Starting a car rental business in South Africa is a sound business idea, but the speed of your success & growth will depend on how much capital you have to get started. The airport car rental industry is saturated, but there’s still a gap in the market for other forms of vehicle rental services.
Ken Research stated that the flexible car rental market has increased by 25% in South Africa since the Covid-19 pandemic. Other factors for this increase include tourism, high vehicle prices, and fleet rental needs.
If this is a business venture you want to explore, Cartrack has some ideas to help you get started. We’ve also sourced a few interesting points of information that’ll help you see the viability of this idea, as well as some strategies you can implement to protect yourself from car rental company risks.
To start a car rental business in SA, you need at least one vehicle, the right legal documentation, and some capital to get started. You should also develop a set process for leasing your vehicles and tweak that process as you go. Finally, make sure you have a solid sales strategy to find clients.
The more vehicles you have to offer as rentals, the quicker you’ll make profit. But you can start with one vehicle; it’ll just take more time to get money coming in. If your vehicle is an entry-level car, you can lease it for around R150 per day (or R4 500 per month).
Remember: Higher-value vehicles can be leased for higher amounts. The more expensive your car (and the better its condition), the more you can charge.
If you have your vehicles ready, you don’t need an exorbitant amount of capital to start a car rental business. However, you will need to put a few things in place. You’ll need money to get legal documentation prepared, and you should invest in some safety features for all your vehicles.
Speak to a fleet safety company about getting:
Once you get an interested client, you’ll need a set process in place. Will you be driving the car to them? Will they fetch it? Will they sign and pay beforehand? All of these are questions to ask, and the answers will be different depending on how you want to run your car rental business.
If you can, set up an online process that makes it easy for people to use your services, get their car, and use it for a set duration. The easier you make your process, the better your reviews and the more clients you’ll end up getting in the future.
Take a look at existing car rental agreements. These can guide you in drawing up your own. A word of caution though: legal documentation MUST be error-free! So if you’re not sure about what to include or how to word it, it might be best to ask an attorney for a few hours of assistance.
It’s vital to insure each and every vehicle you rent out. You won’t know how strangers might handle your vehicles, so always be prepared with a good insurance plan. You can also add insurance to your formal agreement.
If the user agrees to pay for insurance, they won’t pay for any damages to the vehicle. (This allows you to get your paid insurance premiums back.) If they decline insurance, they will be held liable if something goes wrong. Still, you want to make sure all your vehicles are covered on YOUR side—just in case.
Yes, there is a market for new car rental companies in South Africa, but the TYPE of car rental business is important to consider. Tourism, fleet vehicle rentals, and EV rentals are all viable business opportunities in South Africa. These 3 types of car rental businesses also give you space to partner with other businesses who need your services.
Tourism is big business in SA. People from abroad love to visit places like The Cradle of Humankind, Cape Town, and wildlife destinations (to name just a few). Air BnBs are spread out across our beautiful country, and many of these places don’t offer car rental as part of their packages.
This is where you can come in and fill that market gap! Contact as many Air BnBs you can find and ask them if they’d be willing to recommend your services to their patrons. If you can offer good service, you’ll soon have a consistent stream of business—and income!
Companies are constantly looking for transport options without having to commit to buying company vehicles. This is another way vehicle rental companies can fill a big market gap. If you’re able to rent out short-haul trucks, lorries or even refrigerated cargo vehicles, these can pay off big time in the long run.
If you really want to go the extra mile with fleet vehicle leasing, offer to manage drivers & vehicles as part of your service. Our fleet software makes this job so much easier, offering your clients something that other rental companies won’t.
Electric vehicles are relatively new to the car market. Many tourists and businesses prefer to use electric vehicles, but most companies only have a limited number of them available. A good car rental business strategy is to set yourself up as an exclusive EV car rental business, giving you an edge over competing companies (even the large ones!)
A quick word on partnering: it’s much easier to market yourself by piggybacking off the marketing of others. Air BnBs is just one example, but you can also contact hotels, event organisers, and corporations that host international guests.
By finding the right partners, you can often skip the marketing side of your car rental business and just rely on the ever-flowing opportunities that come with the clientele of others.
Starting a car rental company doesn’t come without some risks. While most of these risks can be mitigated, it’s good to know what they are and how you can prepare for them. When you’re managing vehicles, you’re opening your business up to a number of risks like vehicle theft, accident damage, bad driving, and general wear & tear.
You can curb the risks of vehicle theft by making sure you have a tracking device and a back-up tracking tag in every car. Choose a tracking service provider with a good reputation and high recovery success rate for the best risk management.
You should also get insurance for your vehicles in case they aren’t recovered, allowing you to replace a vehicle easily if it gets stolen.
Your users might damage your vehicle and not report it for fear of having to pay for that damage. Having anti-collision technology on your cars will alert you to even the slightest bump, and dashcams will record (and save) anything that resembles even the most seemingly insignificant fender-bender.
Even if your cars are driven with care, they still depreciate over time. It’s almost impossible to know when a car needs maintenance or what kind of maintenance it needs without taking it to a mechanic.
But Cartrack’s technology has now advanced to such a point that it’s much easier to anticipate mechanical needs without having to pay an expert. This means you only take cars in for a service if and when they need it, and you can automatically schedule downtime (vehicles that can’t be leased for a period) so that your clients never drive vehicles that are about to break down.
You’ll always have a few “bad eggs” who break their lease agreement and keep your vehicle longer than they’re supposed to. This is where your contract comes into play. Make sure it’s a tight and clear agreement without any loopholes.
If a car is kept much longer than the agreement states, you have every right to deem that vehicle as stolen—at which point you can call our recovery team to bring it back by force.
When we look at the risks, the opportunities, and the necessities of starting a car rental company, it becomes clear that the only way to manage one effectively is by having solid fleet management technology. This helps you as the owner to:
Cartrack’s fleet management platform allows you to do all of this. So if you’re considering starting a brand new car rental business, be sure to give us a call first.
Starting a car rental business is a sound business idea, but only if you’re prepared for the risks and challenges. Learn the best strategy here.
