Is Car Rental Business Profitable?

Is Car Rental Business Profitable?

Now that we’ve been through ‘How to Start a Car Rental’ and ‘Things to Follow Before Starting a Car Rental’ ‘you may be wondering if a car rental business is profitable; this is a question anyone looking to start a business should ask themselves.

The Market

A car rental business offers cars for hire within a short period of time, usually for less than 12 months. Rental cars are hired daily, weekly, or monthly depending on the renter’s preference. Car rentals mostly make money from the general use market; this includes tourism which greatly contributes to the rental industry as many tourists rely on rentals to get about.

The profitability of a fleet of vehicles depends on the economy as well, especially now with the COVID-19 pandemic affecting most businesses. However, the rental industry still has a future, many people rely on transport, and rented vehicles are safer than public transport.

The profitability of a car rental business

Car rentals usually hold a car for about 2 years after which they sell the vehicle and replace it with a newer model. A rental car is profitable if it has been booked 72% of the time within the 2 years of use. The maximum usage of a vehicle can easily be achieved with a good marketing strategy.

Also, keep in mind that as a business owner you need to make enough revenue to cover all costs such as insurance, maintenance, employee salaries, and more. You can achieve that by making sure the fleet of cars runs a mileage of 60,000 miles each; this is the usual mileage warranty provided by the car manufacturers. In simple words, the more the car is used, the better.

There are other ways you can increase the profit gained by each car and that is by including extras. You can offer additional fees for prepaid fuel, GPS, one-way trips, delivery of the rental to the customer’s preferred location, etc. Remember, profit also depends on the rate at which you offer your vehicles for hire, and that depends on the level of competition within your area.

Other factors that can affect profitability are the location of your business, the variety of vehicles in your fleet, the car models, fleet management software, digital marketing, app or website, and more. If you are thorough in running your business, you can easily reach a profit margin of 5% to 10%.

To conclude…

A rental business usually starts with one or a few cars, and from that, it has the potential to grow into a larger business with a bigger fleet if things are followed through well. If you have a strong marketing strategy and good customer service you can easily build a loyal customer base and even reach new customers.

The demand for rentals may have seen a decline with the recent COVID-19 pandemic however, this is not an industry that will die down. Many people rely on rentals therefore, the car rental industry is highly adaptive and will persevere. So, the answer to ‘is a car rental business profitable?’, is yes!

If you are interested in starting a car rental business, Navotar has all the digital resources you will need. From website development to fleet management software and digital marketing solutions, Navotar has got you covered. Visit our website for more information.

 

 

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