If you’re looking to enter the automobile industry, you might have considered starting a car rental business or a car leasing business. In this article, we outline the advantages of each to help you make the right decision for you.
The vehicle rental and leasing industry contributed approximately £49 billion to the UK economy in 2018 (BVRLA). Many statistics in this sector group car leasing businesses and car rental businesses together. In both car leasing and car rental, the customer pays for the right to use a car that isn’t owned by them. Both are options when an individual wants to avoid buying a vehicle and there is an abundance of companies offering both types of service. As the vehicle isn’t owned by the customer, in both cases, the customer only has access to it for a limited amount of time. This time varies based on the length of the agreement.
If you want to enter this lucrative marketplace but are on the fence about which to choose, or quite frankly don’t know one from the other, this article should help clear things up.
Advantages of starting a car leasing business
Car leasing is when someone hires a car for a reasonably long period of time and uses it regularly for personal use. It’s geared towards businesses that need a large fleet of cars for their employees.
1. Customers can choose to buy the vehicle at the end of the agreement
Leasing is used by car dealerships as a form of finance. With this service, individuals normally pay a monthly fee for a few years. If they want to own the vehicle at the end of the agreement, they can pay a lump sum to make up the cost.
2. You can operate from a car dealership
People usually lease cars from dealerships. While many of them offer leasing as an option, it isn’t the only service they provide. You could also sell new or used vehicles to increase your offering and up sales.
3. The money keeps coming in
Because customers pay regularly, you have a stable source of income and don’t have to chase fees every month. What’s more, there’s a good chance those leasing vehicles will opt to buy them at the end of the contract period, giving you an extra bit of income.
4. Suits the indecisive customer
If an individual is hesitant to commit to buying a car, leasing is a great option. At the end of the agreement, they aren’t forced to buy the car, but it often is an option. The monthly payments therefore essentially go towards the overall cost of buying the car.
5. Customers care about treating the cars well
Sometimes people are more careless when it comes to driving rental cars because they don’t own them. But, as many of your customers will be hoping to buy the car at the end of the agreement, this tends to be the case less often with car leasing.
6. Suits non-committal customers
If customers don’t want to commit to buying a car, they can still use one – and have access to some of the most competitive rates in the market.
7. Leased cars are generally a very reliable option
When customers lease a car, it is usually a brand new model, so they don’t have to worry as much about the breakdowns and faults that are more associated with older cars. Even in the worst-case scenario when something does go wrong, the fault can usually be repaired under the manufacturer’s warranty. This makes it an attractive option.
8. Customers can drive far superior cars
If they choose to lease a car, they often find they can drive a far superior vehicle. When you lease, you only pay for the car’s depreciation for the lease period instead of the value of the vehicle. This therefore results in lower monthly payments than other finance options. The extra cash can go towards a more expensive make or model.
Advantages of starting a car rental business
Car rental is when a car is only needed for a short time period, so there is less commitment involved. For example, car rental would be more appropriate when on holiday or for a special occasion. With car rental, customers usually make a one-off payment in order to use the vehicle for the chosen period of time.
1. You can start a specialist car rental business
Most cars are rented from specialist businesses that only offer car renting services. They own the vehicles for the sole purpose of renting them to generate an income. The franchise model lends itself brilliantly to the car rental business; check out the top car rental franchises in the UK.
2. Large customer base
Car rental agencies can often be found at airports and popular tourist destinations. When on holiday, customers can rent a car to explore the area easily and cheaply.
Car rental businesses are also popular on special occasions, for example when customers are going to prom or a wedding, as they may want to upgrade their car temporarily.
Lastly, road trips are another time when car rental services are required. It’s sensible to rent a car when you’re going to be doing a lot of driving and your own car isn’t very reliable. Customers are protected by the car rental agency and the mileage is put on another vehicle.
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3. Not labour-intensive
There will always be a market for car rentals, so if you’ve always dreamed of being your own boss and entering the automotive industry without it being too labour intensive, car rental businesses are a solid option.
Why not start an automotive business today?
Car leasing businesses and car rental businesses often get confused, but they have some fundamental differences. And, as a result, their own advantages. Hopefully you now have a better understanding of these and can decide whether you would like to invest in either sector. Check out another one of our articles for a breakdown of the industry and the top automotive franchises in the UK.
Becky Martin, Point Franchise ©