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How to Start a Profitable Car Rental Business: A Step-by-Step Guide

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Free Car Rental Business Plan Template

March 02, 2024

11 Min Read

start a car rental business
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Writing a business plan?

The car rental industry offers plenty of business opportunities, and starting a car rental business could be your dream ride. With careful planning and following local regulations, you can navigate the process smoothly.

But why should you think about starting your own car rental business?

Because the future looks bright! Experts think that by 2028, more than 51 million people in the US will be renting cars. That’s a massive market just waiting to be tapped.

So, how do you get in the game and start a successful car rental business?

This guide is your roadmap. We’ll cover everything you need to know to shift your car rental dreams into reality. Let’s get started!

Car Rental Industry Outlook

The car rental industry is zooming ahead and is expected to reach $134 billion by 2027.

But what’s driving this growth? Two key trends:

Tech takeover

AI, smart parking, and even driverless cars are changing the game, helping companies stay competitive and potentially cut costs.

Car rental businesses that use the latest tech, meet international service standards, and take complete control of the rental experience will be the leaders. Travelers want it easy, and tech is the answer!

Changing preferences

Ditching car ownership, people opt for flexible options like subscriptions, self-drive rentals, and car/ride sharing. Companies that offer diverse vehicles and prioritize customer loyalty will lead the pack.

People are realizing that owning a car is not always worth it because of the costs, maintenance, and insurance hassles.

On the other hand, car rentals offer freedom without the headaches, with options for drivers, self-drive, short-term needs, and even long-term subscriptions.

What cars are popular?

Economy cars are still king (33% of the market in 2022), thanks to their affordability and size. But SUVs are rising stars, expected to grow the fastest (11.5%) because they’re spacious, safe, and comfortable for families and road trippers.

So, now that you know about the car rental industry insights let’s see how you can start this business in 8 easy steps.

1. Select a car rental business type

Before you rev your engine on a car rental business dream, deciding your path is crucial! Each model has its perks and pitfalls. Let’s explore your options:


Joining a major franchise can streamline your entry into the car rental business. It’s like joining a team with a big name, such as Hertz or Enterprise, instantly tapping into their brand and business model.

This path makes starting up easier because the brand is already known and loved. However, the initial franchise fee can be pricey, and you’ll have less control over your individual business decisions.

Car dealership

Another route is partnering with a car dealership. This means you offer rental cars to customers who are in for repairs.

It’s a smaller market, requiring fewer cars, which can be easier on your budget.

Independent small business

If you’re in complete control, starting your own car rental business brand is the way to go. You’re the boss from day one but remember; you’ll be handling everything – from making your brand known to find customers.

It’s a lot of work, and you’ll need a good amount of start-up cash.

Existing business

Lastly, buying an existing rental business could be a smart move. It’s like taking over a shop that’s already up and running.

You skip the early struggles but make sure you understand the business inside out to keep it successful.

2. Create a business plan

Your car rental business plan is your roadmap to hitting the open road and making a profit. It’s where you decide on your fleet, nail those operational details, and design a marketing strategy that’ll have customers revving their engines.

A great plan should cover:

  • Your Fleet: What kinds of cars will you offer? What makes your selection stand out?
  • Smooth Operations: Figure out staffing, vehicle maintenance, location logistics…the works!
  • Marketing that Matters: How will you reach potential renters and beat out the competition?
  • Know Your Rivals: Who else is in the race and how will you leave them in the dust?
  • The Bottom Line: Project your finances – you’re here to turn a profit, not just offer joyrides!

The best part? The planning process forces you to understand your ideal customer. Are you catering to business travelers? Adventurous tourists? Knowing them puts you in the driver’s seat.

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3. Figure out financing

Starting your car rental business is exciting, but don’t forget the financial map! Start-up costs vary depending on location, fleet size, and services offered. In general, it can cost anywhere between $99,000 and $470,000. 

So, how do you turn that dream into reality? Here are your funding options:

  • Bank Loans: A business auto loan from a bank is the classic choice but requires a solid plan and strong credit.
  • SBA-Guaranteed Loans: The Small Business Administration can be your wingman, helping you secure that bank approval.
  • Government grants: Explore government programs that might fuel your entrepreneurial journey.
  • Friends & Family: While borrowing from loved ones can be tempting, be cautious. Having clear legal agreements in place protects everyone involved.
  • Crowdfunding: Platforms like Kickstarter let passionate donors support your vision.
  • Savings & Assets: Bootstrapping your business with personal resources is always an option.

For the car rental business, bank and SBA loans are strong contenders, along with friends and family (with proper legal guidance). Crowdfunding can be an excellent fit for innovative concepts.

4. Find the right location

Location, Location, Location! Remember this old real estate mantra? It applies to car rental businesses, too! Your location is your lifeline, connecting you to your target market.

But choosing the perfect spot isn’t just about finding space; it’s also about understanding how your location will shape your clientele.

There are two main approaches:

Location dictates audience

Let the available space guide your target market. A prime spot near an airport might attract business travelers, while an industrial zone could be perfect for a commercial car rental business.

The target market sets the location

Identify your ideal customers first, then find a convenient location that serves them best. It could be close to their workplaces, tourist attractions, or residential areas.

Even if you cater to a specific audience, consider offering a unique selling proposition like luxury car rentals to stand out from the competition.

Before you start renting out cars, let’s get the paperwork out of the way. You’ll need to make sure your car rental business is set up legally.

Our business startup checklist has all the details, from picking a name for your business to getting the right licenses.

Here’s a quick look at what you’ll need to get started:

  • Registering a Business Name
  • Applying for the right licenses and permits
  • Choosing your business structure
  • Getting the right insurance and setting up how you’ll handle payments
If you think numbers aren’t your game, consider hiring an accountant or tax advisor. They can save you time by handling all the necessary paperwork.

6. Get the necessary licenses and permits

Missing required permits and licenses can lead to hefty fines or even shutdowns. So, car rental companies must have all the permits and licenses before they begin.

Here are some essential legal requirements you might need for your vehicle rental business:

Vehicle Renting License

This DMV-issued permit is your green light to rent out vehicles. The process varies by state but typically involves an application and a fee (around $100).

Business License

Every state requires this to operate any business. Again, the process varies, but expect another application and a fee (around $50).

Driver’s License

Depending on your fleet, you might need a Commercial Driver’s License (CDL) for larger vehicles like vans or buses.

Local Permits

Check with your city or county for additional permits specific to the car rental business.

Regulations vary by state. Always check with your local agencies and relevant state departments to ensure everything is in order before starting your car rental business.

7. Get a business insurance

Getting your cars out there is thrilling, but smart insurance is your backup plan. You’ll likely need what your state requires for each vehicle, but here’s why you might want more:

  • Commercial Fleet Insurance:  Protects your whole fleet from damage and accident claims. It’s ideal if you have several cars.
  • General Liability Insurance:  This covers you if your rental car causes injury or property damage to someone else.
  • Excess Liability Insurance:  An extra layer of protection for those big, unexpected claims that could go beyond your other policies.

Remember, most states require renters to be at least 21, and some require 25 for insurance

Protect yourself with a clear rental contract. This outlines who’s responsible for what if something unexpected happens. Get a lawyer specializing in car rentals to review your contract for maximum protection.

8. Build a core team

The success of your car rental business hinges on its people. So, buckle up for a smooth ride with these key steps:

Know Your Needs

Firstly, identify the roles you need to fill. Do you require customer service representatives, rental agents, maintenance staff, or a combination?

Outline their specific responsibilities to ensure everyone understands their part.

Cast Your Net

Post your job ads on relevant platforms like job boards, company websites, and social media. Consider local newspapers and industry publications for broader reach.

Beyond the Resume

Skills are important, but don’t forget soft skills! Assess candidates for communication, problem-solving, customer service magic, and teamwork spirit.

Background checks and reference verification ensure you’re hiring the right people.

Verify & Select

Conduct thorough background checks to ensure references and qualifications are accurate. Offer positions to the candidates who best align with your needs and company culture.

Welcome Aboard

Extend offers to your chosen candidates and provide a comprehensive onboarding process. Train them on company policies, procedures, and software systems.

9. Outline a marketing plan

Ready to put your car rental business on the fast track? Let’s dive into some key tips for drawing in customers and keeping them hooked:

Build Your Digital Showroom

Create a website that’s your online storefront. Show off your fleet, offer clear pricing, and let customers book directly. Make sure it’s search engine friendly to attract more visitors looking for car rental services. In addition, make sure it’s easy to navigate for a smooth booking experience.

Partner Up & Reach Further

Team up with online travel agencies and car rental business platforms like Expedia or Turo. Leverage their massive customer base and marketing reach to get your cars seen by more people.

Target the Right Drivers

Get in front of people already searching for car rentals in your area. Platforms like Google Ads and social media let you focus on location, demographics, and even the keywords potential customers use when searching.

Price-wise, not just cheap

Know your competition, then make your prices work to attract renters. Consider offering discounts for longer trips, deals during certain seasons, or those little extras like GPS that make life easier.

Good reviews = free marketing

Your happiest customers are your best sales team. Make it easy for them to share their love on Google, Yelp, etc. Show you care by responding to all feedback, whether it’s praise or a problem.

Team up with local businesses

From hotels to event planners, businesses in your community also deal with travelers. Work together on discounts or special packages – it’s a win for everyone!

Get Social & Stay Connected

Be active on platforms like Facebook and Instagram. Share beautiful photos of your fleet, promote offers, and engage with customers through contests and spotlights. Let your social media presence drive excitement!


The keys to success lie in preparation: market research, understanding your ideal customers, and handling those licenses and permits.

Add a solid business plan, smart financing, and a great website, and you’ll be well on your way to opening your car rental business.

Ready to dive deeper? Explore the car rental business plan template to streamline the process and get your business off the ground faster.  And remember, our guide is always here to help you navigate the road ahead!

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About the Author


Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more


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