerships
  • Long-term rentals
  • Short-term rentals for travellers

The first step is determining whether, in fact, there is a market need for the business. After that, you should establish who your target demo is in relation to your location as well as the needs of the local population.

Once you have established this demo in mind, you will be better informed when making your business plan, devising marketing techniques, and more.

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Step-3: Come up with a business plan

Once you have established the kind of rental car business to set up, and the market that you’ll serve, you are ready to come up with a business plan. A business plan is important for both you and any prospective partners or investors that you may work with in the future.

When coming up with a business plan, you’ll want to outline the steps to transforming your idea into a lucrative company.

This will entail outlining the kind of car rental business you want to start, the services and products you’ll offer, the fees that you’ll charge, how much of your personal funds you plan on injecting into the business, how much funding you need, a description of your marketing plan, and the financial projections for the coming years.

Take your time figuring out all of these steps. You will be creating a roadmap or blueprint that you will be consulting all through the startup phase of your car rental business to avoid deviating from the track.

start a car rental business
start a car rental business

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Step-4: Get the business registered and licensed

Once the internal work is done, it’s time to go through some external processes so as to legally set up your company. These processes include picking a business entity and then registering it with the state where you’ll operate your business.

The particular registration process may vary depending on the state you’re in, but it can be carried out online via your chamber of commerce or secretary of state. You just need to fill the required forms and pay a nominal fee.

Some typical business entities include sole proprietorships, corporations, and LLCs.

A sole proprietorship is the simplest entity to set up. This is because it doesn’t have to be registered at all. However, it is not the most ideal choice when starting a car rental business. This is because you will be exposing your personal assets in the event that legal action is taken against your enterprise.

A corporation or LLC will cushion this risk and separate your personal assets from your business.

Afterward, you’ll need to get the required business permits and licenses through your local and state agencies. If you’ve not sought the services of a business attorney, this might be a good time to do so. They will ensure that you are licensed properly and ready to operate a car rental business.

Finally, you should get the appropriate business insurance to ensure that your enterprise is covered in the event of natural disasters, accidents, and more.

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Step-5: Consolidate your finances

You’re almost about to open the doors to your business, but before you do that, ensure that you consolidate all your finances. Different kinds of businesses demand different amounts of upfront costs.

In the case of the rental car business, you’ll probably have high startup costs. These will cover buying a fleet of cars, leasing a storefront and lot, employing mechanics, and ensuring the whole operation.

a. Set up a bank account and credit card

Even when you are using your personal funds to set up this business, you want to set up a different business checking account plus a business credit card.

Once you do this, ensure that you only carry out business-related transactions using these accounts. This will come in handy when you are filing your taxes. It will also set a boundary between your personal assets and your business in case of a lawsuit.

Additionally, you’ll want to get an employer identification number (EIN). This is like your business’s social security number. This number will come in handy when opening your business bank accounts. It will also aid you in building your business credit, which will be required when you look for outside funding.

b. Seek outside funding

In addition to your personal funds, you can seek outside funding to bring in additional money.

There are different kinds of business loans to pick from- from term loans to equipment financing to lines of credit. Ensure you find the right kind for your business.

A business auto loan can be a great alternative when looking to finance your fleet of cars. Broad equipment financing can help you get computers and other gadgets that your business will need to operate. This kind of financing is usually easier to secure because the equipment you purchase with the loan also acts as collateral.

how to start a car rental business without money
How to start a car rental business without money

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Step-6: Determine the right location

Once you have all your finances in order, it’s time to determine where you will operate your business. There are a number of factors that will influence this decision. The main factor is the size of the property and how close it is to other businesses or services. For instance, if you’re considering working with business travelers, you’ll want to be situated near the airport.

Furthermore, car rental businesses do well in large cities like New York, Chicago, or Los Angeles because of the large volume of travellers and businesspersons.

Step-7: Come up with a rental contract

One of the key documents for a car rental business operator is the rental contract.

The rental agreement is a contract between the customer renting the car and the rental car company (you). It will cover liabilities, what occurs in the event of an accident, and a statement of who is responsible for what.

When creating a rental contract, seek the services of a legal professional with experience with enterprises in the rental car industry. They will help you create a rental contract that fully protects your business as well as your customers.

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Step-8: Form your operations team

Once you’ve secured space to run your car rental business, you need to find employees and build a support system to help you operate the business. You might require employees to manage the front office and answer phones, an accountant to keep track of your numbers, and auto mechanics to service your car fleet.

In addition to bringing in the right people, you also need to establish your responsibilities as an employer. These include determining the kind of insurance you’ll need to get for your workers.

Step-9: Build an online presence

A requirement for any car rental business is to set up an online presence so that customers can discover you.

In addition to setting up a business website, you should consider creating pages on business review sites like Google and Yelp, in addition to social media pages that your customers can reach your business with queries or leave reviews for potential customers to discover.

This will help to grow your business’s brand and bring in new customers. After all, if your company is not known, you shouldn’t expect to get much business.

Step-10: Give exceptional service

All of the hard work may be behind you, but your work is not yet over. In order to have your business make profits, you need to bring in and retain customers. To achieve this, you’ll need to give your customers a top-notch product, great customer service, and establish a strong relationship with the local community.

If you offer exceptional service that people can count on, word will get around and you will be raking in profits in no time.

How to start a car rental business
Asian man at car rental receiving key

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When trying to start a car rental business, you might be overwhelmed by the number of steps that are needed and the details that must be accounted for. However, with some patience and a dash of attention to detail, then you can fulfill your goal of starting a car rental business.