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A car rental business is a business where the company provides vehicles for temporary use, generally for a few hours/days/weeks, to individuals and businesses. This kind of business can be a good source of income as it allows you to monetize idle assets like personal cars.
By starting a car rental business, you can rent out your cars to tourists visiting your city, professionals on business trips and locals who want a fancy car for attending a marriage or special occasion. In this blog post, we shall guide our readers on how to start a car rental business in India.
To start a car rental business, you require careful planning and meticulous execution of essential steps. Below, we have mentioned all the necessary steps you need to follow to successfully set up and run your car rental business.:
You must begin by selecting the type of car rental service you wish to operate. Your options include the following:
Chauffeur-Driven Rentals: In this, the company provides a driver with the car. The drivers are responsible for taking the customers to the right destination(s).
Self-Drive Rentals: In this kind of business, you just rent out the car to the customers. They drive the car themselves without any driver’s assistance.
Weekly or Monthly Rentals: In this type of business, the cars are rented for a longer period, i.e., on a weekly or monthly basis.
After deciding on the type of car rent business, you need to decide whether you want to offer standard cars for everyday use or high-end vehicles for a niche market. It is important that your choice aligns with your budget, location and the kind of customers you aim to attract.
After choosing the business type, you must come up with a business plan. The plan must clearly include all the important business details like budget and funding. You must also decide the no. and category of cars you want to start your business with.
You must identify who your target customers are from tourists, business travellers (like CEOs, Directors, etc), event customers, celebrities or local customers. You must fix your rental pricing. The pricing must include daily, weekly and monthly rates and must also mention deposits and late fees.
You must also take care of legal and insurance requirements, like company incorporation, necessary permits and car insurance. By preparing a strong business plan, you will be able to make wiser decisions and manage your costs properly.
Now, after your business plan is in place, you can begin its execution. You can purchase brand news cars or second-hand cars or lease the cars. For long term usage and building a professional image, new cars are a good idea. However, if your budget is limited, you can purchase second-hand cars that are in good condition. To reduce upfront costs, you can lease cars. However, that way, the cars won’t belong to you and you will have monthly business expenses you won’t be able to skip. It is suggested to own the assets instead of leasing them.
Instead of buying all the same car models, you can choose a mix of car types to cater to different customers and charge them accordingly. Make sure all the cars meet the required safety as well as emission standards. For customer safety, it is essential to install GPS trackers. These trackers will allow you to monitor the cars effectively. You must get maintenance checks for your cars regularly so that they stay in a good condition.
For each car, you must have necessary documents like Fitness Certificate, Pollution Under Control (PUC) Certificate, Commercial Vehicle Registration, Commercial Insurance, etc. All the drivers who will drive your cars must have a valid driving license.
You must have an office location or a website that your customers can visit to book cars. You can open both or one of them, depending on your budget. For the initial phase of your business, you can open a small business located at a busy street or near hotels or transportation hubs.
Now, for the website, you can start with a user-friendly website with car photos, features, rates, car booking forms, contact information and 24x7 customer service. On the website, you must provide online payment options like net banking, debit card, credit card and UPI. If you are not sure about opening your own website yet, you can list your cars on famous rental platforms like Revv and Zoomcar.
If you opt for a business that provides drivers along with drivers, you must make sure you hire well-trained drivers who are respectful to the customers and have a polite tone. Make sure their licenses are valid and they have good knowledge about the local routes and also know how to use Google Maps.
You must make sure the drivers you hire ensure compliance with all the safety rules and regulations at all times. If they do not ensure compliance, you must take corrective action like giving a verbal warning, retraining, or for repeated or serious offenses, you can take the car away from them. In extreme cases, you must suspend them and revoke their access to your vehicles.
To keep your booking and records in an orderly manner, it is essential to use certain softwares and mobile apps. Some popular softwares and mobile apps are Rent Centric, EasyRentPro and Zoomcar Host App. These tools will help you to manage car availability, payments and customer details.
To avoid double booking, you must maintain a calendar. Don’t forget to store contact and trip details of your customers so you can send them future promotions. Whenever your customer books a trip, you can send them a confirmation text or email.
In the next section, we shall explain the legal requirements for a car rental business.
After understanding all the basic steps required to open a car rental business in India, it’s time for you to understand the legal requirements for this business. Don’t skip out on these requirements.:
Before your car rental business gets launched, you need to choose a proper business structure. You can choose from various options available. In case of sole proprietorship, business registration is not mandatory. Therefore, the proprietor saves up on costs associated with the registration. However, in this model, only one individual can own the business.
You can opt for a partnership firm if you don’t want to register your business and want to run it with one or more partners. In both these business models (sole proprietorship and partnership firm), the owner faces unlimited liability in case the business makes losses or incurs debt. For limited liability protection, it is suggested to opt for one person company (for solo entrepreneurs) or limited liability partnership (for two or more partners).
You can opt for private limited company structure if you want easy access to funding along with limited liability partnership. However, in this structure, a minimum of two shareholders and two directors are required. Also, such a company must adhere to strict compliance requirements.
Each structure has its own pros and cons. If you need assistance in choosing the right business structure, you can connect with our consultants at Registrationwala.
The trade license is important for a car rental business. It helps you ensure compliance with the local regulations. Generally, you must apply for this license within 30 days of commencing business operations.
To apply for the trade license, you must file an application with the local municipal authority. Once you secure this license, you will be able to operate your business smoothly.
GST registration is mandatory for a business if its annual turnover exceeds Rs. 40 lakhs for goods or Rs. 20 lakhs for services. To apply for this registration, the process needs to be completed online via the official GST portal.
After successful GST registration, the applicant receives a GSTIN (Goods and Services Tax Identification Number). This number must be quoted on all invoices, bills and official documents pertaining to the business. GSTIN is also used for filing GST returns and other tax compliances.
You will also require other permits. For commercial tourist vehicles operating across multiple states in India, it is essential to obtain All India Tourist Permit. In case of operations limited to a particular state, State Tourist Permit must be obtained.
A commercial registration is a must for rental vehicles. This is because renting out vehicles is considered a commercial activity. Additionally, clearances must be obtained from the local transportation authority.
Starting a car rental services business is a good idea due to the growing demand of travel and transportation from tourists, business professionals and locals, especially in urban areas. Need help in starting a car rental company? Connect with our company registration experts at Registrationwala for assistance.
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