Risk Management: What you need to know for your car rental company.
Risk management is about identifying, assessing and defining the possible risks that your business may face and prioritizing these risks, and then identifying a strategic action plan. The action plan shall cover all those activities and solutions that are taken to prevent and/or resolve such risks, should they arise.
An accurate risk management strategy, defined in the long term, allows the car rental company to manage those hypothetical situations that could represent an extra cost for the business.
How to identify and define possible risks
The risks must be identified according to its activity, considering a number of factors, but there are general risks, common to all renters what could be the damage caused by the customer during the period of car rental, fines or mistreatment of the vehicle itself.
- What financial resources are available to the company;
- What are the potential risks that the company runs;
- How often these risks could occur and what costs they could entail;
- What solutions are available to prevent and resolve these risks.
There are several ways to prevent or better manage unexpected problems and costs.
There are options specifically reserved for car rental companies, for example:
- Block amounts to guarantee at the beginning of the rental: request a deposit or a deposit that will guarantee the coverage of the cost of any damage that may be found at the end of the rental, during the overhaul of the car.
- Make post-rental charges (for damages or fines), by definition we call it Delay Charge.
The Delay Charge is a very advantageous practice because it guarantees to the car renter the possibility to cover those unexpected and accidental costs that must be borne by the customer who caused a damage or found a sanction. This practice can be carried out within the tokenization of the credit card: during payment, thanks to the integrations with the VirtualPos, the customer’s card data is tokenized, then register on your behalf in a secure and PCI certified mode.
Tokenization of the credit card
The tokenization of the credit card is the procedure that allows you to ask the service provider (Ingenico for example) to record the card data. The merchant retains the ability to make additional charges when authorized and permitted by the agreements between the parties.
Quite simply, at the signing of the contract the final customer accepts the terms and conditions, so if a penalty is found the costs can be charged directly to the credit card.
It represents an advantageous solution not only because it minimizes the risk of fines not paid by the customer, but also because it allows the charging of the costs of notification and management of the fine. It must always be remembered that even the management of the problem also represents a cost for the car renters, whether in terms of money, time or resources employed.
The advice then is to integrate the right systems for managing payments in order to make the automatic procedures and limiting risks. Always request a security deposit or a credit card as a guarantee and when possible make the rental pay in advance.
The monthly rental
A small parenthesis should be made in reference to the monthly rental. In addition to applying the advice explained so far, for the monthly rental you must have specific precautions, one in particular concerns the renewal of monthly contracts.
A good practice is to renew the contract by setting time limits around 30 days and charge the rental amount to the customer’s bank account (or credit card) avoiding other payment methods and before the end of the rental agreement.
This is because creating unique contracts, with durations over the threshold of 30/60 days represents a significant risk for the renter, including the most trivial: the customer at some point decides not to make the payment (if you approve for example the bank transfer). In this case the solutions for the renter would be ineffective, slow and expensive.
What could dissuade the renter from standardizing processes like this is the difficulty of manual management of them. It is precisely for this reason that the integration with software such as MyRent, designed ad hoc to manage these and other procedures, allows you to automate and make a practice all the solutions necessary for the prevention of risk for your business.
Better to prevent, especially when it comes to your rental business. If you want to know more book a free demo and contact our team directly, we will find the best solution for your business.
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