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Tips to Running a Successful Auto Rental Company

by Ralph Heibutzki, studioD

Opening an auto rental business seems like a sure bet, since people always need to get around. However, making such a business grow requires managerial savvy, and a constant drive to contain costs. Otherwise, you risk squandering assets like your vehicle fleet. New car rental businesses also face competition on models, price and availability, which makes it imperative to find some way of rising above the crowd. If you master these factors, you have a shot at long-term success.

Fight For Every Dollar

With so much money tied up in fleet, gas and insurance costs, paying attention to profitability is crucial in the car rental business. For example, every 1 percent that you shave off your fleet finance interest rate boosts your bottom line, "Auto Rental News" advises. Keep a running tally on items that affect your business, such as the average profit per car. Otherwise, you can't adjust your business model when the market changes.

Go Where Your Competition Doesn't

Opportunity is a critical driver of growth, particularly in the car rental industry. For example, Enterprise Rent-A-Car built its reputation as America's largest auto renter by catering to drivers who needed replacement vehicles due to accidents, repairs or theft, "Forbes" magazine reports. Similarly, Zipcar netted $100 million in profits for its membership-based business model during 2008 by aggressively pursuing college students, another population long underserved by car rental companies -- primarily due to concerns about liability issues.

Keep It Simple

Consumers often criticize car rental logistics as complicated and cumbersome. By contrast, Zipcar's membership-based service eliminates human interaction, because users reserve their preferred models online, "U.S. News & World Report" states. Drivers pay a single $6 to $10 hourly rate that includes gas and insurance. Analysts credit this emphasis on simplicity with helping to grow the Massachusetts company, whose target market focuses on users who don't drive daily, or don't own a car themselves.

Offer a High-End Experience

Building a business around luxury cars that customers fantasize about driving offers another way to distinguish your business in a sea of standard model competitors, Chicago auto rental owner Steve Bandovich asserts in "Entrepreneur" magazine. Bandovich's fleet includes such well-known high-end models as the Viper, the Porsche and the Hummer, which he advertises extensively online, according to the magazine. Such tactics offer experiences that drivers can't get elsewhere, and raises the odds of turning them into repeat customers.

Other Considerations

Don't neglect your auto fleet, which is the heart of your business. Novelty is a crucial part of stimulating customer demand, so plan to move vehicles out of your fleet on a 12-month basis, "Auto Rental News" suggests. The local economy's status is also a factor, along with the aftermarket, where your former models will go. By watching these factors, you'll keep a lid on fleet costs, which boosts your odds of surviving over the long run.

About the Author

Ralph Heibutzki's articles have appeared in the "All Music Guide," "Goldmine," "Guitar Player" and "Vintage Guitar." He is also the author of "Unfinished Business: The Life & Times Of Danny Gatton," and holds a journalism degree from Michigan State University.

Photo Credits

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