Start a Luxury Car Rental Company

An exotic car rental company rents out supercars (Lamborghini, Ferrari etc.) and other exotic and luxury cars like Bentley’s by the hour or day.

Opportunity
Expensive cars are always in demand for filming movies, music videos, sales pitches (popular in Internet marketing), events and even for out of town executives to drive around in. This business is a car rental company for exotic and luxury cars.

Requirements
This business requires cars, very expensive cars. You can start with just one car, but 3-5 different cars will make this a more viable business.

Business Model
There are three business models in this business:
1. Car rental company owns cars
Here the car rental company finances the cars and uses the income to repay the finance.
2. Fractional ownership
The car is owned by a pool of investors who each get a percentage of the profits based on the amount of profit the car generates. Example: if ten investors all pooled an equal amount of money (R200 000) to purchase a car worth R2 million, they will each own 10% of the profits of the car. You as the rental shop owner (who may or may not have a share in the car), manages the day to day rental in exchange for a percentage of profits.  So if a car makes R100 000 a month in profit (after insurance, servicing etc.) and you are taking a 10% cut, then you will get R10 000 and each investor will get R9000 a month.
3. Rental management on behalf of single owner
Here you as the shop owner makes a car available for rental that belongs to someone else and get a share of the profits.

Potential
Looking at competition in this business you can see more or less what exotic cars rent for. In Cape Town you can rent the following:
Audi R8 5.2lt V10 for R17 500 per day and R120 000 deposit
Maserati Gran Turismo S 4.7lt V8 for R17 500 per day and R100 000 deposit
Lamborghini Gallardo Spyder E 5.0lt V10 Convertible for R22 500 per day and R180000 deposit
Bentley GTC 6.0lt W12 Convertible for R24 500 per day with a R200 000 deposit
Ferrari California 4.3lt V8 for R27 500 per day with a R250 000 deposit
Mercedes SLS 6.3lt V8 for R28 000 per day with a R250 000 deposit

Now in some countries you can rent exotic and supercars by the hour, I’m not sure how popular this format is in SA, as overseas its mainly done in holiday towns.

Mitigating risk
This is a challenging business with a lot of risk, there will be astronomical insurance premiums with jaw-dropping excess. From an investment perspective you might have thought wow the returns are even better than property but you have to factor in wear and tear, depreciation and maintenance costs which as you can imagine is not cheap. And when the car is sold you can expect it to fetch a fraction of its new value and much less than a similar one owner well looked after car due to mileage. There are ways to mitigate that risk and it starts with the eye watering deposit required as seen above. This does a few things: it makes sure people will look after the vehicle when renting it, it covers you if there is cosmetic damage but it also covers the insurance excess if the car gets written off.

This is a high risk but high reward business if properly executed.