Measuring the profitability of vehicle rentals is a key step in the management of a company. Here are our tips to facilitate and optimize your profitability.
Many managers and entrepreneurs in the car rental business, whether they are experienced or newcomers to this market, question themselves on the best attitude to adopt to make vehicle rentals profitable. High profitability naturally leads to good management and to the economic health of a car rental company. It is therefore essential to take it into account and to optimize it to maximize its profits, its growth and to facilitate investments in a demanding sector. But how do vehicle rental companies calculate the profitability of a car rental?
What is the profitability of a car rental?
Firstly, the profitability of a vehicle rental is made up of several factors. These parameters must be considered in order to optimize the management of your car rental company. The two main elements to be accounted for are the revenues generated and the costs of your rental company. Note that these factors also apply to a rental of a motorcycles, scooters, trucks or any other type of vehicle.
The revenue generated represents the sum of the cash receipts from the rental, whether it is for a short, medium- or long-term lease. When a customer rents a vehicle, his expenses in this regard will naturally go into your company’s books. On the other hand, the costs generated represent your investment and various loans for your car fleet, rents, employees, insurance or even maintenance and repair costs. It is thus necessary to find a good balance between income and expenses so that the balance sheet is positive to grow and make a car rental company profitable. There is, however, a simple and reliable way to find this balance: calculating the break-even point of a rental vehicle.
Measure the break-even point of a rental vehicle to manage costs
Properly managing a car rental business involves calculating the break-even point of a rental vehicle. Moreover, understanding the costs of a vehicle is necessary to reduce costs, control expenses, set appropriate pricing and possibly sell unprofitable vehicles. The following method to calculate the break-even point of a rental car should therefore be applied on a vehicle-by-vehicle basis to your entire fleet.
The turnover of a rental car is made up of the following elements:
- Rental revenues (basic rental, mileage, extra days, insurance and additional options).
- Invoicing for repairs.
- Invoicing for additional fines.
- The income related to the sale of the vehicle (only if the vehicle was acquired using a bank loan or by using the company’s funds).
The operating costs of a leased vehicle consist of the following elements:
- Regular maintenance and repairs incurred by the vehicle renter.
- Administrative costs (registration fees, vehicle registration, insurance, entry into service, etc.).
- The financial costs (depreciation of the vehicle or rent repayment with interest).
The difference between the turnover of a vehicle and the operating costs must be positive to make a rental vehicle profitable.
The calculation of the break-even pointof a rental vehicle is thus the level of turnover at which the vehicle becomes profitable. Having a positive balance on each of the vehicles in your fleet will allow you to make a rental car company profitable. However, how can you centralize and calculate this easily? Fortunately, there are IT tools to help and support you in this task and optimize the management of your car rental business.
Software designed to calculate the profitability of a car rental company
The myrentcar software has been designed to calculate the profitability of a car rental company while drastically optimizing the management of the business. Hitechsoftware is made up of a team of rental and IT experts who have developed the best-in-class solution for car rental companies to considerably improve their daily operations. The myrentcar online system centralizes all your company’s information and allows you to rent, invoice and manage your expenses and income in just a few clicks.
In line with our recommendations and advice on how to make a car rental profitable, myrentcar has states and analysis centers that allow you to cross-reference income and costs. Myrentcar’s vehicle rental management software thus makes it possible to have a vehicle-by-vehicle profitability report. A clear, intuitive and dynamic interface displays the total costs and total income over the entire period of ownership of the vehicle. You can then see at a glance whether or not a particular vehicle is profitable, which rate is to be charged and whether or not it should be sold. Myrentcar also makes it easy to invoice repairs, various management fees and fines to customers electronically. An invaluable help for car rental companies who want to better manage their business.
The myrentcar web solution is accessible via a smartphone, computer or tablet to meet the mobility needs of the sector and enables users to work from home. Configurable according to the user’s profile, this application thus offers a comprehensive experience tailored to each business. The installation and integration of your data is quick and easy. A team will walk you through all these key steps to ensure the growth of your car rental business. Thousands of rental agencies around the world already trust us to help them make car rental and any other type of vehicle rental profitable. In addition to the tools to make car rental profitable, the myrentcar online rental management system also optimises many aspects in the management of your business. Would you like to see more and find out which ones? Please do not hesitate to contact us.
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