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How to start a car rental business

By Umar Nsubuga, Jacquiline Nakandi

Added 31st October 2016 08:18 AM

The reasons for hiring a car are so many.

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Car rental business is booming in Uganda because of more tourists pouring into the country and due to various events such as weddings and conferences.

Many of the cars used for these activities belong to rental companies, but others are hired temporarily from individual owners.

Occasionally, the Government hires cars from individuals to transport guests during big conferences.

The reasons for hiring a car are so many. It could be for a party, business trip, an outing, a funeral or just for fun.

The car rental options

Richard Kalanzi, a director at NM Safaris, says there are four rental options: chauffeur-driven, self-drive, unlimited mileage and one-way rental, which is the commonest.

Kalanzi says the options depend on people’s preferences and prevailing conditions. “If one is uncomfortable when someone else is on the wheel, they will opt for self-drive. It also applies if one needs privacy.”

Type of cars

Jane Nakiwala, a travel consultant at Comfortable Travellers, says to tap into the various interests, an operator needs many car types to meet various needs. These could be saloon, wagons, vans, pick-ups, 2WD or offroad 4WD vehicles.

She says during the set-up phase of your rental business, decide on the type of car that is most demanded to give you quick returns.

“If you are starting small, two or three cars are enough. If you are going large-scale, you will need a fleet. Alternatively, you can hire from friends when need arises or agree with a car company, which can lease you some cars to run your business.”

Most popular rental cars include Corona, Corolla, Super Custom, Caldina, Ipsum and Noah. Toyota Land Cruiser, Mitsubishi Pajero, 4WD mini-buses, 7-seater to the 29-seater buses, are popular for upcountry trips and weddings.

Licensing

According to the Transport Licensing Board, rental cars must have a tourist agent’s licence for a year. Payment depends on the type of vehicle and its seating capacity.

The licensing board inspects the car before issuing the licence, which ranges from sh50,000 for small cars, sh100,000 for minibuses to sh150,000 for a bus, per year.

Requirements

Rashid Kateregga, a lawyer based in Kampala, says an insurance policy for a car rental is vital. He recommended comprehensive insurance and liability insurance policies in case of damage to your car.

Musa Kironde, who runs a school shuttle, says you can start small with your own car as long as it is licensed to do so. His advice is that you need a car with low fuel consumption. Even a difference of sh200 in fuel price can affect your profitability, he warns.

Financing

To start your car rental business, Nakiwala says you can get a car loan from the banks.

“However, before applying for a loan, you should have a business plan that has good chances of success,” she advises.

The rental charges also depend on usage, the size of car, number of days, the distance to be covered and fuel to be used.

 Kalanzi adds that offering unlimited mileage entices customers as will free chauffeur services. Besides, you must be willing to work on a flexible schedule, for example, during weekends, holidays and sometimes at night, he says.

Challenges

“You will be responsible for the maintenance of the cars,” Kalanzi says. He also says service and spare parts for luxury cars can be quite pricey.

“Some clients do not take good care of the cars, some vandalise them, while others fail to pay their parking fees. Others commit a crime in the cars and do not report on bringing back the car or steal the cars,” he cautions.

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