Successful entrepreneurship often starts with tapping into an existing pool of eager customers who are already looking for the products or services you offer. The car rental industry is a sterling example. At tourist destinations—particularly near resorts, airports, and train stations—there’s a constant stream of leisure and business travelers who need temporary transportation. Additionally, as car ownership becomes less important for younger generations, short-term rentals can fill in gaps when those who don’t own cars particularly need them.

Beyond the steady demand, a rental car business cleverly leverages a depreciating asset—the vehicle itself—as a cash-generating tool. A successful car rental business will use its fleet of vehicles to generate consistent income. Then, at the end of the vehicle’s service life, the company can sell it to recoup a portion of the initial investment. 

If you’ve set your sights on starting your own car rental business, here are some things to consider:

Types of car rental businesses

• Franchises
• Peer-to-peer
• Short term
• Long term
• Speciality

There’s more than one way to create a thriving car rental business. Here are a few models to consider when drafting plans for your own business, which you can mix and match depending on what sort of service you’re trying to offer:

Franchises

In this business model, an entrepreneur buys the rights to operate a location under the umbrella of a well-known brand like Hertz or Enterprise. Pairing with a major car rental company lets you leverage the benefits from a recognized brand name, including national marketing campaigns run by that brand. You’ll also have access to their established car rental software to confirm online bookings and track vehicle availability. 

Peer-to-peer

This model operates through a third-party platform that connects car owners with renters. Platforms like Turo and Getaround allow car owners to rent out their personal vehicles to drivers via an online app or website. The peer-to-peer model requires less startup capital than a traditional fleet-based business (e.g., Hertz, Avis), but it also offers car owners less control since the rental platform sets all policies.

Short term

This is the most common model in the global car rental market, in which customers rent vehicles for a few days to a week. This type of business is highly dependent on daily traffic, tourism, and business travel, so you’ll often find it at airports or major city centers. These short-term rental companies can be either standalone or part of franchises. 

Long term

This model focuses on renting vehicles for extended periods, typically a month or longer. It caters to corporate clients, individuals on extended vacations, or those who need a rental vehicle while their own car undergoes repairs. Like the short-term model, you can operate a long-term car rental business as a branded franchise or a stand-alone small business.

Specialty

A specialty car rental business caters to a niche market by offering a specific type of vehicle. This can include luxury cars, classic cars, exotic sports cars, recreational vehicles (RVs), and cargo vehicles. Depending on the niche you select, you may be able to charge a premium rate. As such, the profit margins per rental can be significantly higher.

How to start a car rental business

1. Research your target market
2. Write a well-crafted business plan
3. Name and register your business
4. Procure the necessary licenses and permits
5. Acquire cars to rent
6. Set your pricing strategy
7. Build a business website
8. Pursue partnerships
9. Market your business
10. Invest in vehicle maintenance
11. Provide stellar customer service

Many car rental companies are local businesses that operate as franchises or have carved out small niches in the car rental marketplace. While some car rental endeavors require investment capital in the form of business loans or personal savings, others can get up and running with comparatively little money. Here are the steps you’ll need to take to turn a car rental business idea into a profitable venture:

1. Research your target market

The road to profitable business operations starts with thorough market research. The US car rental market size was estimated to be $37.88 billion in 2024. Industry analysts project it to grow at a 7.5% compound annual growth rate (CAGR) from 2025 to 2030. To capitalize on this growth, you need to understand exactly who your customers are and what they need from a rental service.

Start your market research by studying your target audience, their needs, pain points, and customer preferences. You can create buyer personas to describe the types of people in your target market. The typical customer for a peer-to-peer rental might be different from one who rents from heavily marketed national brands. This initial research could help you attract customers in a competitive market.

2. Write a well-crafted business plan

Careful planning can help you set and meet your financial goals and ensure customer satisfaction over the long haul. A well-crafted business plan should include your potential customers, detailed financial projections, your pricing strategy, operational goals, a marketing plan, potential funding sources, and long-term strategies to make your business profitable and sustainable.

In the rental car industry, a business plan will focus on where you locate your business (e.g., next to an airport, in a downtown core, etc.), what kind of car rentals you’ll offer (e.g., a franchise of a national brand, a specialty service like cargo van rentals, etc.), and how you’ll acquire your fleet (e.g., cash purchases, long-term leases, etc.). Will you seek out partners to invest in your business, or will this be a solo venture?

3. Name and register your business

Choose a unique and memorable name for your business. Shopify’s business name generator tool can help you in this endeavor. You’ll need to register that name as a legal entity. The biggest decision you need to make is regarding the level of risk you’re comfortable with. In the case of sole proprietorships and general partnerships, owner(s) are personally responsible for the business’s losses, debts, and liabilities. In limited liability companies (LLCs) and corporations, the business’s assets and liabilities are separate from the owners’.

A business attorney and a tax professional can be helpful resources when deciding what the best entity type for your business is. Once you’ve decided, register through your state’s secretary of state office or business division.

You’ll also need a separate business bank account and a business credit card to begin building business credit.

4. Procure the necessary licenses and permits

Your state and municipality may require that your car rental business obtain numerous licenses and permits to legally operate. There are no federal licenses or permits related to the rental car industry; however, many states have their own requirements for rental car businesses.

For instance, the state of Washington requires business owners to obtain a document called a Rental Car Endorsement (which is free). Inquire with your own state government—often via a department of revenue or a Secretary of State’s office—for local requirements.

You should also acquire business insurance, including liability insurance and commercial auto insurance, to protect your company and your renters. Once again, a skilled business attorney can help ensure you meet all legal requirements.

5. Acquire cars to rent

You can acquire your fleet of vehicles through various methods. Options include purchasing cars outright from a car dealership, either new or used. Alternatively, you might consider leasing vehicles, which can lower your upfront costs. If you operate as a franchise of a large brand like Hertz or Enterprise, the larger corporation may assist in your fleet acquisition.

Pay attention to market trends to see what types of cars are worth having in stock. For example, some regional customers may show particular interest in renting electric vehicles—a trend noted by industry leaders Enterprise and Hertz. Other regions may favor specific types of vehicles, such as SUVs or convertibles. Understanding your market will guide your fleet acquisition strategy.

6. Set your pricing strategy

Research your competition to set a competitive pricing structure. You’ll need to monitor a host of factors when it comes to charging rates that let you meet all your expense obligations and turn a profit. For instance, many state governments tack on significant taxes to a car rental contract. As of now, Minnesota, Maryland, Nevada, Arkansas, and Texas have the highest rental car taxes. If you do business in those states, you may need to adjust your prices to account for the higher costs incurred by taxes.

Some companies offer dynamic pricing based on demand, time of year, or length of rental. For instance, you could probably charge more for a car rental in a beach town in the summer than in the winter.

Prices may also fluctuate based on where customers pick up cars. In many cases, airport car rentals are more expensive when the rental lot is on airport property, as opposed to on a separate parcel of land just beyond the airport limits. That’s because, when compared to private landlords, airports may charge higher lease rates to their tenants. 

7. Build a business website

Using a platform like Shopify, launch a business website that allows you to showcase your fleet with high-quality images, process online bookings, and respond to customer inquiries. If you’re partnering with a rental car conglomerate like Avis or Enterprise, customers will use those companies’ portals to book with you.

Integrate local search engine optimization (SEO) using techniques like keyword research and content marketing. You can also draw traffic to your site via paid online advertising. These tactics are crucial for independent businesses that aren’t franchises of a larger car rental corporation. If you team up with the big players like Hertz, you’ll largely piggyback off of those brands’ marketing and SEO.

8. Pursue partnerships

Car rental companies can gain repeat business by partnering with travel agencies for referrals in exchange for a small fee. You can also team up with car dealers to offer temporary replacement vehicles when a customer’s car needs multiday repairs. If you’re going the peer-to-peer route, you’ll get a lot more business by advertising your vehicle rentals on a site like Turo.

9. Market your business

Implement a marketing plan that includes a mix of pay-per-click (PPC) ads, social media ads, referral programs, affiliate marketing, and positive reviews to both attract and retain customers.

These tactics will particularly help you with local SEO, where you’re aiming to show up in the internet search results of people in your area. You’ll want to build up local citations—mentions of your business’s name, address, and phone number (NAP) in online directories, apps, and websites like Google Maps and Apple Maps. You can also pursue local citations on social media platforms like Facebook and Instagram.

If you’re trying to build up a national presence, focus your marketing efforts on platforms where customers are already shopping for rental vehicles. These include Kayak, Expedia, and CarRentals.com. These platforms allow paid advertising; you can also boost your search rankings by offering competitive rates and a wide range of vehicles. 

10. Invest in vehicle maintenance

A steady vehicle maintenance ritual will benefit both you and your customers. You’ll keep your fleet on the road, making money for you. Major car rental conglomerates have dedicated staff that clean vehicles after each rental, routinely change their oil and monitor tire pressure, and perform routine maintenance. If you choose to operate a solo car rental business, you may benefit from having such professionals on your staff. Safe, reliable cars will produce satisfied customers who may reward you with repeat business.

11. Provide stellar customer service

Providing exceptional customer service is critical in so many market sectors, and the rental car industry is no exception. There are a lot of car rental agencies competing for clients; excellent customer service can help you stand out from the pack. Most rental car companies offer similar models at similar daily rates, so what sets you apart? Exceptional service might involve consistently short lines, reliable shuttle service, free add-ons like car seats, and simple insurance and fuel requirements with no aggressive upselling. In a competitive market, such service enhancements can be the differentiator between your business and someone else’s.