Starting a Car Rental Business in Nigeria
Renting a car is one of the most cost-effective and easy methods to get around a city. Car rental services are in high demand, especially in trade and commercial hubs like Lagos and other prominent cities in Nigeria. The fact that the car rental sector has been growing at a compound yearly rate is more evidence of this.
Car rental firms make money in a variety of ways. What is the largest automobile rental firm in the world? What is the best way to start a car rental business? When compared to other transportation service businesses, car rental is one of the most profitable start-up ideas. In the automobile rental sector, however, there is severe competition, but only because the business premise is so strong.
Car rental firms generally serve customers who require a temporary vehicle, such as those who do not own a car, out-of-town travelers, or owners of damaged or destroyed vehicles awaiting repair or insurance settlement. Car rental firms may also cater to the demands of the self-moving industry by renting vans or Lorries, as well as other types of vehicles such as motorbikes or scooters in some regions.
How to Start a Car Rental Business
Just like every other type of business, you’d need to go through some steps before launching your car rental business. Below is a step-by-step guide on starting a car rental business in Nigeria:
Conduct a market survey
In other business, vehicles were chosen more for their appearance and comfort, but a car rental business focus more on usefulness and efficiency, as well as being both cost and environment friendly. Conduct a survey in the area where you wish to launch your car rental company. You should make your research about things like:
- What kind of automobiles do people want?
- The number of competitors in the business?
- The market demand for automobiles in the area where the business is to be opened?
- How well can the customers pay for the cars?
We advise that you may also seek guidance from several proprietors of currently operating automobile rental companies to further clear your worries on specific aspects.
The Entrepreneur should also learn how much their competitors charge and how they keep their vehicles safe from theft. You should also do some study on the market and its potential profits. Because some people would like to offer luxury automobile rental services and their clients would be restricted to people of specific classes and certain types of events and you will need to have a thorough understanding of whatever you choose to perform and also determine your client. This is critical because it will influence your decision on which drivers and vehicles to purchase.
Know the type of rental business contract to venture in
This is yet another crucial factor to consider when registering your car rental business. You will have to choose between the two types of car rental contracts or you can decide to venture in the both types of car rent business. However, this will depend on how conveniently you can operate the firm, all things being equal:
- Contract hire car rent: This when corporation leases a car from a leasing company for a set period of time and pays monthly rental payments on time. The leasing company owns the car and is responsible for all associated hazards. The car is returned to the leasing company once the term is over.
Contract Hire is a great choice for VAT-registered businesses who don’t want to declare their vehicles on their balance sheet as an asset. Plus, because the residual value of the vehicle is reflected into the monthly fee, you won’t have to worry about it. One of the advantages of this rent is that you also have the option to switch automobiles on a regular basis and once your lease period is up, you can choose a brand-new vehicle. Contract hires can be effective if you want long-term relationships with small brands.
- Daily hire car rent: In the instance of a daily hire rental, you’d be renting out your vehicles to individuals with an expected return on daily basis. Daily car hire can provide amazing flexibility, reliability along with financial benefits for the business. Like, if you can effectively deal with the general population, a day hire rental would be ideal. Renting vehicles daily can grant you an ideal solution to predict the demand of a business.
Guides to start a car rental business
Prepare a business plan
A business plan is a document that depicts a new firm in greater detail. It contains detailed information about the company’s products and services. Writing a business plan will assist you in effectively directing your company. Writing a company strategy does not need a lot of technical knowledge. Keep it simple but thorough, with no ambiguities. If you want to avoid the stress of writing a business plan, hire a professional to do it for you.
In any case, you’ll need a business plan because it will function as a roadmap for carrying out tasks in your rental firm. You can also get a loan from a bank after they evaluate your business plan.
Business plan will also allow you to determine the amount of expenses to be incurred in the process of the business. In your car rental business plan, you’ll also be allow to determine all the financial information on the company’s top management, operations, sales and marketing in order to avoid overspending but enhance financial predictions.
Your business plan should also be stretch out to determining your clients. Some people would like to provide luxury automobile rental services, but this is only to persons from certain social classes and for specific sorts of occasions. This is critical since it will influence your decision on which drivers and vehicles to purchase.
Items like these should also be included in your company strategy:
- Executive Summary of the Business
- Objectives and Mission Statement
- Keys to Success
- Company Summary
- Market Analysis
- Marketing and Advertising Plan
- Management Summary
Your business plan should also include the fleet of cars, an office, computers, printers, high-speed Internet, incorporation costs, business and automotive insurance, vehicle maintenance tools, a closed-circuit video system and staff wages/salaries that will be required to keep the business moving. You’ll be needing cars for your business, and a few different types of cars will be great for a start- up. For example, if you’d be starting with 5 cars, which can include 2 luxury cars. Another important factor to consider while buying your cars is your locality.
Lastly, we all know that there are a lot of harsh, vulgar, and disrespectful drivers in Nigeria nowadays. Add to that the fact that some drivers can be dishonest. So, in order to be on a saver side, conduct a thorough background check on any driver you want to recruit for the business and determine the number of drivers to employ in order to avoid spending too much on drivers.
Choose a suitable business name
Your choice of business name should be unique and easy to remember while also communicating what services you provide. A good business name should be memorable while also providing potential customers a sense of what your company is all about.
If you plan to have a website in the future, your name will be useful.
Choose a good location for your business
The next step is to decide how and where your workplace will be located. The ideal site is one that is both safe and convenient. It will also help your vehicle rental business if it is located near airports, hotels, tourist attractions, and railway stations. If you’re establishing a business in the same area as other well-established businesses, you may need to come up with something distinctive and different from your competitors’ offerings. Starting a luxury automobile rental business in an area dominated by traditional transportation providers, for example, will help you stand out.
When the cars are not with the renters, you need a place to keep them. Rent a garage where cars not in use are parked. You can rent out a garage for a lower price instead of buying the place. If you only own a single car, then you can park it in your home garage.
You may either buy or rent a space or a storefront to display the different kind of cars you buy for the business. You’ll need to set up your place so that potential clients may come in and look around. And, this will prompt them to make their choice from all sorts of car they would want to rent.
Obtain the necessary licenses for running your business
The next step will involve applying for a business license from the regulatory authority. The license is a small document describing your business and this might attract a small fee. In Nigeria, the ministry of transportation oversees the automobile rental industry. This government organ is known by several names in different states. As a result, find out where they are and get your company properly licensed. You will become a member of the association for taxis and cabs in the area where you want the business to operate.
You’ll also require licenses and permissions from the Federal Airport Authority of Nigeria if you want to rotate your company throughout the airport grounds (FAAN).
Listed below are some of the legal documents that are required to run a car rental business successfully in Nigeria.
- Certificate of Incorporation
- Business Plan
- Business License
- Insurance Policy
- Contract Agreement
- Operating Agreement
- Offer Letters
Get insurance for all your cars
Get Insurance on all your cars against dangers and accidents. For car rental firms, this is maybe the most crucial concern. It should go without saying that trading without any sort of fleet insurance is unlawful. It’s worthwhile to search around for appropriate coverage at a reasonable price. Some firms, such as Tower Gate Insurance, provide “pay as you go” insurance plans that provide all of the benefits of an annual coverage while allowing for more flexibility.
Marketing your business
Marketing is the managerial process for recognizing, predicting, and economically addressing consumer needs. A marketing strategy affects every part of your new business. It’s about directing a company’s whole effort toward providing value for others. Customers, employees, and stockholders all benefit from this.
Marketing has a big role in determining a company’s strengths and limitations. The car rental industry is not exempt. Strive to please your customers while also accomplishing your company’s aims and objectives when marketing. Developing a strong online presence by creating a website for this business where you promote directly to your target market is one of the techniques you should consider doing in this regard. Its appearance and functionality should be nice and professional. Additionally, go viral on social media platforms such as Facebook, Twitter, and Instagram to create awareness and spread a positive image of your company over the internet.
Aside from the internet, print and distribute handbills and pamphlets, personalize your car with your company logo, and make careful use of the media. You should be able to go far in this business with these, making your clients happy while also fulfilling your business objectives.
Build a business website
Building a website for your business will be important if you want to have a regular stream of consumers. This is because Internet now offers customers today more alternatives. Majority now use Google.com to find items, resolve burning issues, service providers, grow their knowledge and like.
Advantage of Online Presence
The online website offers the new business opportunity for people access their business 24/7, seven days a week on your website. In other words, the business is open all day with an extended business hours. Simply said, if you don’t have a website, potential customers will go to someone who does. New business must have a strong presence online.
Advise on use of Website
Avoid the temptation of simply putting your contact information and a few rates on your website and hope for the best. Customers in the twenty-first century are impatient, and they expect to book and pay for their trip plans online. As a result, having a good online booking engine is essential for getting the most out of your website (your shop window). Hiring a custom web developer may appear tempting, but it can be rather pricey but is advised to give you the best feel and touch online. You may have a comprehensive web booking system on your existing website in less than an hour! Tariffs and groups may be easily created. You may set up availability rules to guarantee that you never lose control over your cars’ availability. Automatic booking confirmations and email reminders are also sent to your customers, saving you time and effort.
Challenges in Car Hire
Below are some of the challenges you might face in the car hire business
- Car theft and Robbery: Armed robberies and automobile theft have been recorded in the car hire industry, with armed criminals taking car hire and cab operators’ hostage while committing their crimes in some states in the country. For example. Although these are isolated incidents, they have a way of disrupting business operations whenever they occur, and your company’s reputation may suffer if one of your customers is robbed while using your service.
- Poor roads: This might reduce your productivity and create some annoyance to your customers.
- Uncooperative customers: Some clients are really tough to deal with. They may make excessive expectations or establish unrealistic goals for you to achieve.
- Dishonest employees: Some may work behind your backs, handing out their own phone numbers instead of the firm’s to potential clients and pocketing the money they earn without notifying the company.
Making money in Nigeria is not limited to the affluent or newly wealthy. You can alter your life and the lives of others around you permanently if you start the proper business. The rental business allows you to efficiently manage the input and outflow of your business without having to worry about your employees stealing from you. While operating the business, you may do other things. You may even enable family members or friends to become engaged in the company without worry of disaster. Certain enterprises, especially those that need able hands, might be difficult to carry out at times.
About the author
Adebiyi Adesewa wields a degree in Accounting and has helped startups and small businesses navigate starting our business. Her specialty includes How to guides, articles, small business tips, sharing insights on what matters to the small business.
Reading to Start your new business, reach out now for further information by calling us on +234 802 320 0801 or contact us .
You can also request for proposal by filing us our enquiry form here