How to start a car rental or leasing company

Looking to start a vehicle rental business? A wedding car business? Startups members give their insight...

I’ve been thinking of starting a car leasing company as cars are my passion but I don’t know much about sourcing the cars etc! Would I lease them? Or would I buy the car from a dealer and then lease it out?

Richard How of management consultancy firm How Associates suggests:

“You need to look at who is already doing this in the area, drive past their 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 are the best vehicles for the area they operate in, 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 and you want that to be the other way around.

“Look at the extras they offer, pick up and drop off etc. and see if you can find something that you can do that they don’t, also 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 a 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.

“If you are doing short term rental then ring your local hire places and ask how much notice they generally need to rent you a car, if they say there’s always a car available then they may have too many cars or the market may be saturated already.”

Paul Griffin of Stone Car Leasing advises:

Useful links:
It may be worth considering seeing if you can get a Start Up Loan (external partner site, link opens in a new tab) to help you with financing, and mentoring to start this business idea.

You'll also need to think about registering your business, either as a sole trader or as a company - if a company, then Smarta Formations (external partner site, link opens in a new tab) are an organisation that can help you set up.

“My advice would be to start as a leasing broker, an intermediary between clients and lenders where you can add value by offering excellence in customer service. Your biggest challenge will be finding the prospective clients, not because there aren’t many, there are, but many have long-standing relationships with the bigger companies such as LeasePlan or Lex or indeed with a competent local broker.

“Note, 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! If you act as a broker you need a consumer credit licence (whether you are leasing to businesses or individuals all leasing companies expect this).

“You should also consider joining the BVRLA and registering with the FSA. Broking is by far the simplest way to start and to gain a reputation whilst learning the ropes. Don’t waste time on poor credits as lenders don’t really want them and you will do a lot of work with no surety of a return.”

Car business ideas

Think about whether to be a car rental generalist, or to operate in a niche, such as van rental or wedding car hire.

A Startups member discusses their wedding car business: “The business is mostly seasonal (people like to get married in Spring/Summer). He uses Rolls Royces, but vintage, – not vastly expensive (you can find a wedding car for sale by looking on eBay for second hand classic cars) but look the part – and so he has a little more to offer that other businesses can’t. He also has a black Daimler which he does funeral work in when weddings dry up.

His biggest draw of new custom is through the internet. You should network, though, and do a deal with, say, local photographers (a link on your site to them and visa versa) and perhaps with florists and any other business that deals with weddings.

More and more hotels now offer a full wedding package to guests, make a call and let them know you’re there.”

Remember that, aside from the cost of sourcing cars for your car rental business, you will also need public liability insurance in addition to car insurance. If you operate in a niche or with classic cars, you may want to use a company that offers specialist vehicle insurance insurance, such as wedding car insurance.