How To Start A Car Rental Business

Updated On: September 20, 2022

The car rental industry is booming these days. People are interested in driving the latest models of vehicles and do not want to be stuck with an old one.

Moreover, people are also interested in driving different types of cars for other occasions. For example, they would like to drive a sedan for business meetings and an SUV for family vacations.

This is where starting a car rental business can be a great option.

Starting a car rental business is paramount for anyone who wants to be their boss, make a lot of money, and work flexible hours.

However, it is important to remember that this business is not a get-rich-quick scheme and requires a lot of hard work, dedication, and patience. Additionally, it is important to research before starting this business and have a solid business plan.

This guide will give you all the information you need to start your own car rental business. Let's dive in!

Looking For More Business Options? Check out these business ideas.

Learn The Basics of the Car Rental Business

To start a car rental business, you'll need to understand the ins and outs of the car rental industry. This includes knowing the different types of businesses within the industry and the various business models that car rental companies use.

You'll also need to be familiar with the different types of cars available for rent and the prices associated with each type of car.

Car Rental Business

With an initial understanding of the car rental industry, you can narrow your focus to a specific business model and target market.

Do you want to focus on luxury car rentals or economy car rentals? Do your research and find out what type of car rental company would best fit your needs. The following steps will provide more detailed information on how to start a car rental business.

Step 1: Decide The Car Types For Your Business

If you live in an area with many tourists, you may consider offering various car types for rent. Popular tourist destinations usually have a high demand for rental cars, so it's important to provide a wide selection to attract as many customers as possible.

If you're targeting a specific type of customer, such as business travelers, you may want to focus on offering a smaller selection of luxury and high-end cars.

A car dealership or a car rental company can help you decide which types of vehicles to offer for rent.

Franchise Car Rental Companies

Another option for starting a car rental business is to franchise with an existing car rental business.

This can be a good option if you don't have the time or resources to start a car rental business from scratch. When you franchise with an existing business, you'll be able to use their brand name and marketing materials.

You'll also have access to their fleet of cars, saving you a lot of time and money.

Independent Car Rental Companies

If you decide to start an independent rental car business, you'll need to purchase your fleet of cars.

You'll also need to create your marketing materials and build a customer base. This can be a more challenging option, but it can also be more rewarding.

You'll have complete control over your own business when you're an independent rental car company.


If you're interested in starting a car rental business but don't want to franchise with an existing company or purchase your cars, you can also work with a car dealership.

Many dealerships have relationships with car rental companies and can help you get started

You'll likely need to lease the cars from the dealership, which can be a more expensive option.

Step 2: Decide Your Target Audience

The dignified business person is renting a Mercedes for his out-of-town meetings. The frazzled parents are searching for an SUV to accommodate their children and all their gear for a cross-country move.

The college students are looking to cruise around town in something other than their dusty old hatchback.

When you're planning to start your own car rental business, you need to understand who your target audience is.

Determining your target audience is essential for several reasons. It will help you choose the right inventory for your business.

The persona of your target customer will also give you a good idea of what kind of marketing and advertising campaigns will resonate with them.

For a successful car rental business, the major key to success is to focus on a specific target audience and cater to their needs.

Step 3: Plan A Business Model

Car rental businesses are not like typical businesses. This is because the product sold is not a physical item but a service.

As such, it is important to plan out a business model that will be both user-friendly and profitable. A business plan is a vital document that describes the car rental business in detail.

It should include information on the company's products and services, business auto loan financing, marketing strategy, and rental contract terms.

The venture should be profitable, so it is important to calculate all costs associated with the business. This includes the cost of vehicles, fuel, maintenance, insurance, taxes, and fees.

It is important to have a solid business model before starting a car rental business. This will ensure that the company can generate enough revenue to cover all costs and still make a profit.

A well-crafted business plan will also attract investors and help secure financing. Below are some sections that should be included in the business plan:

Executive Summary

It is important to start with a company summary with any business plan. This should include the company's name, contact information, and brief description. It should also explain the company's mission statement and business goals.

Marketing Plan

All the great business ideas in the world will not amount to anything if there is no market for the product or service. As such, it is important to create a marketing plan to reach the target audience.

The marketing plan for the vehicle rental business should include advertising, public relations, and promotions. It should also detail the company's pricing strategy.

Bios Of Core Team

Any car rental business plan should include a section on the people who are running the company. This should include information on the management team, board of directors, and advisors.

Step 4: Register Your Business With The Government

It is a very crucial step to register your business with the government. This will help you stay on the right side of the law and avoid any legal trouble in the future.

You will need to get a business license from the government and pay all the necessary taxes. Many car rental services are also required to have a special permit from the government to operate.

Registering LLCs and corporations is also a good idea to protect your assets in case your business is sued.

If you are planning on hiring employees, you will also need an Employer Identification Number (EIN) from the IRS. The solo entrepreneur can get by with just a Social Security number for tax purposes.

Step 5: Get Insured

Another step to starting any business is to ensure that your company is sufficiently insured. This protects you, your employees, and your customers in an accident or other mishap. You'll need both liability insurance and collision coverage for your vehicles.

You may also want to consider purchasing additional insurance such as gap coverage, which covers the difference between what is owed on the car and what the insurance will pay in the event of a total loss, and non-owned vehicle coverage, which protects you if one of your customers has an accident in a rented car.

As with any business that owns vehicles, you'll need to insure them against damage and liability. It will be important to have sufficient coverage to protect your business in an accident.

Once you have the necessary insurance, you'll need to obtain a business license from your city or county. This is typically a simple process and can usually be done online. You'll also need to register your business with the state where you operate.

Step 6: Get Funding

Although starting a car rental business with just a few thousand dollars is possible, most companies will require more funding than that. If you don't have the necessary funds, you may need to take out a loan or look for investors.

Many car rental businesses use loans from banks or other financial institutions to get started.

 You may also be able to get a small business grant from the government. However, these are usually only available to businesses that serve a specific purpose, such as promoting economic development in disadvantaged areas.

Outgoing expenses for small businesses include:

  • Employee wages
  • Rent or mortgage payments
  • Insurance
  • Utilities
  • Office Supplies
  • Advertising and marketing
  • Repairs and maintenance

You can also get external funding from friends, family, or venture capitalists. With the right business plan, it may be possible to get financing from these sources.

Various online platforms connect small businesses with potential investors.

Step 7: Open A Business Bank Account

It is very important to keep your personal and business finances separate.

This will make tracking your expenses and income much easier and make your business look more professional. Most banks offer special accounts for businesses, and many have special features and services that can be helpful for small businesses.

For example, some business bank accounts offer free or discounted merchant services, such as credit card processing.

This can be a great way to save money on transactions. Business loans are also available through many banks. A separate account can also help protect your assets if there are legal disputes.

Some examples of business accounts include:

Kabbage Checking

Kabbage offers a checking account designed specifically for small businesses. There are no monthly fees, and you can get free ATM withdrawals.

Unlimited transactions are also included. If your business accepts credit cards, you can also get free processing. Kabbage is fantastic for starting companies, as there are no minimum balance requirements.

Chase Business Checking

Chase offers a business checking account with many features designed to help small businesses.

For example, you can get free online invoicing, bills, and person-to-person payments. There is also no monthly service fee, and you can get free cash deposits.

Many small businesses find Chase a great option, as they have a large network of branches and ATMs.

Mercury Business Bank Account

Mercury offers a business checking account tailored to small businesses. They offer free online invoicing and unlimited transactions. You can also get free cash deposits and no monthly service fees.

Mercury is a great choice for businesses that want the convenience of online banking without having to pay any monthly fees.

All the while, this account also offers a suite of other powerful business banking tools.

Step 8: Get The Right Location To Start Your Business

The success of your car rental business will largely depend on its location. You want to ensure that you are in a high-traffic area, such as near an airport or a busy downtown area. You also want to make sure that there is plenty of parking available.

If you are in a small town, you may want to consider renting a space in a larger city. This will give you access to more potential customers.

It is a wide industry, so you must be careful when choosing the right location. You can also get the help of a real estate agent to find the perfect place for your business.

Step 9: Get Rental Contracts

Once your business is set up, you must get rental contracts. These can be found online or through a car rental company.

Make sure that you read the contract carefully before signing it. This will ensure that you understand all the terms and conditions.

Once you have a contract, make sure that you keep it in a safe place. For a legal business entity, please consult with your business lawyer.

Car Rental Agreements

You should also have a business insurance policy to cover all the liabilities. Having all the legalities in place before starting your business is very important.

There are many different types of car rental contracts. Some will allow you to rent for a set period, while others will let you cancel anytime. Make sure that you understand the terms of the contract before signing it.

If you are not sure, ask a lawyer to look it over. You last want to get into a legal dispute with your car rental company.

The rental agreement must include:

  • The names of the parties involved
  • The dates of the rental agreement
  • The make, model, and license plate number of the car being rented
  • The agreed-upon rental rate
  • Mileage limit
  • Cancellation Policy
  • Late return fees
  • Security deposit info
  • The terms and conditions of the rental agreement
  • The signature of both parties

Each state has different laws regarding car rental contracts. Make sure you are familiar with the laws in your state before signing a contract.

You should also check with your local Better Business Bureau to see if any complaints have been filed against the company.

Step 10: Build Your Operations Team

You will need to hire employees to help you run your business. Starting, you may want to consider hiring a part-time employee or two.

As your business grows, you can add more employees. The number of employees you will need depends on the size of your business.

You will also need to train your employees on the policies and procedures of your car rental company.

Your operations team will need to do the following:

  • Handle customer inquiries
  • Process rentals
  • Prepare vehicles for rental
  • Make sure that all cars are in good condition
  • Update the fleet inventory
  • Ensure that all paperwork is in order
  • Collect payments
  • Handle customer complaints

Building an advisory board can also be helpful. This group of people can offer advice and support as you grow your business.

Your local Chamber of Commerce or Small Business Development Center can find potential advisory board members. You can focus on growing your business with the right team in place.

Step 11: Create Your Online Presence By Building A Website

The car rental industry is a great way to be your boss and make some extra income. If you're thinking about starting a car rental business, the first step is to create an online presence by building a website.

Your website should include your services, rates, and contact information. You can also use your website to accept online reservations and payments.

Investing in a good developer will save you time and money in the long run.

It is important to ensure that your website is user-friendly and easy to navigate. Although building a website may seem like a daunting task, there are many free and easy-to-use platforms, such as WordPress, that make the process simple.

Step 12: Get Started With Marketing And Advertising

Once you have built your website, it's time to start marketing and advertising your car rental business.

Use social media platforms like Facebook and Twitter to create buzz about your business. You can also use traditional marketing methods, such as print ads, radio spots, and TV commercials.

If you're on a tight budget, there are many free or low-cost marketing and advertising strategies that you can use to get the word out about your business. The fundamental goal of marketing and advertising is to generate leads and conversions.

Every rental car service is different, so it's important to experiment with other marketing and advertising channels to find out what works best for your business.

Step 13: Provide An Exceptional Customer Experience

While marketing and advertising are important, the most important thing is to provide an exceptional customer experience.

Your customers should have a positive experience from when they contact you to when they drop off their rental car.

You can provide a unique customer experience by offering competitive rates, being prompt and professional, and providing a clean and well-maintained rental vehicle.

If you provide a positive experience, your customers will likely return and recommend your business to others.

Some vehicle rental businesses also offer additional services, such as GPS rentals and car seats, to improve the experience for their customers. If you provide other services, promote them on your website and in your marketing materials.

Every little bit helps when it comes to delivering an exceptional customer experience.

Step 14: Be Prepared For The Unexpected

No matter how well you plan, there will always be unexpected expenses and challenges that come up when you're running a business.

A contingency fund will help weather the storms and keep your business afloat. It would help if you also had insurance to protect your business from liability.

You'll need commercial auto insurance if you're renting vehicles. You may need additional insurance coverage if you offer other services, such as GPS rentals. Researching and being prepared for the unexpected will help you avoid common pitfalls and keep your car rental business running smoothly.

Sometimes, the best way to learn is by trial and error.


Starting a car rental business can be very lucrative and rewarding with the right planning and execution.

Now that you know the ins and outs of starting a car rental business, it’s time to get out! Just remember to do your research, create a solid business plan, and find the right financing for your needs. You can be a successful car rental business owner with hard work and dedication.

No business is without its challenges, but with the right preparation, you can overcome anything that comes your way. To gain revenue and keep your business running smoothly, offer high-quality services and competitive rates.

By doing so, you’ll encourage customers to keep coming back to your company again and again.

Thanks for reading! We hope this article helped start your journey to owning a car rental business. All the best in your new venture!

About the Author

Colin Shipp is a marketer who has been working remotely full-time since 2015. He specializes in growth marketing, content marketing, online courses, and remote work. On he writes about strategies he is using in his own life.