Car Rental Business Plan for Starting Your Own Business

Do you want to start a car rental business? Well, for a startup you will just need to purchase some automobiles to give them on rent to people for a few days or weeks. Moreover, the rent car business plan doesn’t require a specific skillset, so you can easily step in this domain without having any relevant degree.
So, if you have decided to thrive in this domain, you will need to make a car rental company business plan first, to have a clear view about what you will need to do. Just after the required registrations and licensing, you will also be needing a marketing plan for car rental business, so it is better to already include that in your initial plan.
To assist you in writing a rent car business plan, we are providing one here for a startup, Detroit Car Rentals, based in Detroit.

Executive Summary

2.1 The Business

Detroit Car Rentals will be based in Detroit, Michigan. The company will be owned by Stephen Mark and will provide its customers with fully insured and licensed automobiles ranging from simple cars to luxury ones. The company will also be offering an exceptional online management system for customers to rent its cars from anywhere.

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2.2 Management of Car Rental Company

In your starting car rental business plan, you must include the details about how will you manage all your system. Ensuring that you are getting the cars in the exact conditions in which you rented them out, is only possible if you have a good management system.
Detroit Car Rentals will have extensive personnel support. Though the owner will be supervising all the works by himself, the company will still hire managers alongside IT experts, administrators, and general workers just for the smooth running of the rent car business plan. Later in this sample business plan car rental company, you will be knowing the exact number of hired-employees along with their job descriptions.

2.3 Customers of Car Rental Company

While making a car rental agency business plan you must keep in mind the customers and market in which you will be servicing. As for Detroit Car Rentals, customers will mostly be the residents, tourists, students, and senior citizens.

2.4 Business Target

Car Rental Business Plan - 3 Years Forecast

The company aims at providing the best car rental services to its customers. Monetarily, the company’s goal is to balance its startup costs with the earned profits by the end of the first year.

Company Summary

3.1 Company Owner

Stephen Mark who is an MBA from Harvard University will be the owner of ‘Detroit Car Rentals.’ From the last two years, Mark had been working in an insurance company as a manager, but now he has decided to start his own rent car business plan in which he will have the freedom to take major decisions as well as to generate huge profit.

3.2 Why the Car Rental Business is being started

Besides just earning a profit, the rent car business plan is intended to make people’s life easier by providing them unmatchable services. One of Mark’s friend who gave him the idea is an owner of an automobile showroom. After collaborating with him and other owners of automobiles showrooms, Mark decided to invest the amount he had got from his legacy in something that can benefit him for long.

3.3 How to Start a Car Renting Business

Car Rental Business Plan - Startup Cost

Before taking any initiative it is good to review a car rental business startup guide to have an idea of what you will need to do. This detailed sample business plan car rental can also prove out to be a great help for you.
Mark has contacted the big automobile dealers to include every detail and possible consequences in his business plan for car rental company. Though his main office will be residing near Oakwood Blvd, however, he has decided to rent different locations in the same city to provide instant service. Responsible employees, technicians, and record keepers will be hired by Mark which all will remain under the vigilant supervision of experienced managers.
Moreover, an online system for booking cars and record-keeping will be created. Users will be able to select the car or vehicle through the online website. After the contract, they will be assigned an id and a password which will expire after the contract had ended. The website will also be awarding discounts to the users who had made frequent deals with the company while maintaining a good record.
The costs for the startup are as follows:

The startup requirements are as follows:

Start-up Expenses 
Legal$155 500
Insurance$76 000
Rent$64 000
Research and Development$87 000
Expensed Equipment$34 000
Signs$3 400
Start-up Assets$543 000
Cash Required$634 000
Start-up Inventory$67 000
Other Current Assets$374 000
Long-term Assets$413 000
TOTAL ASSETS$2 031 000
Total Requirements$2 450 900
Start-up Expenses to Fund$613 000
Start-up Assets to Fund$2 932 000
Non-cash Assets from Start-up$877 000
Cash Requirements from Start-up$764 000
Additional Cash Raised$56 000
Cash Balance on Starting Date$73 000
TOTAL ASSETS$1 770 000
Liabilities and Capital 
Liabilities$74 000
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$45 000
Other Current Liabilities (interest-free)$0
Planned Investment$3 545 000
Investor 1$0
Investor 2$0
Additional Investment Requirement$0
Loss at Start-up (Start-up Expenses)($1 894 000)
Total Funding$3 545 000
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    Services for Customers

    If you are to be owning a car rental business you must first carry out a thorough research on who will be your customers. Knowing your customers before starting your rent a car business can help you a lot in deciding your services as well as for deciding the number of employees who can help you in smoothly running your rent car business plan. Determining the services before time can also assist you in acquiring the required permits and licenses.
    We will be having luxury cars, standard cars, economy cars, and mini-vans, to give them on rent to people in various packages given below:

    • One Day Car Rental: We will be offering all our cars to the customers for one day in exchange for rent. The user will have the option to select a pickup position after which our drivers will take the car to the appointed place.
    • One Week Car Rental: We will provide our cars to the clients for one week on 5-day charges instead of 7. Option to select pickup location will still be available for them.
    • One Month Car Rental: Cars for one month will be provided on 24-days fare but the clients, in that case, will need to come to our main office for booking, as we’ll not be providing one-month rental service online.
    • Car Drivers: The service which mainly differentiates us from others is our offering of the car drivers. Customers will have a choice to get our drivers in affordable charges for the three of our services.

    Regular and potential clients will receive several discounts and packages. However, no customer, except they who acquired the services of our driver, will be exempted from the recovery charges if the car given to them is found with some damages.


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    Marketing Analysis of Car Rental Business

    If you are looking for how to start a car renting business that will have almost no chances to end up as a failure, you must research on your market first. If you are starting in a market full of competition, then – either you will have to provide your services at a relatively lower price or – you have to offer your clients something more than others.
    The best option, however, is to explore the market and pick up a commercial location for rent-a-car business, a location which is not saturated by already established rental car dealers. So, after having the best possible location, you can think upon several car rental business ideas that will influence that community. You will also be able to make an effective marketing plan for car rental business only after you have a clear idea of the market and market trends.
    In this sample car hire business plan we have provided the marketing plan of Detroit Car Rentals for anyone who want to benefit.

    5.1 Market Trends

    More than 22,000 car rental businesses are running in the United States. The rent car business plan is expected to expand in the coming few years as IBISWorld has reported the annual growth rate of 2.4 percent for car rental services. The huge revenue generated by the industry in 2019 also demonstrates people’s interest in renting cars. According to the report, revenue of $45 billion has been generated in 2019. The industry has also proved itself a source of employment for about 148,412 people.

    5.2 Marketing Segmentation

    Car Rental Business Plan - Marketing Segmentation

    Knowing your customers and their mindset before making your car rental business proposal can be a plus point for you. It’s the only thing that can help you in devising your advertisement strategy as well as for deciding which sort of cars could have the most demand in the market.
    Mark carried out a detailed survey asking random people about how they think a car rental company could help them. People’s response was that – at certain situations they need a car they couldn’t afford to buy or maintain and also there are situations when they think they need to hire an automobile for a certain event such as a wedding ceremony, because it is uneconomical to buy a luxury vehicle to use for just one or two times.
    Based on his research, Mark divided his target customers into three groups which are given below:

    The detailed marketing segmentation of our target audience is as follows:

    5.2.1 Tourists: The first group of our customers comprises of the tourists who come to our city to explore different areas of historic and aesthetic importance. Several tourists prefer to hire a car instead of traveling on local buses. By availing our services, they will not have to even bother about finding a car rental store because we will be dropping our cars on their said location.

    5.2.2 Students: Our second biggest target category will be the students who belong to higher schools and universities. Most students don’t own a car, so whenever they are off to a trip or break from work, they need to hire a car to enjoy their plans.

    5.2.3 Residents & Senior Citizens: Our last category will comprise of the senior citizens who usually require a person to drive for them. They also choose to travel locally and in hired cars instead of owning and maintaining their own. Besides them, residents will also be needing our services, especially in certain events.

    The detailed market analysis of our potential customers is given in the following table:

    Market Analysis       
    Potential CustomersGrowthYear 1Year 2Year 3Year 4Year 5CAGR
    Students45%31 43333 34435 25537 16639 07715,32%
    Tourists39%22 33423 34424 35425 36426 37412,42%
    Residents & Senior Citizens16%10 86512 43314 00115 56917 13713,43%
    Total100%64 63269 12173 61078 09982 58810%

    5.3 Business Target

    Detroit Car Rentals’ financial business targets are as follows:

    • To become the best rental service in the whole city within a year of the launch
    • To earn the net profit margin of $10k per month by the end of the first year and increase that profit margin by 150 percent by the end of the next year
    • To recover the investment group for business plan and startup costs by the end of six months of the launch

    5.4 Product Pricing

    As Detroit Car Rentals will be coming with certain competitive aspects and benefits for the customers thus it doesn’t need to keep its prices low to attract the target customers. Despite that the company will have almost the same prices as of its competitors, Mark is certain about his success in the rent car business plan.

    Any questions? Get in Touch!


      An essential component of a business plan car rental company is its sales strategy. Every new startup has to do something to grab public attention. If you just focus on how to start a car renting business without paying attention to what you will have to do more than your competitors – you, yourself will be reducing the chances of survival for your startup.

      Detroit Car Rentals will come up in the market with full preparation and competitive aspects, a few of which are given here.

      6.1 Competitive Analysis

      Our biggest competitive advantage lies in our online portal which allows our customers to get a car anywhere at any time. Through our online system, we will be providing convenience to our customers as they can also pay in advance through their online account. Secondly, we will be providing driving services to those who don’t want to drive our rented car or their cars by themselves.

      Lastly, our crew and our policies all will be meant to comfort our customers. The value which we’ll give to our clients will soon be evident to them if they try our services for at least once.

      6.2 Sales Strategy

      To get introduced to the groups of our target customers, we will be adopting the following strategies to advertise ourselves:

      • We will advertise our services through our website and social media
      • We will award 50 percent discount on all our services for the first week of our launch
      • We will provide our drivers without any charges for a whole month after our launch

      6.3 Sales Monthly

      Car Rental Business Plan - Sales Monthly

      6.4 Sales Yearly

      Car Rental Business Plan - Sales Yearly

      6.5 Sales Forecast

      Our sales are forecasted in the following column charts:

      Car Rental Business Plan - Unit Sales

      The detailed information about the sales forecast is given in the following table:

      Sales Forecast   
      Unit SalesYear 1Year 2Year 3
      One Day Car Rental8 4509 76012 500
      One Week Car Rental7 8008 45010 560
      One Month Car Rental5 4006 2007 960
      Car Drivers4 6005 8007 350
      TOTAL UNIT SALES26 25030 21038 370
      Unit PricesYear 1Year 2Year 3
      One Day Car Rental$50,00$50,00$50,00
      One Week Car Rental$59,00$59,00$59,00
      One Month Car Rental$65,00$65,00$65,00
      Car Drivers$85,00$85,00$85,00
      One Day Car Rental$422 500,00$488 000,00$625 000,00
      One Week Car Rental$460 200,00$498 550,00$623 040,00
      One Month Car Rental$351 000,00$403 000,00$517 400,00
      Car Drivers$391 000,00$493 000,00$624 750,00
      TOTAL SALES$1 624 700,00$1 882 550,00$2 390 190,00
      One Day Car RentalYear 1Year 2Year 3
      One Week Car Rental$31,00$31,00$31,00
      One Month Car Rental$35,00$35,00$35,00
      Car Drivers$42,00$42,00$42,00
      Direct Cost of Sales   
      One Day Car Rental$261 950,00$302 560,00$387 500,00
      One Week Car Rental$273 000,00$295 750,00$369 600,00
      One Month Car Rental$226 800,00$260 400,00$334 320,00
      Car Drivers$234 600,00$295 800,00$374 850,00
      Subtotal Direct Cost of Sales$996 350,00$1 154 510,00$1 466 270,00

      Personnel plan

      Before starting your rent car business plan it is necessary to start interviews and tests so that you can have the best personnel as soon as you launch your car rental agency.

      7.1 Company Staff

      Mark will supervise all the works of the company by himself, however, he will be hiring the following people.

      • 2 General Managers to manage different locations of Detroit Car Rentals
      • 3 Accountants to maintain the financial records
      • 1 Freelance Software Engineer to create the company’s online portal
      • 2 IT Experts to manage companies’ software, websites and social sites
      • 3 Technical Assistants to maintain the cars
      • 1 Front Desk Officer to receive customers
      • 1 Sales Executive to advertise the company
      • 2 Cleaners to upkeep the company’s office and equipment
      • 2 General Workers for day-to-day works
      • 4 Drivers
      • 1 Security Guard

      7.2 Average Salary of Employees

       Personnel Plan   
       Year 1Year 2Year 3
      General Managers$53 240$58 564$64 420
      Accountants$33 275$36 603$40 263
      Freelance Software Engineer$39 930$43 923$48 315
      IT Experts$26 620$29 282$32 210
      Technical Assistants$19 965$21 962$24 158
      Inventory Manager$26 620$29 282$32 210
      Front Desk Officer$46 585$51 244$56 368
      Sales Executive$33 275$36 603$40 263
      Cleaners$26 620$29 282$32 210
      General Workers$46 585$51 244$56 368
      Drivers$33 275$36 603$40 263
      Security Guard$66 550$73 205$80 526
      Total Salaries$452 540$497 794$547 573
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        Financial Plan

        If you have decided to start up car rental business and have gone through the phases of exploring car rental business ideas and making marketing and personnel plan, there is just one thing left. Now you have to make a detailed financial plan for your rent car business plan. As you will be requiring a significant amount to buy cars, getting them insured and creating a management portal – you must have a perfect sort of financial plan to make sure that things are going in the right way.
        Knowing its importance, Mark had decided to get this task done by an experienced financial planner who can also tell him the strategy to recover his investment and advertisement costs. The financial plan of Detroit Car Rentals is given here in detail for your help:

        8.1 Important Assumptions

         General Assumptions   
         Year 1Year 2Year 3
        Plan Month123
        Current Interest Rate13,00%14,00%15,00%
        Long-term Interest Rate10,00%10,00%10,00%
        Tax Rate28,48%28,84%29,20%

        8.2 Brake-even Analysis

        Car Rental Business Plan - Brake-even Analysis
         Brake-Even Analysis 
        Monthly Units Break-even4330
        Monthly Revenue Break-even$124 000
        Average Per-Unit Revenue$278,43
        Average Per-Unit Variable Cost$0,77
        Estimated Monthly Fixed Cost$198 463

        8.3 Projected Profit and Loss

         Pro Forma Profit And Loss   
         Year 1Year 2Year 3
        Sales$1 624 700$1 882 550$2 390 190
        Direct Cost of Sales$996 350$1 154 510$1 466 270
        TOTAL COST OF SALES$996 350$1 154 510$1 466 270
        Gross Profit$628 350$728 040$923 920
        Gross Margin %38,67%38,67%38,65%
        Payroll$452 540$497 794$547 573
        Sales and Marketing and Other Expenses$2 300$2 450$2 600
        Depreciation$2 070$2 070$2 070
        Leased Equipment$0$0$0
        Utilities$4 750$5 000$5 250
        Insurance$1 800$1 800$1 800
        Rent$8 000$8 500$9 000
        Payroll Taxes$53 158$59 374$65 590
        Total Operating Expenses$524 618$576 988$633 883
        Profit Before Interest and Taxes$103 732$151 052$290 037
        EBITDA$103 732$151 052$290 037
        Interest Expense$0$0$0
        Taxes Incurred$20 746$30 210$58 007
        Net Profit$82 986$120 842$232 029
        Net Profit/Sales5,11%6,42%9,71%

        8.3.1 Profit Monthly

        Car Rental Business Plan - Profit Monthly

        8.3.2 Profit Yearly

        Car Rental Business Plan - Profit Yearly

        8.3.3 Gross Margin Monthly

        Car Rental Business Plan - Gross Margin Monthly

        8.3.4 Gross Margin Yearly

        Car Rental Business Plan - Gross Margin Yearly

        8.4 Projected Cash Flow

        Car Rental Business Plan - Project Cash Flow
         Pro Forma Cash Flow   
        Cash ReceivedYear 1Year 2Year 3
        Cash from Operations   
        Cash Sales$56 000$58 000$62 500
        Cash from Receivables$5 000$9 000$9 500
        SUBTOTAL CASH FROM OPERATIONS$47 143$53 651$59 359
        Additional Cash Received   
        Sales Tax, VAT, HST/GST Received$0$0$0
        New Current Borrowing$0$0$0
        New Other Liabilities (interest-free)$0$0$0
        New Long-term Liabilities$0$0$0
        Sales of Other Current Assets$0$0$0
        Sales of Long-term Assets$0$0$0
        New Investment Received$0$0$0
        SUBTOTAL CASH RECEIVED$47 143$53 651$55 359
        ExpendituresYear 1Year 2Year 3
        Expenditures from Operations   
        Cash Spending$23 994$26 493$29 473
        Bill Payments$14 895$17 439$20 334
        SUBTOTAL SPENT ON OPERATIONS$35 296$39 549$43 582
        Additional Cash Spent   
        Sales Tax, VAT, HST/GST Paid Out$0$0$0
        Principal Repayment of Current Borrowing$0$0$0
        Other Liabilities Principal Repayment$0$0$0
        Long-term Liabilities Principal Repayment$0$0$0
        Purchase Other Current Assets$0$0$0
        Purchase Long-term Assets$0$0$0
        SUBTOTAL CASH SPENT$35 296$35 489$43 882
        Net Cash Flow$17 383$18 332$19 233
        Cash Balance$22 033$25 333$29 483

        8.5 Projected Balance Sheet

         Pro Forma Balance Sheet   
        AssetsYear 1Year 2Year 3
        Current Assets   
        Cash$286 243$320 102$353 961
        Accounts Receivable$18 253$20 133$22 013
        Inventory$4 390$4 860$5 330
        Other Current Assets$1 000$1 000$1 000
        TOTAL CURRENT ASSETS$201 259$237 468$273 677
        Long-term Assets   
        Long-term Assets$10 000$10 000$10 000
        Accumulated Depreciation$13 000$14 500$16 000
        TOTAL LONG-TERM ASSETS$980$610$240
        TOTAL ASSETS$198 839$232 978$267 117
        Liabilities and CapitalYear 1Year 2Year 3
        Current Liabilities   
        Accounts Payable$10 220$10 890$11 780
        Current Borrowing$0$0$0
        Other Current Liabilities$0$0$0
        SUBTOTAL CURRENT LIABILITIES$9 482$10 792$12 102
        Long-term Liabilities$0$0$0
        TOTAL LIABILITIES$9 482$10 792$12 102
        Paid-in Capital$30 000$30 000$30 000
        Retained Earnings$48 000$56 300$70 000
        Earnings$112 020$154 000$177 000
        TOTAL CAPITAL$189 360$222 190$255 020
        TOTAL LIABILITIES AND CAPITAL$198 839$232 978$267 117
        Net Worth$198 600$234 000$289 000

        8.6 Business Ratios

         Ratio Analysis    
         Year 1Year 2Year 3INDUSTRY PROFILE
        Sales Growth4,23%5,42%6,12%4,00%
        Percent of Total Assets    
        Accounts Receivable4,23%5,32%6,30%9,30%
        Other Current Assets1,55%1,92%2,31%23,40%
        Total Current Assets122,30%143,30%154,30%34,30%
        Long-term Assets-10,20%-12,32%-14,21%45,30%
        TOTAL ASSETS100,00%100,00%100,00%100,00%
        Current Liabilities5,31%6,32%4,31%34,2%
        Long-term Liabilities0,00%0,00%0,00%25,60%
        Total Liabilities3,43%4,31%5,31%34,40%
        NET WORTH99,32%101,04%102,76%44,90%
        Percent of Sales    
        Gross Margin96,40%96,90%97,10%0,00%
        Selling, General & Administrative Expenses74,30%76,21%78,21%65,20%
        Advertising Expenses3,43%4,32%5,33%1,40%
        Profit Before Interest and Taxes32,32%35,43%38,32%2,88%
        Main Ratios    
        Total Debt to Total Assets2,76%2,87%3,32%67,10%
        Pre-tax Return on Net Worth67,32%68,32%70,98%4,50%
        Pre-tax Return on Assets70,10%71,30%73,20%9,00%
        Additional RatiosYear 1Year 2Year 3 
        Net Profit Margin23,20%26,40%28,40%N.A.
        Return on Equity53,50%67,30%65,30%N.A.
        Activity Ratios    
        Accounts Receivable Turnover4,564,564,56N.A.
        Collection Days100100100N.A.
        Inventory Turnover27,528,430,4N.A.
        Accounts Payable Turnover18,319,420,4N.A.
        Payment Days272727N.A.
        Total Asset Turnover1,91,921,94N.A.
        Debt Ratios    
        Debt to Net Worth0-0,01-0,02N.A.
        Current Liab. to Liab.111N.A.
        Liquidity Ratios    
        Net Working Capital$134 000$166 000$187 000N.A.
        Interest Coverage000N.A.
        Additional Ratios    
        Assets to Sales0,560,580,61N.A.
        Current Debt/Total Assets3%2%2%N.A.
        Acid Test25,527,529,5N.A.
        Sales/Net Worth1,561,761,93N.A.
        Dividend Payout000N.A.

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