Tata Capital > Blog > How to Start a Car Rental Business in India?
05 February 2025
6 mins read
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India’s rising economic growth and urbanisation have led to more people prioritising travel comfort. Whether long trips or daily office commutes, rental cars are increasingly becoming the top transport choice. Consequently, the car rental market is on the upswing.
However, an automobile rental agency has many moving parts, which can be challenging. Before diving headfirst into the car rental business, it is important to have a concrete plan. Read on to find out all about starting a car rental business in India.
There are different types of car rental businesses. And so, your first step is to choose the type of car rental business you want to own. Let us take a detailed look at all these options.
To own a franchise car rental business, you will have to buy the rights to use the brand name and business model of an existing car hire business.
An advantage of starting a car rental franchise is simplicity. Your business will get an established name, support, and guidance from a reputable brand. However, the cost of buying the franchise is usually high. Also, you will have less autonomy over the business model as the franchisor will have some control over your business.
In this car hire business model, you will sign an agreement with a dealership to supply rental cars to customers who bring in their cars for repair.
While you will not require a large fleet of cars for this business, the customer pool will be quite limited.
Next on the list is starting an independent car hire business. An independent business will provide you with complete autonomy over the venture.
However, you will need a substantial initial investment to set up the business and build the brand, not to mention tackling the competition from established businesses in this field.
Buying an existing business will provide you with the advantage of an established brand along with complete autonomy.
The advantages of buying an existing business are an established business structure and a loyal customer base. However, this business model will require additional research and scrutiny in the business you want to purchase.
Once you have decided on the type of car rental business, you need to identify your target audience. The target audience will help you decide on the kind of car fleet required as well as marketing strategies.
For example, if your target audience is tourists, you will need to invest in cars that prioritize comfort, like Sedans.
Now you know the type of business you want and your target audience. Next, we come to the most crucial part of starting an automobile rental agency: creating a business plan.
A clear and concise business plan will include:
Type of rent-a-car agency
Products and services offered
Financial details of the operation like fees charged etc.
Required funding
Marketing plan
Financial projection
Quarterly and yearly objectives
A good business plan will help you keep focused on achieving the desired business goals.
With a business plan in place, you can now decide on the car fleet you want to acquire for your business. This decision would depend upon your funding and target audience. With high initial funding, you can purchase new cars for your business. With limited funding, you can either consider renting or leasing the cars or buying used cars at reasonable prices.
The location of your car rental again will depend upon the type of rent-a-car agency and target audience. For example, if you plan to target business people who are travelling, you will need to locate your business near an airport.
After deciding on a suitable location, you can move forward with renting space for your car rental business.
Once the location for the store is set, you will need to hire employees to attend to customers in the front office, accountants for various financial responsibilities and mechanics for car repair.
You should also look into proper insurance and employee benefits to fulfil your responsibilities as a good employer.
The rental contract is the most important document for your automobile rental agency. It is a structured agreement between you, the business owner, and the customer, the renter.
The contract will cover various liabilities, such as what happens in the case of an accident. Getting it drafted by a competent legal professional to protect you and your business in case of mishaps is a good idea.
If people do not know about your business, it does not exist. Online presence for any business is non-negotiable in this age of internet and social media. Ideally, you should develop a website for your business and advertise on social media to increase visibility.
You can also invest in an app for your business that allows customers to book cars virtually. This will not only increase customer convenience and boost sales but also make your business stand out among the older, established competition.
A car rental business is a people service business and heavily relies on word of mouth. Once your business is off the ground, you must focus on providing the utmost customer satisfaction.
This will ensure both an increase in customers and their loyalty. After all, the ultimate aim of your business is to rent more cars more often.
Now that you have a guide to starting a car rental business in India, it’s time to tackle the question of funding. Instead of dipping into your savings, why not consider business loans? These convenient credit vehicles allow you to set up your business comfortably.
Tata Capital offers attractive business loans with competitive business loan interest rates in the market. Further, you can apply for Tata Capital’s business loans with minimal business loan documents required.
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