Entrepreneur’s guide: Starting or buying a car rental business for sale

In a world where transportation plays a pivotal role, the necessity of owning a vehicle has gained significant importance. Despite the presence of options like Uber and trains,and You might had even assumed that with the convenience of purchasing vehicles online through platforms like Carvana, renting cars would no longer be necessary. However, that's not entirely accurate!

Many individuals still prefer the convenience of driving, whether for their daily commute or during vehicle repairs. This preference has led to a thriving car rental industry, making it an opportune time to consider starting or acquiring a car rental business for sale. However, one common question that arises for aspiring entrepreneurs entering this industry is: “How do rental cars charge per day"

In this article, we will delve into the essential factors you should be aware of when embarking on the journey of launching or purchasing an exotic car rental business. So, rev up your engines because we are about to provide you with valuable insights!

Is car rental business growing?

So, you're wondering if the car rental business is on the rise, before you wanna know how much do car rentals charge a day right? Very wise! Well, the short answer is yes, it's actually been steadily growing. According to research from Grand View Research, the global car rental market was worth about $98.14 billion back in 2020, and it's projected to keep expanding at an annual rate of around 4.6% from 2021 to 2028. That's a pretty healthy growth rate.

Now, why is this happening? One big reason is that more and more people are traveling for business and leisure. They're finding rental cars to be a super convenient way to get around, especially in those popular tourist hotspots.

But it's not just about travel. In many cities, owning a car can be a real hassle and expensive too. So, a lot of folks in urban areas are turning to car rental services as a cost-effective and flexible alternative when they need wheels.

And here's a cool twist - car rental companies are teaming up with ride-sharing services. This means they're providing vehicles to drivers who don't own their cars, which is expanding their customer base. Plus, some car rental businesses are offering long-term rental options, attracting both individuals and businesses looking for flexible transportation without the whole car ownership commitment.

To keep everyone happy, car rental companies are mixing up their fleets. You can find anything from economy cars to luxury rides and even electric vehicles. The tech side of things is pretty nifty too. Booking a rental car is a breeze with mobile apps and online platforms, which is especially great for those tech-savvy customers.

However, it's not all smooth sailing. There's some competition from ride-sharing services, and customers' expectations keep evolving. To stay ahead in this growing market, car rental businesses need to stay sharp, innovate, and keep their customers super happy while handling all the day-to-day challenges that pop up. It's a balancing act, but it can definitely be profitable when done right.

Is car rental business high risk? 

Let's explore the car rental business as an example. Recently, a Hellcat was sold on Craigslist after it was initially rented from an exotic car rental company, Drive3 Rentals. When the rental car wasn't returned on time, the company used GPS tracking to locate it. The buyer believed they had secured a deal at $26,000 but ended up with a bogus title.

This incident serves as a reminder that every business, including car rental, can have its share of risks and challenges. While not all car rental experiences are as extreme as this case, it's essential to assess and manage the potential risks involved, such as vehicle damage, late returns, or fraudulent activities. It's crucial to have proper safeguards in place, like insurance coverage and thorough screening of customers, to minimize these risks and ensure the business runs smoothly. So, to answer the question, yes, the car rental business can carry some level of risk, but with proper precautions and management, these risks can be mitigated.

How  do car rental charge per day? 

The question we've all been waiting for revolves around a critical aspect: financial considerations. Specifically, how do car rental companies meticulously determine their daily rates? In this complex and competitive industry, the acquisition of an existing exotic car rental business for sale can offer a substantial advantage. By taking over an established venture, you gain access to a proven blueprint, effectively reducing the arduous process of starting a car rental business from the ground up. Setting the right daily rates presents a formidable challenge – aim too high, and you risk driving potential customers away; set them too low, and your business may struggle to remain financially viable.

In this section, we will embark on an exploration of the intricate strategies employed by car rental companies to ascertain their daily rates. For the sake of illustration, let's consider a medium 7-passenger SUV (Group L4) such as the Nissan Pathfinder or a similar model.

Hertz (per 24 hours): Hertz, a prominent player in the car rental industry, typically averages rates ranging from $70 to $167 per day. After accounting for taxes and insurance, the final cost often falls around $150+.

Enterprise (per 24 hours): Enterprise, another major contender, offers rates averaging between $60.54 and $157 per day. Including taxes and insurance, customers can anticipate a final cost within this range.

Budget (per 24 hours): Budget, a renowned car rental company, provides rates averaging from $69.30 to $167 per day. Once taxes and insurance are factored in, the final charge typically falls within this spectrum.

It is worth noting that many car rental companies tend to cluster their rates around similar price points. Consequently, for those venturing into the car rental business, it is advisable to consider a ballpark rate that aligns with these industry standards. Nevertheless, car rental companies often employ additional strategies to enhance their revenue, such as offering various add-ons that customers can select to tailor their rental experience. To illustrate this, here is a screenshot of Hertz's add-on options, demonstrating the array of supplementary services available to customers.

Do rental companies buy or lease their cars?

This a one of the biggest factors when it comes to starting or buying a car rental business for sale, do you go buying a cars cash to cut down on monthly expenses or do you lease a car and save the cash for a rainy day…Well here is a little break down: 

Buying Cars:

Suppose a rental company is considering buying a mid-sized sedan to add to its fleet. The purchase price for this sedan is $20,000. When they buy a car, they own it outright, but they need to consider depreciation, financing costs, and other expenses.

Here are the financial details for buying the car:

Purchase Price: $20,000

Annual Depreciation Rate: 15% (a rough estimate for a car's annual depreciation)

Annual Financing Costs: $2,000 (interest on a loan if they finance the purchase)

Other Annual Expenses (e.g., insurance, maintenance): $3,000

Now, let's calculate the annual cost of owning this car:

Annual Depreciation: Purchase Price x Annual Depreciation Rate

Annual Depreciation: $20,000 x 15% = $3,000

Total Annual Cost of Ownership: Annual Depreciation + Annual Financing Costs + Other Annual Expenses

Total Annual Cost of Ownership: $3,000 + $2,000 + $3,000 = $8,000

So, the rental company's annual cost of owning this car is $8,000.

Leasing Cars:

Now, let's consider the leasing option. The lease payment for this sedan is $499 per month, which amounts to $5,988 per year.

Here are the financial details for leasing the car:

Lease Payment: $499 per month ($5,988 per year)

To determine whether buying or leasing is more cost-effective, let's compare the annual cost of ownership for buying the car ($8,000) with the annual lease cost ($5,988).

In this scenario, leasing the car is more cost-effective, as it incurs lower annual expenses compared to buying and owning the vehicle.

However, it's important to note that buying offers long-term ownership and potential resale value, whereas leasing provides flexibility and avoids a large upfront purchase cost. Rental companies typically consider their long-term business strategy, fleet size, and budget when deciding whether to buy or lease vehicles.

Now here is how many days you will need to rent a vehicle to break a profit using the above average rental cost at $150:

Leasing a Car:

Suppose a rental company leases a car for $499 per month, which is $5,988 per year. To make a profit that covers this annual lease cost, they need to calculate how many rental days they require at a rate of $150 per day:

Minimum Rental Days for Profit (Leasing) = Annual Lease Cost / Daily Rental Rate Minimum Rental Days for Profit (Leasing) = $5,988 / $150 = 39.92 days (rounded up to 40 days)

So, when leasing a car, the rental company needs to rent it for at least 40 days in a year at $150 per day to cover the annual lease cost.

Buying a Car:

Now, let's consider buying a car. The annual cost of ownership for the purchased car is $8,000. To make a profit that covers this annual ownership cost, they need to calculate how many rental days they require at a rate of $150 per day:

Minimum Rental Days for Profit (Buying) = Annual Cost of Ownership / Daily Rental Rate Minimum Rental Days for Profit (Buying) = $8,000 / $150 = 53.33 days (rounded up to 54 days)

When buying a car, the rental company needs to rent it for at least 54 days in a year at $150 per day to cover the annual ownership cost. In both cases, whether leasing or buying, the rental company needs to aim for rental durations that surpass these minimums in order to generate a profit. The choice between leasing and buying depends on factors such as upfront costs, flexibility, and long-term business strategy.

How many cars you need to start a car rental business? 

Buying a car rental business for sale can be a great investment. You not only acquire an existing inventory of vehicles but also gain an established business with a track record of sales. However, for those who are new to the industry and looking to start from the ground up, a common question emerges: "How many cars do you need to start a car rental business?"

You don't need a fleet of cars to enter the car rental business; in fact, you can begin with just one vehicle. Platforms like Turo provide an accessible entry point, allowing individuals to list their personal cars for rent. 

Simply acquire a suitable vehicle, ensure it's well-maintained and properly insured, and then create a listing on the platform, specifying details, pricing, and availability. By providing excellent service, maintaining your vehicle, and gradually expanding your offerings, you can build a reputation and grow your car rental business over time, all without the need for a large fleet upfront. 

This approach offers an excellent opportunity for those looking to enter the industry with limited initial investment. Once you get the idea and flow of what it's like owning a car rental business, you can easily expand your fleet and potentially establish your own rental lot. 

This progression often follows a natural evolution as you gain experience and grow your business. Starting with a single vehicle or utilizing peer-to-peer platforms provides a practical and cost-effective entry point, allowing you to test the waters and build a customer base. 

As your business thrives and financial resources become available, you can consider expanding your fleet, acquiring additional vehicles, and potentially establishing a dedicated rental lot to further scale your car rental venture. This phased approach offers the advantage of manageable growth while minimizing initial capital requirements.

Whether you're contemplating starting a car rental business from scratch or considering the purchase of an existing one for sale, the key to success lies in market testing and flexibility. Much like choosing the right vehicle to drive, the approach to your car rental venture should align with your comfort level and resources. You have the option to test the market by utilizing platforms to rent a car, gradually building your fleet as demand grows, or, alternatively, making the decision to acquire an established exotic car rental business. Ultimately, the path you choose will depend on your goals and the journey you wish to embark upon in the dynamic world of car rentals. The beauty of the industry lies in its adaptability, allowing entrepreneurs to tailor their strategies to suit their vision and comfort, ensuring a smoother ride on the road to success

Disclaimer: The information provided in this article is for general informational purposes only and should not be considered legal advice. The laws and regulations regarding business licenses may vary from state to state and are subject to change. It is important to contact your local state office to determine which licenses are required for any specific businesses. Additionally, please note that this article contains affiliate links and we may earn a commission from our affiliate partners or amazon links. If you are considering starting a business, it is recommended that you seek the advice of a qualified lawyer, business broker, or professional in your area. The information provided in this article is not a substitute for professional advice and should not be relied upon as such.