How to start a car rental or leasing company

Whether you're interested in anything from wedding car hire, to business fleet leasing, our comprehensive guide will help you get started.

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The vehicle rental or leasing industry is an incredibly competitive market. But, particularly now, it can also be equally lucrative.

The current supply chain delays around semiconductors have made the cost of buying and owning a brand new car climb ever higher, and the demand placed on the car hire industry is growing fast.

But starting a car rental or leasing business is not an easy venture. With so much competition, it’s vital that you identify a niche, and determine whether there is a suitable gap in the market for the services you’re hoping to offer.

People rent or lease vehicles for an array of reasons, and so you’ll need to carefully consider the demographic of customer you’re trying to connect with. You’ll also want to closely examine how your future competitors are operating, as well as think about tons of other areas that can impact car leasing.

It's a long list to consider – but luckily, we've picked out everything you need to know in the guide below.

Read on to find out more about starting a car hire business in the UK, and learn about how to providing stellar customer service, build a great reputation and make good returns.

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Find your niche

1. What’s the difference between leasing and rental?

If you’re looking to start up in this industry, the first thing you’ll need to understand is the difference between leasing and renting a car. Then, you can decide which of these models you’d like to offer.

In short, leasing a vehicle is classed as a longer-term commitment wherein a customer will use the car as a regular vehicle for personal use.

On the other hand, renting a vehicle generally involves a smaller commitment. The vast majority of customers will rent a car for a shorter term; usually for a business trip, a holiday, an event or even as a replacement car while their own undergoes repairs or maintenance.

Giorgia Robinson is Head of Leasing at car selling marketplace, carwow. Robinson told us about the opportunities currently available in the car leasing market: “The Personal Contract Hire (PCH) market has grown significantly over the last 10 years, when leasing was previously more of a corporate/business offering.

“There is now a range of marketplaces, like carwow, in the leasing market – [enabling] customers to find the best deals in the market.”

But that’s not all. Leasing and renting come with very different financial arrangements too – and all entrepreneurs looking to tap into this market should be aware of them.

Here’s a look at some of these key differences:

  • Leased vehicles typically come from car dealerships, whereas specialist car rental agencies are responsible for renting out vehicles.
  • Many car leasing establishments will sell cars too, whereas most car rental agencies will not.
  • Leasing a car can lead to a level of ownership on the customer’s part at the end of the lease, whereas renting a vehicle involves no potential for ownership.

Giorgia Robinson added: “Car leasing firm is a bit ambiguous and it's important to understand the nuances – you will mainly have Brokers and Leasing Companies (Funders) operating in this space alongside the manufacturers and car retailers.

“Typically, most people would see opportunities in becoming a leasing broker – the agent which sits between the customer and the funding leasing company. Just like being a mortgage broker, think of the bank as the Funder.”

2. Deciding on your niche

Once you’ve decided whether you want to rent or lease cars, you’ll need to choose what your niche (or unique selling point) will be. In other words, think about:

  • For what purpose would you like to provide vehicles?
  • What type of car would you like to work with?
  • What type of customer would you like to provide vehicles for?

If you don’t want to start a business from scratch, you can still tap into the car rental and leasing market by buying into a franchise.

This list of potential niches and business ideas might help you decide on what you’d like to do:

  • Transport and logistical services – for example, providing vans for removals or otherwise transporting heavy goods, renting cars for trips to and from airports, leasing fleet cars to companies whose workers need them, and more.
  • Leisure services – for example, providing cars to tourists who are visiting your area and want to explore (of course, this will only work if you launch in a holiday destination), or holidaymakers who plan to drive the car to their destination and use it throughout their trip. Or, you could start a luxury car dealership and lease/rent premium brand cars or supercars to people who’d like to drive them for fun.
  • Events services – providing vehicles for transport to and from events, such as luxury wedding cars, limousines, and more.
  • Corporate services – providing cars to workers for long commutes from city to city or for business trips, renting cars for transporting business personnel from meeting to meeting or to and from airports and stations, etc.
  • Individual services – providing everyday-use cars for people who would rather lease or rent a vehicle than buy their own.

Of course, we've only scratched the surface with these ideas. There are a whole host of other car business ideas, which, if managed in the right way, could set you up for a healthy return on investment.

Giorgia Robinson says it's a good idea to pick a business area that you already have experience in when finding your niche: “You want relationships within the industry already (Manufacturers, Funder, Dealer Groups).

“Starting from scratch is extremely difficult given most Funders won't work with a broker that doesn't have proven experience to commit to a certain volume of deals.”

Need help staying on target?

Starting and then running a business takes time, and includes a huge number of tasks. To help make it all easier, we recommend project management tools to help you to keep track of everything that's going on.

Read our guide to the top project management software solutions for small businesses to find out more about the best providers for your firm.

Conduct market research

When it comes to deciding what your car rental or leasing business is going to do and how it’s going to operate, conducting thorough market research is crucial to ensure you come up with an offering that can compete in the market by offering something unique.

Business models for a car rental or leasing business

In order to set up a private limited company, one of the first things you will need to do is register your business with Companies House. To do this, you must have one director and shareholder.

At the same time, you will also have to consider best set up method for your business idea.

Here’s a look at the different ways that you can set up your business:

Sole Proprietorship

Widely recognised as one of the easiest and most cost-efficient options when it comes to setting up a car leasing or car rental entity, this option allows you to create a business without the need for legal representation.

However, a major downside to this option is that you might find it difficult to secure funding from investors, and you will also be financially liable for all areas of your business.

Partnership

Extremely similar to a sole proprietorship, this option allows individuals to join or contribute to the funding of your car rental business at any stage in your company formation.

Limited Company

A limited company is a separate and distinct legal entity, which will allow you to trade, open a bank account and obtain a tax identification number – all under your business name.

However, if you decide to set up your business in this way, it’s important to recognise that you will be held personally liable for company liabilities or debts.

Car rental franchise

Another option for tapping into the car leasing or car rental market is to buy into a franchise. A car rental franchised dealership is an auto seller that sells new and used cars for different car manufacturers. They are also known as new car dealers, used car dealers, automobile dealers.


Giorgia Robinson, carwow's Head of Leasing, says: “It is a competitive market with a few very large players so small companies just starting out could struggle. The best chances are with Appointed Representative (AR) programmes.

“If you can establish a successful broker as an AR, making strong relationships and proving strength with sales volumes, then you may be able to become a standalone broker and try to gain access to the Funders directly.”

Buy cars to rent or lease

The biggest expense you’ll face when starting your business is buying cars to lease or rent out. You’ll have to buy them outright rather than lease them yourself.

Paul Griffin of Stone Car Leasing explains: “It is highly unlikely that you will be able to lease a car and then sub-lease it to a client; this is strongly frowned upon by most leasing companies and will also make you liable for everything!”

To save money on buying cars, it’s a good idea to start with second-hand models. You can find these on websites such as Gumtree and eBay, or visit used car dealerships in your area.

If you’re confident enough to start off with several cars, try visiting online used car wholesalers such as Car Craft, Car Giant and The Car People.

In terms of working out what vehicles to buy, drive past other business’ depots and see if you can get a look at their vehicles. If they have been in business a long time they should have worked out what the best vehicles for the area they operate in are.

This could save you from buying five Astras and finding out the hard way that the Ford Focus is the favourite vehicle in your area. If this happens you will only get business when the others are fully booked.

How do I manage my vehicles?

It’s crucial that you’re able to keep an eye on the whereabouts of any of your vehicles if they are abandoned, lost or stolen.

Learn more about what leading UK vehicle tracking services can offer you, and what they cost, by filling out our two-minute vehicle tracking form. We can then use this information to match you with supplier quotes that make sense for your requirements. This service is quick, easy, and 100% free.

Get up to date on car rental and leasing regulations

Legal regulations

In terms of legal regulations, while renting or leasing cars to customers your priority must be adhering to product liability legislation under the Consumer Protection Act. In short, this means ensuring that all of the cars you supply are completely safe to drive.

While your cars’ manufacturers are also responsible for this, it’s a legal requirement that you do your part to minimise any risk to your customers’ safety – by:

  • Warning customers about any potential risks that come with the vehicle, and ensuring they thoroughly understand these risks (of course, you shouldn’t rent or lease a car at all if it has a fault that could lead to your customer getting hurt)
  • Constantly monitoring the safety of your cars
  • Taking action to solve safety problems whenever they’re found

Alongside this, you’ll also need to be aware of the regulations that fall under the Consumer Rights Act – which is intended to make sure consumers have fair, transparent and positive experiences with traders.

To make sure your business adheres to this act, you’ll need to:

  • Make sure each one of your cars is of a satisfactory quality (i.e. they can’t be damaged – unless the consumer is already aware of the issue and has agreed to rent/lease it anyway), is fit for purpose, and comes exactly as you’ve described or advertised it.
  • Accept your customers’ legal right to return a car – and get a refund, partial refund, replacement or repair for it (depending on how long they’ve had it) – if it’s of an unsatisfactory quality, has been found to be unfit for its purpose, or isn’t how your business had described it would be.
  • Make sure the rental/leasing contracts your draw up for customers are entirely fair and transparent. They must not put you in a significant position of power over your customer, and they cannot hide fees and charges in small print, limit your customer’s legal rights, or demand disproportionate default or early termination charges.

Giorgia Robinson, carwow's Head of Leasing, advises that if you're starting a car leasing form, “[getting] on board with a Funder requires commitment to a certain level of volume per year and accreditation with BVRLA. To become a broker in any form you must have an FCA license.”

The BVRLA is the trade body which represents and regulates the vehicle rental and leasing sector.

Joining this organisation as a member will lend your business credibility, and give you access to specialised support and industry information.

Learn more about registering as a BVRLA member.

Get the right insurance

A key business insurance policy you’ll need to look into is self drive hire insurance – this is designed for companies which rent/lease cars to customers who then drive the cars themselves.

You’ll also need to insure the driver renting/leasing your car so they can drive it, and get it insured against third-party incidents and also any losses your business might suffer if accidents or damage happens. NB: In this case, the driver will pay the insurer excess on any damage, not you.

However, as mentioned earlier, you can have your customer effectively pay for this his/herself by factoring the cost of this insurance into how much you charge them for the vehicle.

Aside from this, you’ll need to look into more general business insurance policies, including:

  • Product liability insurance
  • Public liability insurance
  • Employers’ liability insurance (if you hire staff)

The BVRLA recommends the following insurance providers as ones which specialise in providing cover for car rental and leasing businesses:

  • Arthur J Gallagher Insurance Brokers
  • M&P Insurance Solutions
  • MS Automotive (London)
  • Rival Insurance
  • Sentinel Insurance Solutions

Write a car hire business plan

No business comes without its challenges, and it’s vital that you leave no stone unturned when it comes to identifying potential roadblocks and costs – as well as making financial predictions and planning for growth.

Writing a business plan can help you to do this and might well prove very valuable – especially if you are trying to attract potential investors to take your business idea seriously.

Our advice would be to download a free business plan template, which will guide you through what you need to include and where.


Decide on pricing for your car rental or leasing business

It goes without saying that the prices you choose to rent/lease your vehicles out at will be integral to how much profit you make.

This is a difficult balance – you want your prices to be competitive and attractive, but you also want to make a good enough margin that your venture becomes worthwhile financially.

To come up with a plan for what your prices should look like, try the following:

  • Research your competitors. What are nearby businesses who provide similar vehicles to you charging? How adds: “Check all the prices they charge, including things like cost per litre for fuel if people return the car without a full tank. If you are looking at long-term leasing then look at miles included and pence per extra mile. Adding 1,000 miles per year to the miles included in the package may not increase your cost by much, but it may make a huge difference to a customer when they calculate the cost of the overall hire.”
  • Consider your costs. You’ll need to make sure your prices cover how much you spend on maintaining and insuring your vehicles and renting your premises (if you have one), as well as your marketing costs and anything else you pay to run your business effectively. Remember, buying vehicles and paying for business insurance will be your two largest outlays to start with.
  • Consider your customers. Are you targeting money savers or high-earning corporate travellers? You can charge a little more if you know your target customer would be willing to pay it. This is a delicate operation, though, so it’s worth researching carefully.

Remember: The hire price you can charge for a car is likely to depreciate over time as the vehicle ages and clocks up more miles.


Managing your accounts

Starting a business takes time and money, and accounting software can help you with both. Whether you started your car rental business alone or with co-founders, you'll need to stay on top of your finances. If you aren't ready to employ an accountant to help out yet, we suggest using an online accounting tool.

Accountancy software is designed with ease-of-use in mind to simplify the sometimes complete processes that go with tracking your business outgoing and incoming revenue. From tracking invoices to arranging your taxes, you'll find every process simpler with the right tool in place.

Take a look at our top-rated accounting tools below.

Name your car rental or car leasing business

Vehicle rental is a competitive, lucrative, and attractive industry to be part of, but with so many people looking to make their name in this flourishing market place, it’s crucial that you come up with a name for your business that will allow you to stand out from the crowd.

So, choosing a name for your business is one of the most important decisions you’ll make while setting up your company. It can be incredibly daunting – but it can also be fun.

Remember, the name of your business is one of your brand’s most important and powerful marketing tools. It’ll need to signal the services you’re offering, and encourage potential customers to resonate with your brand.

It’s vital that you also consider everything from its spelling and pronunciation (is it manageable?) right through to domain name availability (you’ll need your website to be named after your brand) and similarity to other brands (you don’t want to be confused for someone else!).

Above all, you should focus on choosing a name that appeals not only to you but also to your target market; a name that customers can relate to on an emotional level, as well as a name that is short, concise and memorable.

Naming inspiration:

  • Northgate
  • Avis UK
  • TLS Vehicle Rental
  • Sixt
  • Burnt Tree Vehicle Rental
  • National Van Rental
  • Thrifty Car & Van Rental
  • Enterprise Rent-A-Car

The UK’s top car leasing companies are:

  • Hippo Leasing
  • Nationwide Vehicle Contracts
  • All Car Leasing
  • Ling’s Cars
  • Intelligent Car Leasing

Registering your business name

Once you’ve picked a name that best reflects who you are as a business and how you want to be seen, it’s time to officially register your business name!

To do this, you should:

  1. Use Companies House to check that the company name doesn’t already exist
  2. Decide on a company address (don’t worry, this can be your home if you don’t have an official premises yet)
  3. Appoint your official company director or directors
  4. Decide on your company share structure
  5. Register your company with Companies House

Start marketing your car rental or car leasing business

In such a competitive industry, it’s really important for new and existing car rental/leasing companies to recognise the importance of standing out from the crowd, both on and offline.

When marketing your business there are two key things to remember:

  1. Target your messages to your target audience. Prioritise using the channels your target customer is most likely to use or see, and tailor your tone, imagery and messaging style to ensure it resonates with them.
  2. Maximise on what works for you. You can try all the marketing techniques you want, but it’s unwise to keep spending money and time on those that aren’t very effective for you. Monitor the results of your marketing, ditch the techniques that aren’t reeling in customers and invest more in the ones that are.

But what marketing ideas for your car rental business or car leasing business should you try? Get started with these:

Open social media accounts

If you’re a business that doesn’t use social media, you could well be losing out. For businesses of all shapes and sizes, social media is one of the most powerful communication tools for optimising exposure and brand awareness.

Allowing you to connect and engage with your target market 24 hours a day, seven days a week, social media is recognised as forming the basis of all online marketing strategies for the car rental industry.

Try Instagram, Facebook, Pinterest (especially if you’re providing cars for weddings and events), and Twitter. Share photos of your cars and details of special offers. Make sure your contact details are easy to find.

Launch a website

Every business needs its own website to appear credible and give potential customers a place to explore what you offer, learn about your prices and find out how to get in touch with you.

Don’t worry if you’ve no idea how to build a website – you can either hire a freelance web designer or try a website building tool.

Write a blog

Blogs are another effective marketing resource, enabling you to increase exposure for your car leasing/rental company by writing content which:

  • Highlights the benefits of your services
  • Discusses industry news, hot topics and popular conversation points
  • Features regular case studies and stories from your customers

Remember, all blog content should be SEO enriched to ensure people see your content on Google and click on it often.

Use targeted advertisements

With the potential to reach mass targeted audiences, the power of targeted advertisements should certainly not be underestimated or ignored.

For example, advertising tools such as Google AdWords and Facebook Advertisements will instantly create a heavy traction for the car rental services that you are offering.

Try traditional techniques

Remember, traditional forms of marketing can still be extremely beneficial car rental/leasing advertising ideas when it comes to shouting about your business and the services that you provide.

From sticking flyers through letterboxes and having an ad printed in a newspaper through to setting up at a car industry trade show and attending networking events, there’s a lot to be said for offline marketing techniques, too.

What’s next?

In conclusion, starting a car rental or car leasing business can be difficult because it’s such a competitive industry – but by following the advice in this guide you can tap into the huge demand that’s placed on car hire today.

Startups.co.uk can help your business succeed

At Startups.co.uk, we're here to help small UK businesses to get started, grow and succeed. We have helpful resources for helping new businesses get off the ground – you can use the tool below to get started today.

What Does Your Business Need Help With?
The Startups Team
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