How to start a car rental business: your first moves

Starting a car rental business is an exciting venture that combines a passion for vehicles and strong customer service skills with business savvy. The market is a multi-billion dollar industry, fueled by steady demand from tourists, business travelers, and locals who need a temporary ride.

This guide will take you through the practical steps of validating your business concept, securing funding, obtaining necessary licenses, and acquiring your first vehicles to help you launch a successful car rental business in the U.S.

Step 1: Plan your business and validate your idea

Start by researching your local market. Check data from your city’s tourism board and airport to gauge visitor numbers. Use Google Trends to see how often people in your area search for car rentals. This helps you understand seasonal demand before you spend a dime.

Next, analyze your competition. Look at what independent owners on Turo and Getaround offer. Also, review the local fleets and pricing of major companies like Hertz and Enterprise. Many new owners buy the wrong cars, so let local demand guide your vehicle choices.

Estimate your startup costs

Speaking of costs, you need a clear budget. Initial expenses can range from $25,000 to over $100,000, depending on your fleet size. Here is a typical breakdown for a single vehicle to get you started.

• Vehicles: $15,000 - $30,000 for a quality used car.
• Commercial Insurance: $5,000 - $10,000 annually per vehicle.
• Licenses and Permits: $500 - $1,500 for initial setup.
• Booking Software: $1,000 - $5,000 for a professional system.

A frequent misstep is underbudgeting for commercial fleet insurance. Your personal auto policy will not cover business use, so it is wise to get quotes from specialized insurers early in your planning process.

Here are 3 immediate steps to take:

• Analyze local tourism reports to forecast seasonal demand.
• Scout competitor fleets and daily rates on Turo and Enterprise.
• Draft a startup budget with detailed estimates for cars and insurance.

Step 2: Set up your legal structure and get licensed

You should form a Limited Liability Company (LLC). This structure protects your personal assets, like your home, if the business faces a lawsuit. It is a simple way to create a legal separation between you and your company.

File your LLC with your state’s Secretary of State. The cost is typically $50 to $500. Once established, you can elect S Corp status with the IRS. This move can potentially save you money on self-employment taxes as your profits grow.

Next, get an Employer Identification Number (EIN) from the IRS. It is free and you can apply online. You will need this number to open a business bank account, file taxes, and hire any future employees.

Now for state and local requirements. You will need a general business license from your city or county. Some areas also require a specific vehicle rental permit. Your local Department of Motor Vehicles (DMV) is the best place to start asking questions.

A frequent mistake is using personal vehicle registrations. Your cars must have commercial plates. Failing to do this can void your insurance and lead to fines. Budget around $100-$500 per vehicle for these registrations and permits, which can take 2-4 weeks to process.

Here are 3 immediate steps to take:

• File LLC formation documents with your Secretary of State.
• Apply for a free Employer Identification Number (EIN) on the IRS website.
• Call your city clerk’s office to identify all required local business permits.

Step 3: Insure your fleet and manage risk

Secure the right coverage

Your top priority is commercial auto insurance. A standard policy will not cover rentals. You need coverage specifically for a rental fleet, which can run $5,000 to $10,000 per car annually. A solid policy should offer at least $1 million in combined single limit (CSL) liability.

Many new owners make the mistake of getting a cheaper, non-specialized policy. This can leave your business exposed, as it may not cover claims from rental operations. Instead of your local agent, contact brokers who specialize in rental fleets, like Lancer Insurance or National Interstate.

You will also need General Liability insurance, which protects you if a customer is injured on your property. If you hire employees, Workers’ Compensation is legally required in most states. These can often be bundled with your auto policy for a better rate.

Here are 3 immediate steps to take:

• Contact a specialized broker like Lancer or National Interstate for a quote.
• Request a policy with at least $1 million in CSL liability coverage.
• Ask about bundling General Liability with your commercial auto policy.

Step 4: Secure your location and equipment

Choose your operational base

You will likely need a property zoned for commercial use, such as C-2 or C-3. Contact your city’s planning department to confirm the requirements for a "vehicle rental" business. Many new owners overlook this and face issues with city code enforcement later.

A small office of 200-500 square feet is usually sufficient. Your main concern is parking. Plan for at least 1.5 parking spaces per car in your fleet to accommodate both rented and available vehicles. This prevents logistical headaches during busy periods.

When you negotiate a lease, push for dedicated, marked parking spots. This makes your operation appear more professional and avoids disputes with neighboring businesses over shared space. Some landlords may offer a lower rate for lots slightly off the main road.

Equip your operation

With your space figured out, you can now acquire your operational gear. Focus on security and efficiency. Your initial equipment investment will be relatively modest compared to the vehicles themselves, but these items are necessary for daily operations.

Here is a breakdown of what you will need:

• GPS Trackers: Expect to pay $100 - $250 per unit. Look at providers like Bouncie or Vyncs for real-time location and vehicle health data.
• Key Management: A secure, wall-mounted lockbox costs between $150 and $500. This protects your most valuable assets.
• Cleaning Supplies: Set aside around $500 for a shop vacuum, upholstery cleaner, and professional detailing products to keep your cars in top condition.

Here are 3 immediate steps to take:

• Contact your city’s planning department about zoning for a car rental business.
• Calculate your total parking needs based on your planned fleet size.
• Get quotes for GPS trackers and a secure key lockbox system.

Step 5: Set up your payment processing

Handle payments and deposits

You will primarily accept credit cards. It is standard practice to place a temporary hold of $200-$500 on a customer’s card as a security deposit. This protects you against damages or late returns. Make this policy clear in your rental agreement.

When you choose a payment processor, prioritize flexibility. Many new owners get locked into systems with high monthly fees or clunky hardware. You should look for a solution with transparent, pay-as-you-go pricing to keep overhead low as you grow.

For car rental businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit, and digital wallets directly through your smartphone. Just tap and you are done.

At just 1.99% per transaction with no hidden costs or extra hardware, it is a significant saving. Other processors often charge rates above 2.5%. It is particularly useful for handling walk-up customers or processing payments right at the vehicle during drop-off.

• Get Started: Download JIM app for iOS
• Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone
• Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers

Here are 3 immediate steps to take:

• Decide on your security deposit amount and state it in your rental agreement.
• Compare pay-as-you-go payment processors against options with monthly fees.
• Download the JIM app to see how it works for mobile payments.

Step 6: Secure funding and manage your finances

Most lenders see vehicles as solid collateral. This makes equipment financing a good option for acquiring your fleet. You can approach lenders like Crest Capital or even your local bank for loans that cover up to 100% of the vehicle cost, with rates often between 6% and 12%.

For broader startup costs, you might consider an SBA 7(a) loan. These government-backed loans can provide $50,000 to $150,000 for new businesses. You will generally need a credit score above 680 and a detailed business plan to qualify.

Plan for your first six months

Beyond the cars, you need working capital. This is the cash that covers your expenses before rental income becomes steady. For a small fleet, aim to have at least $30,000 to $50,000 set aside for your first six months of operation.

A frequent misstep is securing a loan just for the cars, leaving no cash for insurance premiums, marketing, or maintenance. This puts the business under financial pressure from the start. Your loan application should include these operational costs.

Here are 3 immediate steps to take:

• Request a quote for an equipment financing loan for your target vehicles.
• Review the SBA 7(a) loan requirements on the official SBA website.
• Create a 6-month budget to calculate your exact working capital needs.

Step 7: Hire your team and set up operations

Build your initial team

You will not need a large staff at first. Your first hire should be a Rental Agent. This person handles customer check-ins, processes rental agreements, and inspects vehicles. Expect to pay between $15 and $22 per hour for this role.

There are no specific certifications for this job. However, you should look for someone with a clean driving record and a background in customer service. Many new owners hire part-time help initially to keep payroll costs low while they learn the business rhythm.

Streamline your daily workflow

To manage bookings and your fleet, you need dedicated software. Systems like Rent-a-Car or HQ Rental Software automate reservations and track vehicle availability. This prevents the double-bookings that often happen when people rely on spreadsheets to start.

As you grow, a good benchmark is to have one full-time employee for every $150,000 to $200,000 in annual revenue. This ratio helps you scale your team in line with your income, which prevents overstaffing during slower seasons.

Here are 3 immediate steps to take:

• Draft a job description for a part-time Rental Agent.
• Request demos from rental software providers like Rent-a-Car.
• Project your first-year revenue to estimate your staffing budget.

Step 8: Market your business and get customers

Focus on local channels first

Your first customers will likely come from your local area. Claim your free Google Business Profile immediately. This action puts you on Google Maps and in local search results. Encourage your first few renters to leave reviews to build credibility quickly.

You can also form partnerships with local hotels or auto repair shops. Offer them a 10% commission for each referral. This creates a steady stream of customers with very little upfront cost.

Use online travel agencies strategically

Listing on sites like Kayak or Rentalcars.com gives you instant visibility. However, expect to pay commissions of 15% to 25% on each booking. Many new owners rely too heavily on these platforms, which can shrink profit margins significantly.

Use these sites to fill gaps in your schedule, not as your primary source of business. Your long-term goal should be to drive direct bookings through your own website, where you keep 100% of the revenue.

Here are 3 immediate steps to take:

• Claim and complete your Google Business Profile with photos of your cars.
• Draft a simple partnership email to send to three local hotels.
• Research the commission structures for two major rental comparison websites.

Step 9: Set your pricing and create rental packages

Establish your pricing structure

Start with a tiered pricing model. Offer daily rates for tourists, discounted weekly rates for business travelers, and monthly options for long-term clients. You should also implement dynamic pricing, increasing your rates by 15-30% during holidays or major local events to match demand.

To set your baseline, research what competitors charge for similar vehicles. Look at listings on Turo and the official sites for Hertz and Avis in your area. Your goal is not to be the cheapest, but to price competitively based on the value and service you provide.

Many new owners price too low and forget about profit. Aim for a gross profit margin of 30-40% per rental. If your daily cost to own and operate a vehicle is $40, your rental rate should be at least $55 to $65 to ensure a healthy business.

You can also boost revenue with add-ons. Offer child seats for $10-$15 per day or a pre-paid fuel option for a flat fee of $50-$70. These small charges add up and can significantly increase your profit on each transaction.

Here are 3 immediate steps to take:

• Calculate the all-in daily cost for one of your vehicles.
• Research competitor daily and weekly rates for a comparable car model.
• Create a price list for three add-on services you can offer.

Step 10: Maintain quality and scale your operation

Maintain quality control

To keep customers returning, you should aim for an average review score of 4.5 stars or higher. You can track this through your booking software or Google Business Profile. A frequent oversight is letting cleaning standards drop during busy periods, which quickly leads to poor reviews.

You should also implement a strict maintenance schedule. Perform oil changes every 5,000 miles and rotate tires every 7,500 miles. This practice prevents unexpected breakdowns and costly repairs that can damage your reputation and sideline a vehicle for days.

Scale your business

The key metric for expansion is your fleet utilization rate. Once your cars are consistently booked more than 80% of the time for two consecutive months, it is a strong signal to add another vehicle. This ensures you are growing based on proven demand.

As you grow past 10-15 vehicles, spreadsheets become unmanageable. You might want to look at advanced fleet management systems like RentWorks. They integrate with accounting software like QuickBooks and automate your financial reporting, which saves significant administrative time.

For staffing, a good benchmark is to add one full-time employee for every $150,000 in annual revenue. This helps you manage growth without letting your payroll get ahead of your income, especially during slower seasons.

Here are 3 immediate steps to take:

• Set a target customer review score of 4.5 stars and track it weekly.
• Calculate your current fleet utilization rate to decide if it is time to expand.
• Research advanced fleet management software that integrates with accounting.

You now have the roadmap to launch your car rental business. Remember that your reputation is built one rental at a time through clean cars and great service. Stay focused on the customer experience, and you will build a business that lasts. You are ready for the road ahead.

As you handle those first bookings, make payments simple. JIM turns your phone into a card reader, letting you accept payments anywhere for a flat 1.99% fee with no extra hardware. It makes getting paid easy from day one. Download JIM to get started.