Profits in Car Rental Business in India (Cost to Start)

Introduction to profits in the car rental business in India (Cost to Start)

India is gradually standing to be a global tourist hub. The nation has varied climatic and geographical conditions, with rich culture and heritage, and impressiveness history. All these features charm foreign tourists. Low air costs and ease of commutation have increased the growth in Indian tourism. But they people at times do not prefer to travel in public transports. They feel to travel in private cars, which will be available for a call at all times. While some prefer an experienced driver, others prefer to drive the car by own. No matter whatever they feel, it has catapulted the increase in demand for car rental services in India.

Ideas to start and make profits in the car rental business

If you are planning for an attractive business venture, then you must consider opening a four-wheeler rental service.

How to start a car rental business in India?

Whatever business you want to begin, the base should be strong. First, you need to design a perfect car rental business plan. No venture could develop on a fragile foundation. If you are not aware of vehicles or rental services, then it is best to reach out to any experienced person. Gathering details is the first step towards establishing a strong base. The primary resources to know about this business might be interest articles, books, and people associated already with car rental businesses. The car rental business owners could show the proper path, and will also guide you about common mistakes and risks. So, a positive attitude, forward-thinking and market analysis will aid you to have a proper beginning and stand firmly opposed to the rival groups. This blog acts as a car rental business startup guide.

License, permission, and registrations for car rental business

Proper business license – Proper licenses will dictate any individual one from functioning in a certain region. In case of common registration of the vehicle rental organization, you should contact the local trade license office.

State and national permits – The permit indicates the geographical area, within which, the cars will be permitted to operate. Each state offers a separate state permit and it allows the car rental company to drive the car in various parts of the state. It is issued by the state authority. A national permit is issued by the central government, and it permits the car to drive different areas of the nation. The service provider must pay money to renew these permits timely. The fee for a national permit is greater than a state permit.

ID and address proof documents – Whether it is to obtain the cars or for registering the rental company, the submission of identity and address proof is mandatory. Voter card, PAN card, passport, and various other documents, issued by the central or state government, are useful for this purpose.

The bank account of the company – It is very important to pay taxes regularly, or else you will face many legal issues. The perfect way to avoid trouble is to maintain proper business accounts. Monetary transactions majorly take place through a bank account. Thus, it is obligatory to open and maintain a bank account with the car rental company name.

If you are vigilant about all these segments, then you will not find it tedious to start and run the car rental business. You must be alert to make changes in the business policy whenever there is a need. Flexibility is very important, especially in the car rental business. Small steps in this sector including some motivation and much hard work in initial days will help you to carve a niche in this business.

Basic requirements for car rental business to make huge profits

For starting a car rental business in India, you need to purchase a minimum of ten cars. The car rental service providers may acquire some of the cars, but there is no such agency that can own hundreds of automobiles. It is always better to have many cars to gain more profits. But it does not indicate that you cannot begin the business without ten vehicles. So, the next thing that must be considered is the ownership of the vehicle. In case you have a sufficient amount, you may buy one or more vehicles. But keeping many cars mean more maintenance expenses. As nobody is interested to have an ill-maintained car.

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Car Rental Business in India.
Car Rental Business in India.

So, the other option is to get vehicles on lease. Here you will be renting the cars from another agency and thereby you will be re-renting them to your customers. Leasing automobiles will gain substantial money in your wallet, which is diverted for vehicle maintenance.

Different types of car rental services offered

Once you have the information handy now you can proceed to think about the type of car rental service you desire to offer. In India, you will find two types of vehicle rental options. The first is where the vehicles are given for rent to any individual or a business house for longer periods. It is mainly done when the car is rented on lease. For the second type of rental service, the agency offers the vehicle to a person or a company for a shorter duration. Most traditional taxies, UBER service, or for OLA providers come under the latter vehicle rental category. The service provider may support a driver if the customer rents the car for more time. Sometimes, the customers even request the option to drive the car by own by signing an agreement.

Whether your car rental business is large or small, you must fill out essential legal documents. If you lack essential certifications, then you will not get the approval to operate in any area. There are many kinds of company registrations, and you must fill the forms as per the agency’s ownership. It can either be a partnership firm or sole proprietorship, which is based on the number of owners or shareholders. When there are no partners, both profits and losses will be substantial. In case you have partners, then profits and losses will be distributed among the shareholders, as per partnership deed.

Location for car rental business 

The number of OLA and UBER has increased enormously in the urban region. Opening your rental agency in the center of the city will not help you acquire an adequate number of customers. Lack of planned location will be risky for your business. If you desire to offer taxi or cab services, then city location is mandatory. Identifying the location of your operation will have a great influence on your business. So, you must properly do a market survey, obtain information about competitor agencies, and based on that must prepare a unique selling proposition. Opening car rental agencies in tourist spots will fetch more customers and thereby higher profits.

Vehicle insurance is mandatory

One can never project the future so when the car meets with an accident you will have to spend a lot of money. So, it is obligatory to take the necessary steps to safeguard yourself from unsolicited expenses by insuring the car. In this manner, if anything happens, the insurance company will cover the expenses.

An excess clause in the car rental business

If you start a car rental company that gives cars for a longer duration to a single person, then you must ask the customer to sign an “excess” clause. It is a must if you wish to stay out of trouble. The excess clause highlights that in case the car has any damage, during the time it was with the customer, the customer musty give extra money required for fixing the vehicle. It helps the rental service provider to bear losses.

Effective management of the services 

With the use of technology, one must record information about the trips the car made, the cost of petrol left in the car, the count of passengers it serviced every day. It will avoid inefficiency, and provide you a backup of all records. So, even if you forget any specific paper, you can cross-check with the backup saved digitally. Earlier, it was done manually but now many applications have made the various operations very less time-consuming and simple.

Promotion of the car rental services

Spreading information about your business on channels with sufficient advertisements is mandatory for car rental agencies. Most people check online to get essential information. So, if you desire to grow the inflow of clients, then you must send the word to them. Proper advertisement is a must for the newly started business, and even the conventional way of spreading the information via pamphlets, newspapers, banner ads, etc. is also applicable.

Cost or Investment in car rental Business

You need to invest a minimum amount of Rs. 50 lakhs to start the car rental business in India. For starting this business you can even apply for a loan where it would be much affordable for you to start the business with minimum investment.

The conclusion of profits in a car rental business

According to various reports, the demand for app-based cab rental services has grown in India. If you think that vehicle rental service requires large capital, then you are incorrect. Banks offer credit to obtain vehicles at low-interest rates. As there is more demand for rental vehicles, some techniques will help to have a continuous inflow of customers and gain satisfactory income. So, it is the right period to plan for this business from today. The car rental business profit margin ranges from 35% to 40%.

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