How to Start a Luxury Car Rental Business
March 13, 2023 | Last Updated on: March 13, 2023
March 13, 2023 | Last Updated on: March 13, 2023
Do you have a passion for unique and exotic cars?
Why not share it with others — while earning significant revenue — by operating a luxury or exotic car rental business?
The limited supply of this type of vehicle makes these businesses popular and profitable right now.
Whether it’s an Audi, Mercedes, or Mustang, vehicles today are prohibitively expensive for many luxury car enthusiasts. A used car is typically not an option for people passionate about luxury vehicles. And borrowing one from a friend could put the relationship at risk if an accident happens and doesn’t really satisfy the itch for a high-end car.
This is where turning to a luxury car rental or leasing dealership comes in. For many people today, the leasing or subscription model is their best option for accessing the exotic vehicle they want.
This article answers common questions about owning an exotic car rental business to help you figure out if it’s the right move for you.
Whether you rent out your fleet of luxury cars for everyday use or special events like weddings, vacations, parades, movie shoots, and more, the number of businesses is relatively low, demand is high, and profit margins are solid. You could even earn extra money by offering chauffeur services and shuttle rides to the airport as a higher-end alternative to Uber.
For customers, renting or leasing a car is not only a financially sound choice but also offers other benefits like convenience, flexibility, and simplified maintenance.
You provide customers with access to luxury vehicles for a monthly subscription fee or lease payment. This model is attractive to customers because they don’t have to pay registration charges, taxes, maintenance, and in some cases, roadside assistance and insurance. The customer typically only pays for fuel. If they prefer to have the car for an extended period, for instance, six to 12 months, you can offer them a short-term lease agreement.
After the lease agreement is over, the customer can upgrade, downgrade, or discontinue the service. People who want to learn more about luxury car models may turn in a Jaguar and try out a Porsche or a Ferrari.
A luxury car rental company can be profitable if you start and run it correctly. Do it wrong, and you could end up with a lot of costly vehicles nobody wants. Here’s everything you need to know to get it right.
A solid business plan is essential to start your car rental company and guide its path into the future, whether you start a new venture or buy an existing business. A business plan is the foundation of running your business. If it’s complete, it will lay out how you’ll market your business, its structure, who you need to hire, and how you’ll run it.
For high-end car businesses, the most crucial section of your business plan is the one covering finances. Investors and lenders will pay particular attention to it. It will help them determine if the financial picture is a viable one.
Tip: You can find many business plan templates online. Take time to find one that’s right for your operation.
When it comes time to add cars to your fleet, you must work closely with automakers to purchase new cars. Another option is to purchase vehicles from private individuals or rental companies selling them. You could also partner with people who are not using their luxury cars and want to earn some cash from them. You can act as an intermediary, making it possible for them to rent their vehicles to your clients. It’s a win-win situation for both.
Many luxury car rental agencies start with as few as three to five cars, enough to have inventory on hand and provide customers with options. Aim to rent some vehicles daily and others for more extended periods. Short-term rentals will earn you more, while longer-term ones will provide dependable income, even though the rental rates will likely be lower.
Tip: When a car gets old, sell it and re-fleet. Don’t let your inventory get old unless you rent classic vehicles. Make it a point to buy and sell at the right time.
Find out who your local competitors in the luxury car rental industry are. See how they position themselves. Figure out their strengths and weaknesses. Come up with a way to make your business stand out. Carve out a niche area for your agency. Some ideas include:
Ensure what makes your brand unique is reflected in your business name. It will help you attract the right customers to your rental car dealership.
Tip: Consider partnering with local luxury car dealers. They could refer on-the-fence buyers to you for longer-term trial rentals of their models.
Speak with an entrepreneur in the luxury car rental space, ideally one who won’t be a competitor. They can give you real-world advice and tips about what to watch out for when you start your small business. While you’re at it, speak with legal and financial experts with startup and small business expertise.
Remember: Exotic car rental companies come with high risks and high rewards. It’s critical that you do your due diligence so you know how to run your business right and avoid common pitfalls.
There are many ways to start up a car rental business. Some of the most popular include:
Working through a luxury car rental franchise company makes it easier for entrepreneurs to start a business. Most will provide you with relatively simple ways to build a fleet, financing, marketing assets, and more. Plus, they can guide you on how to run a vehicle rental business successfully. The only issue to consider when opening a franchise is that you will give up some of your freedom to run a business because you will have to follow franchise rules.
If you have larger companies in your area, you may be able to partner with them to rent vehicles to senior employees. This is often a good option for rental agencies located in larger cities.
Running an independent luxury car rental agency may take more money, time, and effort than franchising or partnering with a corporation. Still, it will provide you with the independence many entrepreneurs crave.
Take time to determine the right business model for you. It could make all the difference between ultimate success and contentment with your operation and a car rental business that doesn’t work out.
Starting and operating a luxury car rental business takes a significant cash outlay. You may need to get financing. Some standard options include:
Of course, the demand for luxury cars is more significant in high-income neighborhoods. Do demographic market research to identify possible locations for your business. You may find cheaper rent in a lower-income area, but people leasing high-end cars are unlikely to travel to them to pick up a car.
Demand for luxury cars is strong near airports and hotels. Many luxury hotels have guests who want high-end vehicles to go shopping or sightseeing. Consider whether it would make sense to locate your rental agency near these places.
You should have cash flow projections as part of your business plan. You’ll need to convert them into a budget.
Operating a luxury car rental service requires a lot of working capital. Car payments will be your most significant expense. Another major one will be auto insurance. You’ll also need to set aside money for rent, salaries, utilities, small business insurance, and advertising.
Securing the right car insurance for your luxury fleet is critical. If a customer damages an expensive vehicle in an accident, becomes injured, or harms someone else, it could cost you your business if you don’t have enough — or the right — coverage.
Work with an agent or company specializing in insurance policies for luxury car rental businesses. Get several quotes and proposals so you can feel confident you have the best combination of coverage and premium cost for your small business.
Tip: Bundling coverage with a single provider could help you save money on your business insurance.
Of course, the best — and least costly — source of new customers for high-end vehicle leasing companies is repeat business and word of mouth. Serve people well, and they will return for more and recommend you to other luxury car fans. Some other popular marketing strategies include:
If you’re not a marketing expert, it could make sense to hire someone part-time through an online source like Upwork. Just make sure they have experience in the rarified world of luxury vehicles.
Don’t make the common mistake of leasing expensive cars to the wrong people. Research your customers before renting out cars. Check their addresses, credit scores, and payment methods. Validate their debit or credit cards. Make sure everything checks out before you hand anyone the keys.
In the lux vehicle rental game, earning repeat business is essential. The best way to do that is to delight your customers. Consider:
Tip: If you offer chauffeur services with your rentals, ensure they’re well-groomed, properly dressed, and well-informed about their responsibilities. You don’t want to harm your top-tier rental experience with a poor driver.
Running an exotic vehicle operation can be lucrative if you do it right. However, there are challenges when you operate your own business. Insurance is very expensive. Customers may be involved in costly accidents. High-end renters can be challenging to serve. Plus, you must consider wear and tear, repair, and vehicle maintenance.
Ultimately, the luxury car rental business isn’t necessarily easy, but it can be gratifying and satisfying. If you follow the tips in this guide, you’ll be more likely to start and run a successful operation.