6 Steps to Start an Online Car Rental Business


Ever since Uber’s success, the market became aware of the fact that porting the transportation industry to the online environment is a highly profitable idea. It’s not just about the affordability of the online taxi services to the commuters but more about the massive increase in the scope of a single business entity due to the accessible nature of the internet and smartphones. No one might have imagined two decades ago that a USA-based taxi company (Uber) will have successful operations in over 190 countries.

Yet another segment of the transport industry is car rentals. A business, just like taxi services, has been in the offline market way before online car rentals became a thing. The success of Uber encouraged dozens of innovators to port the traditional car rental business to the online sphere, and it has been a great success so far.

According to a report, as seen on Allied Market Research, the overall global car rental market was $79,648 million big in 2015 itself. From 2016-2022, with a CAGR of over 11.6%, the same will grow to cross the $164,335 million mark by 2022.

It’s massive!

To be honest, the online counterparts share a significant proportion of this market value, but a majority of this segment is still waiting for online alternatives to explore. As of 2020, only a handful of regions in North America, Europe, Asia-pacific, and LAMEA have online car rentals prominent enough. To be precise, not more than a dozen of online transportation companies are sharing this massive market value, out of which, only a few are working in the online car rental niche.

The market of online car rentals is still in its budding phase and comprises of more than enough opportunities for innovative business models. If you think you can crack the code to grab a share from this billion-dollar pie, this article will guide you through the fundamental steps for doing so.

Is this niche correct for you?

A car rental is a complex business idea. It’s not something you can operate out from your garage. A simple systematic guide on how to start a car rental business is not enough to venture into this market. You need some pre-requisite skills, knowledge of the traditional market, growth potential in your target market, and many B2B contacts.

For example, the choice of cars in your fleet. It’s a tricky decision, as not all types of vehicles are in demand in every other region. Depending on the region of your operation, you would need different types of vehicles to address the exact pain points. Open Jeep Wranglers might rent well in beach cities and tropical regions with adventure markets, while people prefer luxury cars more in business cities or romantic destinations. There are different types of cars in demand for a daily commute of the locals, while the tourists might look for an entirely different segment of cars.

It’s all about the knowledge of the traditional market in your target region, which you need to analyze carefully before porting it to the online platform. It’s a segment where consumer behaviors might change when moving from traditional to online alternatives, but not the actual demand. If there is no demand for car rentals in the traditional model in the market, it’s more likely that there wouldn’t be much on the online market either in the same market. It’s simple math.

If you think, you have enough experience to understand the complex nature and methods of manipulating the same for your benefits, you can follow the below steps to jump right into the online car rentals market.

Step 1 – Plan your business

At first, it looks like a generic step that you might find in every other guide. However, it’s not a generic but most crucial step for any kind of venture. You need to devise and document a clear roadmap, which will help you to not only plan your strategies carefully but also to track your progress in the end.

  • Target market: Analyze and identify your target market with all the scope and study of the current consumer behavior. If you are going to make a difference, you must know your target market form inside out.
  • Branding: Plan how you are going to brand yourself as a trusted entity in the target market: How long it will take to plan, launch your business, competition research and formulating your marketing strategies.
  • Cost: Last but not the least, you need to analyze your financial balance sheet. Right from venture capital to the cost for upscaling, technology, infrastructure development, vehicles, employees’ salaries, B2B services, overhead, maintenance, and profit margin in the near future.

Step 2 – Select a Business model

This step comes under the planning itself. However, since it’s extremely crucial, we are discussing it in a dedicated segment. Car rentals in the traditional market comprise of simple business models: Go to a car rental office, complete the paperwork, deposit some security amount, take a car, complete your trip, and make the final payment while returning it back. However, a single business structure cannot drive the entire online car rental business. Let’s check it in detail:

Business model: Currently, two major models drive the entire online car rental market for direct consumers:

  • The inventory model (B2C): The car rental company arranges its own fleet of vehicles and rent it directly to the customers under its brand. The company may opt to purchase its fleet or jump into some contracts with individuals or businesses for the supply of the fleet. Nevertheless, the customers see the brand as a face and contact the same for any kind of support.
  • The marketplace model (C2C): The car rental company does not manage its own fleet but allow individuals and other businesses to offer their vehicles on its platform. Both the customers and the car owners are clienteles for the rental marketplace. Same as Airbnb does. The platform acts as a medium of contact between the car owners and customers. Here, the car owners are responsible for the maintenance of their vehicles, except the marketplace may provide some sort of insurance or damage protection to encourage the car owners for joining the platform.

Rent Model: Online car rental companies use a hybrid of different rental models. It also depends on the business model, as explained in the above section. The companies may give-

  • Long-time rentals: Customers take cars for longer durations. The contracts are usually for a week, month or more. It may also renew on demand. It’s more like a subscription.
  • Short time rentals: It’s more like daily rentals but under a short-term contract. For example, take a car for a day or a couple of days and return it on the specified schedule.
  • Trip rentals: The rentals do not depend on the time but on a trip. They function more like cabs. Customers may take the car for a few hours or even days, depending on the nature of the trip.

Charge model: The charges may depend on the business model and the nature of the rent model. You may choose to charge based on the distance traveled, time-period of the rent, or a combination of both. Moreover, it’s also important to consider the model you are going to adopt for fueling. Besides, the cost of maintenance and commission from the car owners are also crucial while deciding your price point.

Step 3 – Fulfill all legal formalities

Car rentals are not purely online. You will have a majority of assets and business activities in the physical environment. That’s why it’s crucial to cover your business from all around by fulfilling every major legal formality.

Legal entity: Form a legal entity by registering your company under a suitable act. For example, LLC, Private Limited, Incorporation, etc. The registration will also help you to acquire financial investments easily and stay compliant.

File for taxes: Register your business for all kinds of state and federal tax structures. Depending on the region of your operation, you might have to apply for VAT, EIN, or GST Numbers.

Permits and licenses: It’s important to stay compliant with the local business and civil laws. Depending on the region, you might have to apply for different permits and licenses to operate. Failing to do so may also cause your business to shut down.

Service contracts: Depending on your business model, you will work with different B2B services and individuals. It’s important to make all these relations formal by entering into service-level contracts. Prepare legal documentation of everything from vehicle leases to properties, maintenance services, insurance, or any vendor service.

#Tip: Hire a business lawyer to get expert assistance and advice through the entire process. It’s a non-negotiable part of your business activity and you shouldn’t leave any stone unturned in this regard.

Step 4 – Setup the financial aspects

Finance is the building block of any business activity. It’s imperative that you keep your personal and business financial matters separate. Moreover, you should also apply for apt insurance and protection plans to safeguard your business.

Business account: Get a business bank account to manage all transactions. Separate your personal assets from the brand’s assets. Besides the ease of access to different business credit systems, having a business account will also make tax filing easier.

Business insurance: Like every wise person, it’s important that you secure your assets via proper insurance schemes. It might look like an overhead expenditure, but it’s not. Insurance is a mandatory requirement in most of the regions. There are different levels of business insurance schemes and you might have to purchase most of them. For example, vehicle insurance, employee health insurance, etc.

#Tip: It’s wise to consult an experienced financial adviser to help you out in this step.

Step 5 – Establish your online presence

Since you are going to start an online car rental business, you need to build your online presence. Depending on your business model, you will need a different set of features and solutions for your overall platform.

For example, to function in the marketplace model, you will need rental marketplace software, which will provide tailored features for customers, car owners, admin, commission management, payouts, and others. Moreover, you will also need customized interfaces for car owners to sign up for renting their vehicles on your marketplace.

Luckily, there are turnkey solutions available in the market for both the rental marketplace model and inventory-based model. Depending on your business model, you can search for such solutions using keywords such as Airbnb clone script, Uber clone script, Turro clone script, B2C rental script, C2C rental script, etc. These solutions come with the ready-made website and mobile applications for your needs.

Step 6 – Continuous marketing and maintenance

Once, you launch your website and a mobile application, everything else is about cutting-edge marketing and brand promotion to acquire the market share. Be advised that marketing strategies will also differ according to your business model. For instance, the inventory model will need you to market to the customers, while the marketplace model demands an equal level of presentation to both customers and the car owners.  If required, take the help of marketing and SEO experts and formulate your strategies.



Jessica Bruce is a professional blogger, guest writer, Influencer & an eCommerce expert. Currently associated with ShopyGen as a content marketing strategist. She also report on the latest happenings and trends associated with the eCommerce industry.

Follow me on Twitter @Jessicabruc (https://twitter.com/Jessicabruc)

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