Self-drive hire

[midland]

I am looking to start a Short Term Hire company, mainly targeted at the Asian/pakistani/indian market - I wont just limit it to this market, i'll target all but my main focus will be majority populated Asian areas, why? simply because it works.

the city/area im going to target has only 1 private hire company and it does extremely well.

I have £100k to start my new venture - I have no experience and I'm simply looking to research for about up to 10 months. I understand there are so many hurdles and pitfalls. i.e: car stops working, insurance, if car arrives late, security etc etc, list is endless.

I am currently looking to buy 3 hatchbacks.
Audi S3 Black edition 18 plate
Golf R 18 plate
BMW MSport 135i 18 Plate

looking to invest about £80k in the 3 cars.

I understand the depreciation rate will be around 15-20% year on year. Insurance too will need to be factored into the cost and maintenance.

DEPRICATION: £80k * 20% = £16k / 365 = £43.85 depreciation cost of all 3 cars per day

INSURANCE: not too sure how much insurance will be and that's what I need assistance with

MAINTENANCE: £1500 / 365 = £4.10 maintaining cost for 3 cars per day.


with out factoring the cost of insurance it would cost me per day per car to hire out so far - 14.62 + 1.37 = £16.00 - I will try and factor in a utilisation rate of 3 over 1 - so basically each time I hire a car out just the once I will gain revenue off hiring it out 3 times over. but I cant complete my costs properly, not until I have a quote for insurance

I wont have other cost such as storage, since it will only be 3 cars, my drive will be big enough to accompany the 3 extra cars as well as my own personal one.

insurance is setting me back - since I have no experience, most insurance companies don't take me serious enough, how do I get around the main obstacle.

 

[billybob99]

How will you market this business.

 

[Gordon - Commercial Finance]

why? simply because it works.

Based on what? How do you know it works?

I have £100k to start my new venture

looking to invest about £80k in the 3 cars.

Spend 80% of your cash on things that will instantly depreciate? Very quick way to turn £80,000 into £55,000. Not a great idea.

What are you spending the rest of your money on?

 

[midland]

How will you market this business.

Mainly through Social Media and the local radio Station - the radio station with in the community I live in, is very popular. if I need extra marketing, I'll factor in the total cost over 365 and add it to the daily rate which I don't think will be much

 

[midland]

Based on what? How do you know it works?

I know i'll work because in the city I live in there is only 1 other car hire company, which is very popular, the most popular cars they have on hire constantly are the 3 I've named above, in particular the golf R and the S3.

I understand the cars will instantly depreciate. however its the depreciation I am looking to make back - after a few years I can sell the remaining value off the car back. tbf I am looking to break even or close to break even in the first few years - I understand it'll take a while before I see profit coming in, I'm simply looking to nurture the business in the first few years.

80k on cars, the rest on insurance, but no entirely sure how much it would cost - obviously if it is too expensive i'll reconsider the business as a whole - only if it is cost effective i'll consider going ahead




Spend 80% of your cash on things that will instantly depreciate? Very quick way to turn £80,000 into £55,000. Not a great idea.

What are you spending the rest of your money on?

 

[Mark T Jones]

I suspect your depreciation figures are rather modest for hire vehicles.

Have you started on a detailed cashflow forecast? This will help you to drill down on significant numbers and assumptions.

Ultimately, the success of this business relies on having vehicles on hire as often as possible, whilst allowing appropriate time for maintenance, repairs and slippage (and sometimes blatant disregard for the contract)

What jumps out to me is that your marketing strategy is currently vague and not well researched; I'd suggest that this is a key area to address before you invest in any assets.

Also speak to some specialist insurance brokers - it won't be cheap!

 

[Mr D]

Mainly through Social Media and the local radio Station - the radio station with in the community I live in, is very popular. if I need extra marketing, I'll factor in the total cost over 365 and add it to the daily rate which I don't think will be much

And once the money is spent, then what?
To get the business off the ground and producing a profit may take longer than you expect, then comes time to replace cars ….
Your maintenance costs may be a bit low too.

And you are going to run the business from home for free?

If one business is well known and does well in the area it does not mean your business will do well - often the biggest cost a business has is marketing, becoming known.
And sorry with 3 cars you are limited in what you can hire out at any one time. Say a good radio advert works and you get 30 people contacting you wanting a car for a week next month. Each.
Disappoint many of them who may not bother trying you again.

You can spend money to advertise but can also waste advertising.

 

[Nico Albrecht]

There is so much wrong with that idea and how you want to set it up. Not even sure where to start. Just have a think about why all the big rentals player pull out of the premium car hire market and focus on entry level and low mid range car hires. They all lease their cars and another challenge is if somebody rents a car and crashes it. Nightmare if you only have 3 cars. You essential limiting yourself to everything here.

When I say limit yourself I mean you need a person who is over 30+ has 2 credit cards allows a 2K- 4K security deposit on them and pays you a £100 day for short rentals. That market share is very low.

 

[Nico Albrecht]

From my experience hiring a car and i do that quite a bit is I prepay and book a mid range car that the rental company offers. On arrival I asked them if they have a better one e.g convertible or fun car and in most cases if it is during the week they can do that and the additional cost is so small compared to pre booking prices. They just sit there as a prestige but are not being really used or demanded by rental users hence they give them cheap away if you ask for.

 

[J Ali]

You really want to lease the cars and not buy them, more cars and less risk overall.

 

[WaveJumper]

Unfortunately I agree with the above you really need to think this through, the rental market on a whole is swamped with people offering very cheap deals on high end vehicles (you only need to watch the tv to see the current crop of adverts) I am almost emailed daily by one company I have account with offering very low rates on top of the range cars and quite often when i pick them up they are under 500 miles on the clock.

I also thought rental companies never bought their cars outright but had them on lease or something similar, as already pointed out the depreciation is your killer, and you have to factor in changing stock almost I would have thought yearly too keep pace with the competition.

All mentioned one way or another above, these things are going to quickly deplete funds:
Marketing
Valeting .
Repairs / vehicles off the road
General maintenance
Insurance (will be a killer)
Car recovery in the event of breakdowns

Do more research. If you want to dip your toe in the water how about going to the other end of the spectrum, offer very cheap local rentals and purchase very cheap budget cars.

 

[Gordon - Commercial Finance]

I also thought rental companies never bought their cars outright but had them on lease or something similar

Correct. A hire company would never put all their capital into rapidly depreciating metal.

There used to be a repayment scheme from the manufacturers which kept most hire companies afloat for a long time, I forget what the scheme was called, but it ceased a number of years ago and left most unable to continue, just leaving the big players like Enterprise with the whole market.

 

[midland]

Correct. A hire company would never put all their capital into rapidly depreciating metal.

There used to be a repayment scheme from the manufacturers which kept most hire companies afloat for a long time, I forget what the scheme was called, but it ceased a number of years ago and left most unable to continue, just leaving the big players like Enterprise with the whole market.

From what I have been told, leasing and then sub hiring/leasing short term is not allowed, or is it?
the 2 options i came up with were out right purchases or financing, the later would have worked out more.

 

[midland]

You really want to lease the cars and not buy them, more cars and less risk overall.

i thought that wasn't allowed or is it, but only certain companies do?

 

[Mark T Jones]

i thought that wasn't allowed or is it, but only certain companies do?

any finance company specialising in cars will waive the sub hire clause

 

[Mark T Jones]

Correct. A hire company would never put all their capital into rapidly depreciating metal.

There used to be a repayment scheme from the manufacturers which kept most hire companies afloat for a long time, I forget what the scheme was called, but it ceased a number of years ago and left most unable to continue, just leaving the big players like Enterprise with the whole market.

Many years ago we (and several other brokers) arranged large facilities for a company who hired cars into the indie hire trade

Their supplier arrangements were such that they effectively got the vehicles at zero cost for 6 months, with huge discounts and a guaranteed 100% buy back.

 

[Gordon - Commercial Finance]

From what I have been told, leasing and then sub hiring/leasing short term is not allowed, or is it?
the 2 options i came up with were out right purchases or financing, the later would have worked out more.

Finance companies understand how vehicle hire companies work. There are specific products for them in which agreements include permission to sublet. My company deals with a number of car hire companies and that's how they all work it out.

You mention "financing" as the only other option, but that's a pretty broad term, which would include leasing. Probably the most common is Hire Purchase with sublet permission I would think, and it certainly will work out more, because of interest, but not significantly more.

A lot of well established hire companies will start to use a credit line facility which has no specific asset security, but instead is an open fund which they can spend as and when vehicles come available or are required.

 

[Gordon - Commercial Finance]

Many years ago we (and several other brokers) arranged large facilities for a company who hired cars into the indie hire trade

Their supplier arrangements were such that they effectively got the vehicles at zero cost for 6 months, with huge discounts and a guaranteed 100% buy back.

Yes that's the one I was thinking of - thanks Mark. You have a few years of "experience" on me for sure!

 

[cts1975]

Self Drive Hire companies often have their fleet on contract hire for 9k miles or 9 months which ever comes first,then they are generally sent to auction. The 9/9 seems to be the optimum point for best return for the under writing finance company on the lease/contract hires.
Why 3 hatchbacks? Surely MPV's and larger saloons would be more suitable?

 

[midland]

any finance company specialising in cars will waive the sub hire clause

sorry, what do you mean by waive sub hire clause

 

[mattk]

On top of everything above... your maintenance costs seem extremely low. Remember, with the type of cars you are hiring customers are going to drive them hard, so they will need brakes, clutches and even gearboxes twice as frequently as if it were your own.

How are you going to deliver cars to your customers? Presumably you'll need someone else to pick you up/drop you off. You'll need to factor in that cost.

 

[MBE2017]

I would suggest working in this field and gaining some experience of the industry, it will save you a lot. My understanding is such hire companies obtain the cars at huge discounts, and even at auction tend to make money even after depreciation.

Not my area of expertise, nor yours atm.

 

[JEREMY HAWKE]

This gets asked every week on here so the answer wont change

Nobody ever makes any money running a small hire fleet They normally run it with three or four other businesses on the same site . A workshop would be a good co activity as your small fleet would require looking after but this idea will lose you money

 

[Ziggrs]

I would certainly agree with all opinions expressed here. You just need to understand better this business and rethink buying v.s. leasing vehicles for your business. Secondly, think if you will be able to cover all your expenses from your income. Cash flow will probably be your main issue

 

[Root 66 Woodshop]

Forget it, it won't happen... sorry...

not being a target for a racial attack here, but honestly it happens all over the UK, Young Asian men renting a car, only to let their family members to drive the vehicle, damaging it, refusing to pay for damages, for bailiffs to be sent to recover costs, getting nowhere, going to court, being ordered to re-pay, bailiffs being sent again only to not get the funds... it's a very quick way to fund a strangers lifestyle to cost you copious amounts of money for no reason at all.

Vehicles being stolen from smaller rental companies being used as get away vehicles, hit and runs, fuel thefts even terrorist attacks etc etc...

https://www.thetimes.co.uk/article/...ing-hire-cars-to-escape-detection-mj39stp5hzn

https://www.gov.uk/government/news/vehicle-hire-companies-to-reduce-terrorism-risk



How are you going to ensure the drivers have their own insurance exactly? also is it the right insurance? never mind the vehicles being insured as a rental vehicle, what proof will you be given? how will you check against it to make sure it's all above board?

Who is liable if someone you've rented one of your vehicles to, hits someone and kills them... is it simply the case that you're insured that's all that matters? ... Sorry but it's not the case at all.

 

[DavidWH]

Here's a rental Lambo from weekend

https://twitter.com/gmptraffic/status/1155372609380528129?ref_src=twsrc^tfw

 

[Root 66 Woodshop]

Here's a rental Lambo from weekend

https://twitter.com/gmptraffic/status/1155372609380528129?ref_src=twsrc^tfw

I had to miss out on my MAccy D's because of that crash

 

[Mitch3473]

You'll be able to name your price and be flavour of the month with those cars during ramadan. Until you get them back, through the letter box.

 

[Mitch3473]

On top of everything above... your maintenance costs seem extremely low. Remember, with the type of cars you are hiring customers are going to drive them hard, so they will need brakes, clutches and even gearboxes twice as frequently as if it were your own.

How are you going to deliver cars to your customers? Presumably you'll need someone else to pick you up/drop you off. You'll need to factor in that cost.

Not to mention the cars returned without the original tyres/wheels, batteries, exhausts etc etc on them. Some young buck out there may want to upgrade his older model and for a daily hire rate and a box of spanners it's a win win situation for him. There are a lot of problems to consider when entering this kind of market, experience is a wonderful thing.

 

[Mitch3473]

...aaaaand another thing...Do you know how to read a driving licence, how do you know the guy standing in front of you is the actual licence holder, can you spot a dodgy driving licence, will you be taking some form of deposit, what card payments, will you be taking the customers own insurance. One thing you must never do is to advertise the actual car, make and model. Group the cars and charge by the group. Be wary of non locals/out of towners.
Sorry to pi$$ on your fireworks but all this and a lot more happens.

 

[DavidWH]

Aaaaannnnddddd

Dont most insurance policies exclude cover for hire vehicles, and the cover for driving other people's vehicles is only 3rd party.

Our company policy that covers driving customers vehicles has a maximum vehicle value.

 

[JEREMY HAWKE]

No our policy covers vans that we have on hire .We just add them to the policy as required

 

[Noah]

not being a target for a racial attack here, but honestly it happens all over the UK, Young Asian men renting a car

Yes, that is "racist" - and probably sexist and ageist as well.

There are all sorts of scumbags who behave as you describe; there is nothing useful, and lots of risks, in selecting specific categories. We could go into lots more depth, but this isn't the place for it.

 

[Root 66 Woodshop]

Not racist at all Noah it's a fact... some people can't stand the hard truth I guess... I am far from Racist.

 

[Noah]

Not racist at all Noah it's a fact... some people can't stand the hard truth I guess... I am far from Racist.

I didn't say you were racist, I said that statement was.

Is your "fact" that all people who abuse car rentals are young Asian men?

 

[Root 66 Woodshop]

I never said you said I was racist... I said Not racist all all Noah, it's a fact. I then added that I am far from Racist.

Plus, I never said that ALL young Asian men abuse car rental...

I said...

It happens all over the UK, Young Asian men renting a car, only to let their family members to drive the vehicle, damaging it, refusing to pay for damages, for bailiffs to be sent to recover costs, getting nowhere, going to court, being ordered to re-pay, bailiffs being sent again only to not get the funds.

 

[Noah]

Plus, I never said that ALL young Asian men abuse car rental...

What is the point of identifying a specific group then?

I'll explain one risk : a well-dressed middle-aged male comes into the car rental business. He's not a young Asian man so of course he's trustworthy. Next you see of your car it is on TV burning in a field after being used as a getaway from a jewellery robbery.

Happens all over the UK.

Oops.

 

[Root 66 Woodshop]

What is the point of identifying a specific group then?

I'll explain one risk : a well-dressed middle-aged male comes into the car rental business. He's not a young Asian man so of course he's trustworthy. Next you see of your car it is on TV burning in a field after being used as a getaway from a jewellery robbery.

Happens all over the UK.

Oops.

Try reading the Original post... and you'll see why I mentioned Young Asian men.



It's not that hard really...

 

[bodgitt&scarperLTD]

Yes, that is "racist" - and probably sexist and ageist as well.

There are all sorts of scumbags who behave as you describe; there is nothing useful, and lots of risks, in selecting specific categories.

Root 66 is right. Reality trumps rose tinted glasses and 'social justice' niceties every time in small business.

The only 'risk' in profiling is that you might end up offending somebody. If you are a SJW friendly, 'progressive', nicey nicey company then the PR from appearing as such might be worth more than the gains from correctly profiling somebody and avoiding a risk.

I can spot a wrong un in a van cruising for something to steal from a mile off. So when, as now, the travellers are in town, and asking to 'buy scrap', the yard is locked down.

Insurance companies categorise people all the time. There might have been a recent law ostensibly to limit 'sexism' when insuring young male drivers but are you honestly telling me premiums are not calculated based upon a bloody obvious risk?

Let's talk business, not 'isms'.

So to the OP- your target market of Asian (self declared in the OP) payday millionaires (bloody obvious) is indeed a specific niche- well done. Can you control, mitigate or insure against the risks well enough to leave sufficient profit after depreciation?

 

[Noah]

Root 66 is right. Reality trumps rose tinted glasses and 'social justice' niceties every time in small business.

Tinted glasses of any colour obscure reality.