Have you ever thought to yourself, “Why don’t I run down to the used car lot, pick up four or five older cars and get myself started in the rental business?”
Why not? You figure you might make a couple bucks and have yourself an extra car around in case you need it, right?
I hate to burst your bubble, but that’s not reality. The rental car business is sort of like a roller coaster ride. It has its gradual ascent to the top of the first peak, where you quickly get dumped into a 50-foot plunge, throwing you into a triple loop, up another hill and back down – until you finally come to a slow descent into the final phase of the coaster. Here, you feel like you’ve beaten the ride and can finally catch your breath, figuring you’ve now survived “it all.”
You see, I’ve been renting cars for more than 23 years and, at one time, on a much larger scale than I do today. So I can safely say that I have some knowledge on the “INs” and “OUTs” of auto rental.
How’d I get started? In 1974, I opened my own body shop. This, in turn, led me to eventually start my own rental business. I started with one car in 1979 – a 1974 Chevy Laguna two door – and I topped my rental fleet out at approximately 300 cars in 1995, when I decided to sell my small rental car company to the “Big Boys.”
If you, too, think you might want to tackle the challenge of running a rental car business, keep reading. My story just may be of interest to you.
MARS Cars for Rent!
In 1983, I decided to open my own rental car company, Midwest Auto Rental Services, Inc. I started by renting a few cars to my body shop customers, and then those few cars grew into four separate rental locations and almost 300 cars overall.
I even rented motor homes in the summer, but I decided that was no longer a good idea when a guy called me from Custer State Park in South Dakota – where he’d wedged the motor home into a tunnel and couldn’t go forward or back. He literally ripped off the roof of the motor home to get it out. Needless to say, he wanted his money back because our motor home ruined his vacation.
Anyway … while I was at the height of my rental years, I used a strategy that I feel made me stand out in our area. Most rental companies put some sort of identifying sticker on the back of their cars so you knew where the rental was from. Nope, not me.
If you were in a Midwest Auto Rental Service car (affectionately referred to as a MARS car), you were driving an all white car with an Illinois license plate that read MARS, followed by a number. Needless to say, our rental lot was hard to miss. When directing new customers to our locations, we’d always tell them to look for all the white cars.
Our cars ranged from stripped down Ford Escorts to loaded town cars to deluxe passenger vans. We had it all. And each and every car was white.
Can you picture it yet? Wonder what my reasoning was?
With my first obsession being the autobody industry, I realized that the easiest car to repair, when it came to paint, was a white one. And believe it or not, they show less dirt than a colored car. Besides, it gave me the edge I needed to survive in the area’s rental industry for more than 20 years.
I finally sold MARS to the “Big Boys” for no other reason than I got a great price for the company and was ready to retire from that aspect of my life. However, I continue to operate Midwest Auto Rental Services, Inc. as an entity of my body shop, solely for my customers.
I run it the same as I did the big operation, only now I have a new marketing tactic that catches some attention with my customers. A large part of my rental fleet now consists of PT Cruisers. People remember these cars when they see them, and lots of people would like to take a no-pressure test drive in one (as in no salesman with them). So, if for no other reason, we might get the repair just because they want to drive a “Cruiser.”
I’ve found that making myself different from the rest in this business makes all the difference in the world.
However, I’ll admit, I made a lot of mistakes at first. Hopefully, I can help you to avoid making the same mistakes by telling you the lessons I’ve learned along the way.
The Pros of Renting Cars
Having said that, let’s now look at renting cars – the ups, the 50-foot drops and even the triple loops. Warning: Please keep all arms and legs inside the car while the ride is in motion.
We’ll start with the good points of renting cars …
- You become a one-stop shop – First, there are many, many, good things about the car rental industry combined with your body shop – the main point being that you’re now a “one stop” shop. You can make it very convenient for your customer by not requiring him to go somewhere else for a rental. Sure, you could get a car delivered – some companies do that – but it isn’t quite the same. If you’re using a rental agency, your transaction with the customer might sound something like this:
“Mrs. Jones, I’m calling the rental car company to let them know you’re here.”
The rental agent says, “We’re backed up right now, but we’ll be there in 15 or 20 minutes.”
Well, 15 to 20 minutes may seem short to you, but it’ll seem like forever to your customer.
A good alternative might be to just pull out your own rental and say: “This is the way we take care of our good customers, Mrs. Jones. No waiting.”
Also, upon delivery of the vehicle, the average rental company might just drop off your customer at the door and take off. But what if the repair turned out to be less than perfect? In the customer’s eye, he’s now stuck at your place without a rental. And the rental agent probably hasn’t even gotten back to his office yet, requiring the customer to wait in your office yet again.
But if the customer had your rental car, you could simply say, “I’m really sorry. Let’s keep you in the rental another day until we get this right.” The customer might not be happy, but at least you’ve minimized the inconvenience and can control the cost of the rental.
- You control rental costs – To expand on my above point, let’s say you have a customer come in to pick up his finished car and he’s unhappy with the paint job. He asks you to redo the job and you agree. If this customer is in another company’s rental, you not only have the cost of the redo, which would be bad enough, but now you add the cost of a daily rental, too.
To take it one step further, let’s say you get the redo done late Friday night, but too late to find the customer to get him into your shop. Now, if he’s in another company’s car, that’s another day of rental charges added to the total cost of the additional repair. If, however, it’s your rental, you can decide if you want to charge yourself or not. But even at your internal cost, it’s still better than someone else’s daily rate.
- You make money – Another good point is that you might actually make some money renting cars. The average rental car is on the street 22 days a month because most cars don’t rent well over the weekends – so you’re lucky to keep them out during the week. Oh, sure, there are those cars that are rented for 30 to 40 days on the “big hits,” but that’s usually less than 20 percent of your rentals.
You also might catch some instances where your customer is renting your car and his car totals out – so now you have a customer who needs to buy a car. Since he’s been driving yours for about two weeks now, trouble free, and he’s “fallen in love” with it, he may want to purchase it from you.
Sometimes, you can sell a car to your customers for a profit. But beware. They might wreck that car in the future, and you wouldn’t have wanted to overcharge them for a car in the past. Customers are for life – unless you abuse them.
This is one way of making money that you may not have thought much about. All your customers are experts – or at least have had experience having wrecks. Therefore, it’s not so unbelievable that they could wreck your car.
If their insurance covers it, you now get to fix your own car at a profit and possibly are paid for loss of use for down time. Since the car is bringing in no money while it’s in the shop, you can sometimes get compensation for this event. Again, a word of caution: Don’t get greedy.
- You can play the hero to customers and insurers – Here’s a scenario for you. Let’s say your customer has a $500 maximum rental policy, and he goes to a rental agency to rent a car. Your customer, who’s less than brilliant, says he wants a car just like his to drive or he won’t be satisfied.
Well, the big companies can usually accommodate almost anything, so if he said he wanted a Hummer to drive, they might actually produce one. Unfortunately, his daily rate for that Hummer might be $100 a day, so his rental policy is all used up in five days, leaving your shop without a chance to get the parts in that you need to even start the job. So what do you do now?
Well, you could tell him how ridiculous his request was, or you could try to become his hero. If you give him a car of your own, you might even be able to get him to participate in the cost of the rental. If you had rented a car to him, his coverage would’ve lasted 25 days instead of five. So maybe you can get him to pay $10 or $15 a day – whatever you can. (I personally believe in customer participation.) But remember that it’s no longer free for him so you need to keep him in the loop. Eventually he could see it as too costly if the repairs take too long.
You could always give some deals to your insurance agents, too. Say you give a customer or two a free rental even if they aren’t paying. This makes your agents really happy – just don’t let them abuse it. But maybe it could also give you a competitive edge and may even get the agent out of a jam, which makes you look really good.
The customer may have even thought he had coverage when he didn’t, so again, you made your agent a hero to the customer – and that makes you a hero to your agents. But again, I can’t say it enough, don’t let agents abuse it or let them dictate which cars you give them.
My motto is that a freebie deserves a freebie, most of the time. The idea isn’t to make money on the rental, but to make it on the repair. That’s the focus you should maintain in this case.
At this point, renting cars sounds pretty good, huh? But it wouldn’t be fair if I didn’t tell you how bad it can get …
The Cons of Renting Cars
Let’s start from the beginning …
- Good cars aren’t cheap – You figure you can go out and get four or five good used cars for $4,000 each. Which I’m sure you can. And I’m sure you’re a great mechanic and can keep them running forever. However, is this the image you really want to portray to your customers? It’s a known fact that older cars are more prone to breakdowns than ones with lower miles.
Let me ask you this. Do you like getting up at 4:30 a.m. because one of your loyal customers walks out of his house to head to work and the rental you gave him won’t start? There’s a good chance he’ll call you, needing assistance. And chances are, he’s not going to be in an extra good mood. He might be understanding but, then again, he might think that if this is the best you can do with your own cars, what are you going to do to his? Now he’s going to be a much harder sell on the finish line.
- You don’t want to rent to everyone – OK, now that you have your cars, you should know that you don’t always want to rent every person a car and not every person actually qualifies to rent a car.
Never rent a car to a person who’s had a DUI or a reckless driving ticket. These tickets say something about a person’s character – and driving record. Never, and I mean never hand a customer the keys to one of your cars if you wouldn’t hand him the keys to your own car.
If you get tempted, picture that customer with a ticket for reckless driving calling you one evening – while in your rental car – and saying, “Oh, by the way, I had a little mishap with your car today, but don’t worry, I’ll take care of it.”
When you ask what happened, he says, “It’s no big deal, I just barely bumped a school bus full of children. I think only three or four children were taken to the hospital, and the fire department got the fire out right away.”
Trust me. This isn’t a scenario you want to deal with just to keep one unreliable rental customer.
Sometimes everything might look OK to rent your customer a car, but he has a high deductible or only carries liability insurance. If you still want the job, then simply don’t pull out your best, which then puts your most expensive car at risk. This is when you bring out the “old ’74.” (That was the signal we gave our detailer to bring around the oldest, smallest car we had!) This gives you less exposure for damages.
When the customer would ask, “Is this the best car you have?” we’d politely tell him, “No sir, but this is the only car that’s not booked already. We might have something larger in a couple of weeks if you can wait.”
The customer will then, almost always, reluctantly agree to the car at hand.
Sometimes by just listening to your customer you can tell whether or not you want to rent a car to him. He might say, “This car can’t smell like smoke.” Or “It has an animal hair in it.” Or, “It better have a good A/C system.” Or “I won’t be happy if it doesn’t have a CD player.”
Well, needless to say, we likely sent that person to the competition without even trying to win his business. He likely would’ve been unhappy either way, so it’s better he gets mad at the competition, which leaves us open to a great repair and makes us the hero, again.
- The insurance is expensive, but you need it – One of the larger downsides to rental cars is that the insurance is a little high. There are only a few companies that specialize in it, and I highly recommend using a specialist.
Some companies may say you’re covered under your garagekeepers insurance, but in my opinion, I want the companies to be separate. I don’t want the rental business to be a part of my body shop.
I also suggest buying the highest limits you can afford. Insurance isn’t for small claims. It’s for that day a customer rolls the car, swerving to miss a cow in the road and instead, kills the passenger in the car. The driver may claim that if the tires on your car had been better, the accident could’ve been avoided. Always remember: You can never have too much insurance.
- One word: liability – As I mentioned, I like keeping my rental company separate from my body shop. What I’ve found in this business, based on work with my own attorney, is that it’s best to keep a totally separate company/corporation for liability reasons.
For example, if a wreck occurred when your car was being driven by one of your customers and people were injured both in your car and in the car hit with your car, it’s possible all injured parties could look to your company for money. My experience has shown me that most lawyers will go for the gold, meaning the body shop. But if you’ve legally set up a separate corporation, they’d have to exhaust all money from the rental car company first. (I never realized how much the “Golden Arches” of McDonald’s were worth until a rental of mine swerved to miss a deer and instead took out the arches – a $20,000 set of arches.)
This separate corporation keeps your name on the body shop door by protecting you with a corporate “veil.” However, being that I’m not a lawyer and being that laws differ from state to state, you’ll want to check with your own attorney prior to entering into a rental company venture.
- Some cars don’t get returned – Besides liability, there are additional risks. For example, not all rentals will return as planned – for a lot of different reasons. The most common is that the rental costs get out of hand, and they can’t afford to come in and actually pay for it.
Sometimes, as I’ve experienced, you may have to give your customer a little “incentive” to pick up his car. Late at night, you might need to take the spare keys and go to your customer’s house to return your car yourself. Don’t worry, it’s not theft – you actually own the car, remember? And then, when your customer wakes up and finds the car gone, he’ll call you to tell you it’s been stolen. This gives you the opportunity to fill him in on your previous night’s adventure and get him in to start paying you the money he owes.
You probably won’t get paid much on the rental, but remember your focus: You’re trying to make money on the repair, and you’ve now forced him to come in to see you.
Some Final Considerations
You might be thinking, “This doesn’t sound so hard. I can do this. I’m going to rent cars!”
Well, before you make that leap, there are just a few more things you should know (picture that triple loop on the roller coaster):
- Claimants can be especially tough on you and your car – especially if your car is less than perfect. Remember, they were driving a 2002 Cadillac STS and now you’ve rented them a Malibu. They may not see the need to take care of it as well as they did their own.
Oh, yeah, and then there’s the guy who has a blowout or flat four miles from work, so he drives it on in. Now not only is the tire wasted, but also the rim and wheel cover. Did he do it on purpose because he was in your car? Maybe. But try to prove it.
- Monitor your gas expenses. At today’s prices, gas is precious. We always sent our cars out full and asked our customers to bring them back the same way. Sometimes a claimant will want you to bill the insurance company for the gas or will want you to pay for it because he did nothing wrong. Don’t get caught in that one.
- Accidents will happen – we all know that! But how would you like to hear that your tire is flat in their driveway? The rental contract states that the customer is to treat the car as if it were his own, so I generally suggest he change it and bring it in so we can replace the tire at his convenience. You can imagine that that doesn’t always go over so well.
- Make sure you have plenty of spare keys. People are always locking the keys in the car or even losing the keys. Never give them more than one set, though, or you’ll never get them back – either because you forget or they forget. And remember to charge them if they lose the keys. If they lost their own keys, they’d have to pay to replace them.
- Always make copies of driver’s license numbers and addresses. And make them produce this proof in person. In addition, always make sure you verify their insurance coverage.
- Be leery of people with post office boxes for an address. Good luck finding where someone lives when his address is Box 160, Any Town, USA. Unless you know someone at the post office, you’ll never find him.
With that said, we’re rounding the final turn and slowing down so you can reflect on the roller coaster ride I call the rental car industry. Hopefully my sharing some of the mistakes I made and what I’ve learned along the way will allow you to make better-educated decisions about whether or not this is the ride for you.
Andy Batchelor owns Andy’s Auto Body of Alton, Inc. in Alton, Ill., and has been a self-employed automotive repair owner for nearly 30 years. He’s a certified Automotive Specialist with training from Rankin Technical School and a Platinum-certified I-CAR member. He has Master Collision Certification from ASE and a degree in Business Administration from Lewis and Clark Community College. Batchelor also serves as I-CAR’s Southern Illinois Training Chairman. Batchelor and his wife, Nancy, reside in Alton, Ill., and have two children, both married and living in the suburbs of Chicago. Batchelor can be reached at [email protected]
Fax your comments to (330) 670-0874 or e-mail them to BSB editor Georgina K. Carson at [email protected]
Top 11 Dumbest Excuses Used by
Rental Car Customers
11. “I can’t drive a car that has Firestone tires on it.”
10. “My dog doesn’t shed. I have no idea where all the dog hair came from.”
9. “I can’t bring the car back. I owe too much on it.”
8. “Your car has a shimmy at 76 miles an hour. It’s not safe to drive.”
7. “It’s snowing, and I don’t drive in the snow. When it clears up, I’ll bring your car back – but I’m not paying for the days I didn’t use it.”
6. “My dog got sick in your back seat, and I didn’t have time to clean it up. But it was dirty when I got it so it needed to be cleaned anyway.”
5. “I’m really sorry your windshield got bashed in. I shouldn’t have driven a foreign car to work. The boys at the plant get upset about losing their jobs to foreign countries. Have you got an American car I can switch to?”
4. “I got a DUI two years ago and I don’t have a license, but the cops won’t spot me in your car ’cause they’re looking for my Monte Carlo.”
3. “If you’d given me two sets of keys, this wouldn’t have happened.” (The customer returned the car with the driver’s side window smashed out. He’d locked the keys in the car.)
2. “I drove your car into a ditch. After that, it didn’t run right, so I took it to the dealer and had it fixed. Here’s the bill. Oh, and you should deduct two days of rental from my bill while it was in the shop.”
1. “Someone came over, and I haven’t seen them or the car since.”