Judging by the number of forecourts in the centres of our major cities, car hire has become a major business.
Car hire firms used to rely on two core markets – businesses needing occasional hire or fleets (the bulk of the turnover in cities) and the tourist market. The latter used to only be significant in resorts, but the increasing popularity of city breaks means that more urban car hire firms are receiving the bulk of their trade from tourists.
Many people, particularly in London and other large cities, forego the expensive option of owning a car as public transport is a cheaper and more convenient day-to-day way to get around
New market
The last few years have seen the emergence of another sector of the market.
Many people, particularly in London and other large cities, forego the expensive option of owning a car as public transport is a cheaper and more convenient day-to-day way to get around. But they still occasionally need their own wheels, and will often rely on the services of a car hire company.
The result of this expansion is that car hire has moved on from a situation of being dominated by a number of multinational brands. Local independent businesses have, of course, always been strong in this sector but increasingly the prospective owner has the option of entering into franchise agreements with the likes of Eurodrive or Budget.
Car hire is a reasonably simple business to understand. Besides wages and property costs, the main expenditure will be the fleet of cars to be hired out and their subsequent maintenance.
Unfortunately, this means that buying a car hire firm can be quite expensive – remember that in our lives, cars are often second only to houses in terms of cost. And a business will need to own several.
However, if you work through a franchise the bulk-buying ability of the parent will substantially lower this cost. But it is still not to be sniffed at; Eurodrive, for example, asks for an initial franchise fee of £19,500 and for proof that you have working capital of between £35k and £55k.
It’s harder to price individual businesses as they can vary enormously in size, turnover and cost – businesses currently for sale on our site vary from just over £100k right through to over £1m.
Unless you are a qualified mechanic with extensive experience of car maintenance, you will also need to employ qualified staff.
Hire charges
The main source of income is the hire charge, which needs to reflect the depreciation of the car during the time it is hired out. This will not just depend on the ageing of the vehicle during that period, it will also vary according to the miles driven.
Therefore, some car hire firms have lower per day charges and make a levy on the miles driven; others factor the average cost in and offer ‘unlimited miles’. Obviously firms charge over and above the actual value in order to make a profit.
The hire charge is not just depreciation. An important part of it will be the insurance for the vehicle, and many firms make a great deal of their profit by basically acting as insurance brokers.
