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Beginner’s Guide on Starting a Car Rental Business in Singapore
Take this opportunity to learn about starting a car rental business in Singapore. Car rentals are always high in demand in cities, and because of this, car rental businesses are becoming more competitive. Nevertheless, let us guide you if you don’t know what it takes to operate a car rental business. There are a few things you need to know for company registration in Singapore.
What Is a Car Rental Business?
A car rental business is a company that rents cars for short periods of time, from a few hours to a few weeks. In addition, they rent cars out to individuals and even corporations based on their needs. They have a number of locations where customers may pick up and return rental automobiles, as well as online platforms that allow for online bookings with prepayment options.
Before getting your feet wet, it would be wise to do a proper study of the industry itself.
Thorough market research would provide you with a good overview of the market trends as well as your probable competitors. The research outcomes will also enable you to plan a more strategic business model so you can stay ahead of the other players. As you would have already found out, the car rental business is a very competitive business in Singapore. Therefore, meticulous planning with the strategic allocation of resources is key to a successful car rental business. If you need a professional opinion, you could hire a Singapore corporate service provider like 3E Accounting.
Based on your market research, strengths, and risk appetite, you have to decide whether you want to run a lease to use (daily rental) or lease to own (hire purchase) car rental business. Leases to use and own have two different groups of customers. Customers for hire purchase are typically businesses that have long-term use for the vehicle, while daily rentals are usually individuals with short-term needs. My advice is that you take into consideration the market research to know the business opportunity, your capability, and risk appetite before deciding. Having decided, proceed to develop your business plan and move from there.
Developing a Business Plan
When developing your business plan, you must note that you have to decide on the inventory of vehicles that are required to serve your projected clients. The plan must also include the strategy to ensure that all the vehicles are well maintained and conform to the state laws to avoid dissatisfied customers.
One of the success factors of a car rental business is its location. The locality of your business will determine your overhead costs, your marketing approach, and your market share. How your business will go is dependent on how well your business plan juggles with the three mentioned parameters. Therefore, another special tip, car rental agencies should be near places that have lots of people that have short-term needs for a vehicle, such as tourists or people who don’t own a car but require personalized transportation. So my dear readers, do you have a place in mind? That’s right! The airport and hotels or even the train and bus stations are the best locations to start your car rental business as they will give you an advantage.
You should include a customer management system online or otherwise in your business plan. This automation will ensure smooth management of customer reservations and increase customer satisfaction. While online platforms will give customers better accessibility, it also increases operational overheads contributing to higher rentals equivalent to lesser competitive pricing. Organic social media marketing approaches in Facebook or Instagram would help reduce advertising costs if your team has the know-how.
Online CMS has widely been adopted by many businesses recently and would greatly help in your cause. Besides that, an online platform can manage customers 24-7 at a lower cost compared to the conventional face-to-face approach. Moreover, automation will be a big advantage for your car rental companies because it can manage bookings and cancellations, fleet management, customer database management, and invoicing efficiently.
Extra Tips to Make Your Company a Success
- Challenge your business model
- Be obsessed with numbers
- Know your vehicle and your customers
- When acquiring a vehicle, know when, where and how you’re going to dispose of it.
- Manage risk.
- Don’t neglect sales and marketing.
- Look for marketing alliances.
- Optimize your profitability
- Identify your great employees and pay them well.
Lastly, you should also get insurance for your car rental business. First, your car rental business will need insurance to protect the business itself. There are a few insurance policies that can be considered for your car rental business.
- General liability insurance: General liability insurance is required by law for all enterprises. This policy will safeguard your company from third-party claims of bodily injury, property damage, or advertising injuries. Overall, if a third party is hurt in an accident involving one of your rental automobiles, your general liability insurance should cover your car rental business
- Commercial property insurance: Although commercial property insurance does not normally cover the damage or loss of commercial cars, it does cover the damages, loss, or theft of any other property or equipment owned by your company.
- Business interruption insurance: often known as business income insurance, compensates you for income lost as a result of a calamity that requires you to slow or cease operations. For instance, if a hurricane wrecked your office and you were unable to rent out your cars until the office was repaired, business interruption insurance would compensate you for the loss of income.
Licenses and Permits
The LTA has imposed a few regulations on Singapore automobile rental companies that also provide private hire drivers, including:
- Must pass a medical examination;
- Have a valid class 3/3A/3C/3AC driver’s license;
- Completed a private hire car driver’s license training course.
Based on your finalized business plan, you would have a clear cost requirement for starting and operating a car rental business. Here comes the most challenging part, which is funding the business. Financing is not only about getting sufficient funds to start the business. You have to consider its cash flow and the incubation period before the business can sustain itself on its own. There are many ways to get your business financed, such as through investors like venture capitalists or specific investors or even self-funding through loans from financial institutions. Each of these options has its advantages and limitations depending on your risk appetite. If you have further questions, our company formation specialists at 3E Accounting can assist you in company incorporation.
These simple guidelines may seem easy to follow, but you may face some difficulties when going through them. There may be a few hiccups along the way but fret not. To every problem, there is a solution. Here at 3E Accounting, you may contact us if you are ever in need of our corporate services in Singapore!