The Car Dealer business model is more close to the car rental business than we think. But the question remains How to make a profit renting cars?
There are several secrets that make car dealers earn more money. Providing courtesy cars or test-drive cars requires the same process as a rental, but without charge. Another example could be the customer purchase a car, and he is waiting for the arrival of his vehicle or is signing a long term rental or maybe leasing in that case, the dealer would provide another car for managing the period in the middle.
How Car Dealers Can improve its Management?
It is very important to have full control over your fleet. It is very important to have a system that will give you the possibility to check vehicle availability according to usage. Car Dealers can have 4 types of usage of vehicles:
- Courtesy cars
- Test drives or demo Cars
- The cars for people that need to rent a vehicle (as a car rental company)
- The cars that you are providing to people that are waiting for the new car from the car manufacturer.
How to move a Car Dealer Business Model to Rental?
Before moving to the rental model we advise considering very well all the details. We highlighted below what could be the things to pay attention to.
Fresh used vehicle to sell – You have to consider that after 6-12 months, you’ll have fresh cars to resell once the rental activity will be terminated. The vehicles used for the rental will become good used vehicles to resell for your sales agents.
System – Organization of the fleet is the key success for starting automating the process. Choose the system, that will allow you to see vehicle availability according to vehicle usage. The system also should allow you to make charges for damages, or as called “Damage report”. You can provide courtesy cars or test drives for free, but damages should be paid. The integration with your DMS (Dealer Management System) is also a crucial factor.
Budget – What revenue and cost are you planning to allocate, how many vehicles are you planning to involve? What is your target utilization? 50%?
Rates – Keep in mind rates. And when we speak about the rates, it differs according to the customer. Because if we are providing a courtesy car, in many cases the dealer provides it for free. Instead, when the car is not for free, your team should be ready to apply the right rates.
Extras – extras are a source of additional revenue for car dealers even when you provide cars for free. Such as limited service liability, or a young driver, baby seat, Wi-Fi, etc.
Website – prepare your website for options to rent. It is important to have a rental option also there when the client will check.
Monthly rental – New trend for car rental companies that will allow you to give companies the flexibility to rent a car from 1 month to 12 months. It is also more profitable because the monthly rental has a higher price compared to the long term rental/leasing.
So in the end, for the car dealers, it’s a business that is already doing, but maybe, not managing so well. So take this in consideration and moreover, don’t forget to check the numbers, the KPI, and to analyze and check why you are providing so many cars for free to your customer and this is not for free, but he’s a revenue for the rental business unit and it’s instead a cost of your car repair service. We know that the dealership will change in the next months/years and the COVID-19 of course will accelerate this process, so be prepared for managing well your business. If you have any questions, please contact us and send us your question to firstname.lastname@example.org