A van rental company hires out commercial vehicles to both businesses and private individuals in return for a set rental fee. The van rental market is highly competitive and success is very much dependant on scale and utilisation of vehicles, however there is a big market for this much needed service and there is the potential to expand into other rental markets.

Why start a van rental company?

The market for vehicle rentals in the UK is estimated to be worth around £1.8 billion and has grown over the last decade. As well as vans, there is the potential to expand and rent out larger commercial vehicles such as lorries, which may be more profitable. There is also significant money to be made from renting out vehicles on long-term contracts which goes some way to solving one of the main problems faced by van rental companies – wasted money from vehicles sitting for days not being rented out.

What skills will I need?

You will need to possess good numerical, management and key business skills as keeping a close eye on the numbers is very important in this business which relies heavily on scale and utilisation. You will also be personable and focused towards providing good customer care at all times. Being familiar with marketing also helps as large players such as Hertz traditionally dominate the market and you will need to market heavily to make people aware of your business.

What are the keys to success in this business?

A van rental business relies heavily on utilisation of vehicles. A van that stands empty for two weeks is costing the business money and it may take several weeks rental value to recoup back the money. Van rental companies also rely on scale as more rental income helps to recoup the significant overheads.

Start-up costs

Start-up costs for a van rental company can be on the high side. You need to buy or lease vehicles, maintain them and insure them – the latter of which especially can work out expensive for companies operating in the rental market – and you’ll need commercial premises to store the vehicles. You can also expect to have to spend money on marketing to raise awareness of your company amongst your target audience. In order to minimise costs you may want to think about starting small with just a couple of vehicles.

Insurance and compliance

A van rental business will need to insure all vehicles using a specialist rental policy that specifically permits vehicles to be used for rental purposes and which allows for high mileages and many different drivers using the vehicles. You will also need to take out insurance on your premises, as well as public liability insurance. It is often worth going through a specialist insurance broker who may be able to advise you and negotiate your business a better deal from the insurance company.

Should I consider a franchise?

Franchising can be a good, if expensive option in what is a highly competitive market. Becoming a franchisee provides you with the benefit of buying into an established brand and business model. You will also usually receive support and help with lead generation and marketing which are essential to the success of your van rental company. Franchise opportunities vary widely, so make sure you investigate exactly what is included in the franchise agreement before committing your cash. Bear in mind that some entrepreneurs find a franchise to be quite restrictive, however for the right person it can provide an excellent and safer option.

Your first step

Your first step should be to conduct some market research. How many competing van rental companies operate in your area and what vehicles do they rent out? Also conduct some research on potential premises and start-up costs, and get advice on insurance and how much this is going to cost.