How to Start a Luxury Car Rental Business? [Investment, Tips & More]

How profitable is it to run an exotic car rental business? Though a lot of businesses have been affected by Covid, surging demand and a shrunken supply of cars are boosting the luxury car rental market. Earlier the options to drive a luxury car like an Audi, Mercedes, or Mustang, was limited-buy to a new vehicle that was prohibitively expensive, purchase a second-hand car, or, borrow one from a friend. But for many people, buying a luxury car is not a feasible option due to the costs involved. And, the issue of trust factor comes in the way of borrowing cars.

This is where an exotic car rental or leasing business comes into the picture. For the reasons given above, many people are preferring the leasing or subscription model, rather than buying new cars. A luxury car rental business rents out cars for business or leisure.

The benefits of starting a business of exotic car rental

You can rent your fleet of classic and exotic cars for weddings, corporate events, parades, music videos, and movies. Though the exotic car rental business is small, the profit margin is quite high. If you get the right clientele, your income can reach sky-high.

Renting or leasing a car is not only a financially sound decision for the customer, but also offers several other benefits like convenience, flexibility, and safety. To make it more hassle-free for the customer, you can add chauffeur service as well.

According to an industry report by Mordor Intelligence, the global car rental market is poised for a 7.5% CAGR during the 2020-2025 period. In India, the luxury and vintage car renting business is worth Rs 800 crore and growing at 30 per cent every year.

What is a car subscription?

In a car subscription, the customer gets access to a car in lieu of a monthly fee. He does not have to pay for registration charges, maintenance, and insurance. The monthly fee covers all of these and also includes roadside assistance. Apart from the monthly fee, the customer only has to pay for the fuel. If the customer wants to have the car for a long period, say, 6 months to 12 months, you can sign a short-term lease agreement with him.

After the subscription period is over, the customer has the option to upgrade, downgrade, or discontinue the service. So, a customer who was using a Jaguar can now opt for a Porsche.

How do you start a luxury car rental business?

Starting a luxury car rental business can be quite profitable if you do it right. In this article, we will give you tips on how to do it successfully.

1. Business Plan

A high-quality business plan is essential to boost lender confidence, and layout your course of action. The most important part of your high-end car rental business plan will be the section on finances. This is where the attention of your investors will veer towards, to access the viability of your plan.

To add cars to your fleet you have to work closely with automakers. If you don’t have an inventory of luxury cars, you can find the people who have. You can partner with people who are not utilising their cars or want to make some money off their cars. You can give them the option to rent their cars to your clients. It will be a win-win situation for both.

You can start with 3 to 5 cars, so there are some inventory and variety. You can rent out some cars daily, and others for a longer period. If a car is getting old, you can sell it, and then re-fleet when there is more demand. Don’t let the inventory go old; buy and sell at the right time.

Try to rent out cars for a longer period, say, a week, rather than a weekend.

2. Finance

To minimise the start-up costs, you can buy an existing business. In this way, you can tap into an existing customer base. You can raise funds from carmakers or venture capitalists to finance the purchase of new luxury vehicles.

3. Study the competition

See who your competitors nearby are, and what their strengths are. You have to stand out from the crowd in a crowded market, and find out a niche area for your business. Some of your target markets can be any of the following:

• Leisure Services.
• Corporate Services.
• Individual Services.

4. Get some advice

Try to talk to an entrepreneur in the exotic car renting business, who is not your direct competitor. He can give you some sound advice and tips about the things to watch out for in this small business. Remember that this is a business with high risks and high rewards; so, you should have a healthy risk appetite.

5. Location

Demand for luxury cars is strong near locations like airports and hotels. Many five-star hotels have rich customers who ask for luxury cars while going shopping or sightseeing. It would be an advantage to have your business located near these places.

6. Expenses

Opening a luxury car rental service requires plenty of working capital. The biggest expenses will be for making the payments for cars. What are the other expenses that you will encounter every month? A part of the budget will go into rent, salaries, insurance, and advertising. The amount of insurance will depend on the number of cars in your fleet.

7. Advertisement

The best advertisement for this business is through word of mouth and repeat customers. Creating a good website can generate a lot of traffic, which can translate into sales for your premium car hire business. You can use Instagram as a promotional tool, with images of cars that are available for rent.

You can bring out discount codes, coupons, or undertake promotions, that will help customers save money.

Also Read: Car Brands in India

8. Carry Out Due Diligence

Don’t make the mistake of renting out to the wrong kind of people. Verify the customer before renting out a car. Check his address, and also the validity of his debit/credit card, if any. The profile of the customer is also important.  The luxury cars are very expensive; you should not rent one to an immature 21-year-old, even though you may have insurance.

9. Give Customers Something Extra

In this business, it is very important to get repeat customers. And, the only way you can do that, is to make the customer happy and giving him something more than he asked for. Try to get your cars to look better in person than they look in the pictures.

You should be prepared to go the extra mile. People usually rent luxury cars for a memorable occasion. If a customer wants a car to be placed at a certain location at say, 3 a.m., decorated with flowers, you must be prepared to fulfil that request.  

Make sure that the drivers are experienced and well-groomed. The fleet should be looked after properly, and everything should be well-monitored.

Franchise Route

Since the travel and leisure market has started to restart, now is the right time to go for a car rental franchise. You can take the franchise of a successful luxury car rental company. Try to find out about all the details on their website.

Corporate Rental Services

You can open a corporate car rental service where you will rent out luxury cars to companies 24x7. The demand will be more in bigger towns and cities.

Challenges for the luxury car rental business

Insurance can be very expensive. Sometimes the cars might be involved in an accident, and the insurance might not cover all of the repair costs. So, that might dig a big hole in your pocket. Other major expenses may be excessive wear and tear, repair, and maintenance.

As you can see from this article, the luxury car rental business isn’t necessarily easy, but it can be very rewarding and fun. If you are committed and have a good business plan and marketing strategy, the profits in this business can be sky-high!

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3) How to Start Silk Business in India? Steps, Process & more
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5) OkCredit: Simple, Paperless & Secure solution for businesses

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FAQs

Q. What are the barriers to entry in the luxury car rental business?

Ans. First, is the high cost of luxury cars, which can run into crores of rupees. You need to maintain a fleet, to run a sustainable business. The second is the cost of insurance.

Q. What are the things I should check before renting out a car to a customer?

Ans. Besides the driver’s license, you should check the validity of the debit or credit card.