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How to Start a Car Rental Business in India?

calendar21 Nov, 2022
timeReading Time: 4 Minutes
Car Rental Business

Usage of rented cabs and taxis has seen a steady rise in most urban cities, and rented cars are substantially becoming the more preferred mode of travel over public vehicles. We live in a day and age where people don’t have the patience or time to wait in the sweltering heat or chilling cold to wait for a bus or even hail an auto. Due to rising disposable income, people have moved to the alternative, which is comparatively less time-consuming, more comfortable and reliable. Most youngsters are opting for cabs or rented cars over buying their own vehicles.

Names like Uber and Ola have become common household names and there are many other local car rental and cab companies having a flourishing businesses. This is because there will always be a demand for car rentals and cabs in urban cities for intra-city and inter-city travel. It is an extremely lucrative business option for people wanting to get into the business, even with a small initial investment. Scroll down to check more information regarding the Car Rental Business in India.

Car Rental Business – An Overview

A car rental company leases or rents its cars to customers for a period of time which can range from a few minutes to a few days/weeks. Business owners can choose to operate as car aggregators like Ola or Uber or just start with a small fleet of cars and lease them out to people. People can book a rental car online and pick and drop the same at a branch nearest to them. This is an optimum way to travel without

Steps to Start a Car Rental Business in India

As iterated above, car rentals can be an extremely lucrative form of business, provided one does the requisite research and plans various aspects of it well. Mentioned below is an overview to help one understand the basic steps involved in starting a Car Rental Business.

  1. Market Research and Business Plan
    This step is an important pre-requisite in understanding the market one is getting into. As per customer demands, one can get into a small car rental business, economy car rental business or luxury car rental business.
    After extensively researching and understanding the market, it is imperative to form a business plan which will provide a detailed insight into, inter alia, the target audience[1], initial investment and recurring costs, pricing plan, and marketing strategies to attract customers.
  2. Buying/renting a fleet of cars
    This is the major investment that one would have to put in to start a car rental business. Depending on the funds available, one can either buy a few economy cars, to begin with and then keep adding more to the fleet as the business grows. Buying used cars is also an economical option during the initial days of business. If one wants to invest even less, they can opt for renting cars for the business and then sub-lease it further. As the business flourishes, one can move on to buying executive and luxury cars and target an audience that is willing to shell out more money in exchange for higher-quality products and services.
  3. Zero in on the Car Rental Business Model
    Choosing the optimum business model based on the business owner’s investment capacity and market demand is imperative. Majorly there are two types of business models when it comes to a Car Rental Business.
    Contractual Hire: In this model, cars are leased for a longer but fixed period of time.
    Regular Hire: in this model, cars are hired for a shorter period of time.
    Here, the decision to either conduct an independent business or partner with aggregators like Uber and Ola and whether the operations would be conducted online via a website or a mobile application.
  4. Setting up the Car-Rental Company
    Decide on a location where the business would be operated. Choose a commercial space near airports, railway stations or hotels and be mindful of having a large enough space for the cars to be parked. Subsequently, one should look into hiring drivers, customer care executive, marketing professionals and other workers for the smooth functioning of the business. Be mindful of including all these expenses while deciding on the investment and recurring costs one would have to incur.
  5. Registration
    To operate a car- rental business in India, the business ought to be registered as a legal entity, compliant with all regulatory and statutory requirements. One can register their business as a partnership firm, LLP, private limited company or a sole proprietorship based on one’s capacity and business requirements. Additionally, one can register the trademark of the entity and get requisite tax registrations applicable to car- rental business providers.
  6. Business Account
    It is prudent to have a separate bank account in the entity’s name carrying on the Car Rental Business. This makes it easier to manage all expenditures and profits related to the business and also makes it easier to avail loans, if required, for the business.
  7. Insurance
    It would be a blunder to run a Car Rental Business without protecting the business from the many risks involved. It is extremely important to educate oneself with the types of insurance available for the business and then choose the ones that work for one’s business. In addition to one’s own insurance for renting out the vehicle, the insurance can be sold to the customers as well. Some of the important insurance policies that car-rental companies should invest in are :
    i. Harm Collision Waiver
    ii. Personal injury insurance
    iii. Personal belongings coverage
    iv. Extra liability insurance
    v. Specific accountability and responsibility insurance
    vi. Employee benefit
  8. Create a website and market the business
    Having a website or a mobile application offering car-rental service online is a smart way to ensure that customers can avail of cars with a click of a button. The website should clearly state the services provided and the area covered by the business.
    Moreover, it is important to promote the business either by approaching other businesses like hotels or travel agencies and entering into a teaming agreement with them. Make optimum use of social media to promote the services provided by one’s business and if funds permit, hire marketing professionals to promote the business further extensively.


With the advent of technology and rising disposable income, car rentals have become a major part of urban city life. More and more people are opting to travel within and outside cities using rented cars and are especially used when going on outstation trips. Car Rental Business is extremely lucrative, and one can build a flourishing business by conducting thorough research and, understanding the market, having an efficient business plan.

Read our Article:GST on Motor Vehicle Renting Services

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