For automotive dealerships new to the rental business, deciding to offer retail rentals as part of their services is a significant commitment. To ensure profitability and long-term success, it’s essential to establish a solid strategy and carefully plan your rental operations. Here are 12 critical factors to help your dealership succeed in starting a rental department.

1. Treat Rentals as a Standalone Business

Each department within a dealership—whether it’s sales, service, parts, or rentals—should be treated as a profit center. Appoint a dedicated, experienced manager who knows the rental industry. This person will help you determine the right vehicle mix and fleet size to maintain a balance between vehicle utilization and profitability. Tracking revenues and expenses is vital to identifying profit potential and ensuring sustainability.

2. Leverage Rentals as a Sales Tool

Offering rentals exposes potential customers to your dealership’s vehicle inventory. Promote the availability of rental vehicles for sale, including marketing materials inside the rental car. Implement a “Try Before You Buy” program, where rental costs can be deducted from the vehicle’s purchase price, creating a synergy between your rental and sales departments.

3. Market Your Rental Fleet Beyond Service Customers

By expanding your rental marketing beyond existing customers—promoting options for family vacations, business trips, or specific needs like large group travel—your dealership can tap into new markets. This increases rental demand while also introducing new potential customers to your dealership.

4. Utilize Pre-Owned Inventory for Rentals

Building your rental fleet from your pre-owned inventory allows you to acquire vehicles at lower costs than buying at auctions. This tailored approach to fleet acquisition also provides a steady supply of well-maintained used cars ready for resale, enhancing the profitability of your rental and pre-owned departments.

5. Keep Customers at Your Dealership

Offering rentals directly from the dealership eliminates the need to shuttle customers to offsite rental agencies, keeping the entire experience within your dealership. Customers benefit from added convenience, while the dealership retains control of the rental process and customer interaction.

6. Lower Operational Costs

Dealerships benefit from lower operational costs compared to standalone rental agencies. Using existing facilities, utilities, and staff during peak demand periods reduces expenses. Dealerships also have the advantage of avoiding rental taxes that airport operators face, providing a competitive edge.

7. Shift the Free Loaner Mentality

Transitioning from free loaners to paid rentals requires a cultural shift. Rentals should always be paid for, even if another department covers the cost. Treating the rental fleet as a revenue generator ensures its profitability.

8. Allocate Resources Wisely

The rental department needs adequate resources to succeed. From advertising to training and fleet size, investing in the right areas is crucial. Managers should be accountable for tracking results and ensuring profitability.

9. Collaborate on Fleet Orders

The rental manager and pre-owned manager should collaborate when ordering vehicles to ensure that both the rental and sales departments benefit. Avoid scenarios where vehicles are taken from the rental fleet prematurely, disrupting rental operations.

10. Optimize Pricing for Rentals

Involve the general manager in setting rental vehicle sales prices, ensuring that both rental and used car departments benefit. Profits from vehicle sales should reflect the efforts of both departments.

11. Recognize the Full Scope of Rental Demand

Dealerships should train staff to identify and ask for customers’ full rental needs, not just during service appointments. Expanding rental options beyond service-related use increases profitability.

12. Expand Your Fleet Mix

Consider offering specialty vehicles—such as work trucks, minivans, or luxury cars—that cater to niche markets. These vehicles often command higher rental rates and can fill profitable gaps in the rental market.

With these factors in place, a dealership can successfully manage an in-house rental service that boosts profitability, enhances customer satisfaction, and seamlessly integrates with other dealership operations.