Beginner’s Guide on Starting a Car Rental Business in the United Kingdom
For the right price, everyone is willing to pay for convenience. Why? Sometimes, people choose to throw money at their problems to make them go away, no matter how big or small they are. For example, one would opt not to commute via trains or buses if he or she can afford to rent a car. This is why starting a car rental business is a venture worth considering, especially in an area where commuting to work or school is an everyday struggle.
More and more entrepreneurs have been throwing their hats into the ring in recent years—participating in the ever-growing car rental business in the UK. With this, the car rental segment is indeed a competitive market that hinges on excellent customer service, good reputation, and profits. Allow this article to serve as a guide to company registration in the United Kingdom and a reference for newbies deciding on starting a car rental business.
What is a Car Rental Business?
The article aims to discuss why starting a car rental business is a major commitment. With this, allow us to equip you with the knowledge you will need to make your dream a huge success. To start, let us clarify the difference between leasing and renting a car. Learning the key differences is important, so you know which path to take on.
A car rental business deals with short-term commitments in terms of providing services. People rent cars usually just for a three-day business trip, a week-long holiday, or even to serve as a mode of transportation for one-day events. Some even rent vehicles while their cars are in the repair shops. A car leasing agreement, on the other hand, takes a long-term commitment. Customers signing this deal use the vehicles regularly for personal use. Let us also take a look at the following delineations between car rental and car leasing business:
- Specialist car rental agencies offer vehicles for rents while car dealerships provide car leasing agreements.
- Car leasing establishments can sell vehicles as well, while most car rental businesses are not in the business of selling vehicles.
- When renting out a vehicle, the customer cannot potentially have ownership. In leasing, a car can lead to a level of ownership for the customers, depending on the leasing terms.
One key difference between leasing and renting a car is the financial arrangements as well. Car rental businesses usually receive payments upon delivery of service. For leasing, because it is a longer-term commitment, the customers make regular payments per month. Consider these aspects of the business before looking for UK company incorporation.
Choosing Your Services for Customers
Starting a car rental business needs a lot of capital infusion. You will spend a substantial amount of money to buy a fleet of cars and maintain them for continuous use. With this, you have to make sure that you will make profits at the end of the day.
Here are some of the business niches and ideas you can consider when starting a car rental business:
- Leisure services. You can make money by targeting tourists visiting your area and providing them car rental service. The people taking vacations usually rent cars to go around your vicinity, following a holiday destination map. Teaming up with travel agencies is something you could consider, allowing a regular stream of customers.
- Transport and logistics services. These are a more transactional type of services, including transporting heavy items, travels to and from airports, and serving as shuttles for employees of a company.
- Individual services. You can also consider cultivating a customer base comprising individuals who need daily car rides but want to rent a vehicle instead of buying their own.
- Events services. Providing vehicles for transport to and from event places is also in demand, especially for weddings.
Car Rental for Weddings
In the events industry, weddings are major moneymakers, and you can join the game when starting a car rental business to generate profits for yourself. As such, you must have working knowledge in this segment before engaging with a corporate service provider.
- Applying for insurance. You must secure specialist wedding car insurance when renting out a car for hire. Insurance protects both the drivers and passengers in case an unfortunate event happens, and they need to be hospitalized. The insurance cover can pay for the related bills so you will not shoulder the financial burden. The regular payment for the insurance depends on the terms of protection you are applying for.
- Drivers. For your wedding car rental business, you have to decide if it comes with or without drivers. If you choose the former, you have to ensure that your drivers meet the requirements to provide such service. A full UK driving license and previous driving experience are a must for chauffeurs.
- Cars. Starting a car rental business means you have to invest in purchasing vehicles for rent. It is not advisable to lease cars for your business just to be rented out again. For weddings, customers usually want to rent out classic and vintage cars. While this is not financially accessible for all businesses, it is still worth considering. Still, you have to think in the long term.
Business Registration and Licenses
When starting a car rental business, the legal side is also something you should prioritize. Doing your due diligence is a must if you want your business to remain going concerned—which means more opportunities to make profits.
Note that the most common business structures are sole proprietorship, partnership, limited company, and corporation. Many opt to establish a limited company because it protects your personal assets from the debt payments of your business. You have to register your limited company with the Companies House to do so. A limited company is a legal and separate entity from the owners. It has the power to own and sell assets, among others.
When renting out your unit, you have to ensure that licensed drivers will be using it. You have to thoroughly check the following:
- customer’s driving license
- driver number
- photo car license matching the driver
- signs of tampering in the driver’s license
With this, the customers should be able to prove that their license is registered with the DVLA. You can ask your customers to bring a DVLA check code with them upon checking out the car unit for rent. On the other hand, you can also ask them to present a printed copy of their driving license details for further scrutiny.
Professional Help for Your Business
Starting a car rental business, like any venture, can be daunting. You may need assistance from professional experts so you will avoid making rookie mistakes. Contact 3E Accounting today. We are a corporate service provider offering services in accounting, taxation, business advisory, and many more. Reach out to our team—we are ready to help you every step of the way.