Looking to start a business or side hustle? A car rental business is a promising area that is gaining more ground in Uganda. 

Lately, one income stream isn’t enough to make a comfortable living; you need an extra stream of income – a car rental could be that one business for you. 

New car rental companies are emerging day by day, and have a huge market in the tourism industry. The tourism industry had been hit hard by the COVID-19 pandemic – the industry shut down, but today, it is gaining momentum again. 

According to a report by the tourism ministry, Impact of COVID-19 on Tourism Business in Uganda, in the 2018/19 financial year, travel and tourism in Uganda contributed approximately 7.7% of GDP and over $1.6 billion (about sh5.8 trillion) in foreign exchange. The stoppage of airline travel and imposition of quarantines on inbound travellers across the globe led to a complete fall in the number of tourist arrivals and distortion of the entire value chain. 

According to the UTB Recovery Business Plan, from the international market, the government is targeting to receive increased numbers of leisure and business tourists, directly and indirectly. They also expect an increase in the number of domestic travellers to the key attraction sites of Uganda. 

A significant rise in the number of people taking business and leisure trips across the globe is driving the demand for car rental services, thereby propelling the industry’s growth. 

Defining a car rental 

A car rental, hire car or car hire agency is a company that rents vehicles for short periods of time to the public, generally ranging from a few hours to a few weeks. 

Starting a car rental business 

Any business should start with a detailed study and analysis of the market. You need to understand who your target audience is, and what advantages and disadvantages are involved. This will make your concept as attractive and effective as possible. 

In the car rental business, this data will help you choose the price category you will work in. It will help you decide which cars you should get for the fleet as well.  

In the process of budgeting, it is worth considering crucial items of expenditure such as buying cars, company registration, insurance, permits, rental of office space, parking, office equipment and extra car rental equipment for example camping gear, baby seats, Global Placement System devices and travel maps among others. 

Others to note down can include recruitment of employees and payment of salaries, development of a website and mobile application, development and implementation of a marketing strategy, car maintenance and unexpected expenses. 

Ssali Bukenya, director of Ayla Tours, a car rental in the country, says there are mainly two rental car options in Uganda; self-drive and renting a car with a driver. Others could include one-way rentals, cross-border rentals and unlimited mileage. 

The self-drive option is the most common because of a number of reasons, including privacy, flexibility and cost. Renting a car in Uganda with a driver always comes with an extra cost of not less than $30 (about sh110,610) per day, and if one needs a multilingual driver, the cost can go up to $90 (about sh331,832) per day for only the chauffeur service.  

The other option becoming popular is the cross-border rental option, where you can rent a car to go to other countries such as Rwanda, Kenya and Tanzania. 

Variety of cars 

Sebuufu Jonathan, a travel consultant at Experience Uganda Safaris, says to tap into the budding market, an operator needs many car types from saloons, wagons, vans, and recently, pick-ups to meet various needs and these must be four-wheel drive. 

During the set-up phase of your car rental business, decide on the type of car that is most demanded to give you quick returns. If you are starting small, you will need two or three cars, and if you are going large-scale, you will need a fleet that may also include Land Cruiser V8s, Hiace Vans and customized Safari Land Cruisers, among others.  

Alternatively, you can also get suppliers when the need arises, especially in high seasons. Many big car rental companies also lease cars to others. 

License requirements 

On top of the third-party insurance, the Transport Licensing Board advises rental car owners to get tourist agent license for a year. Companies that mainly serve tourists obtain these licenses from Uganda Tourism Board (UTB). Payment depends on the type of vehicle and its seating capacity. The car is first inspected before issuing the license which ranges from $70 (about sh259,079) to $200 (about sh740,227).  

A comprehensive insurance policy for the car rental is also vital to protect it from losses and damages, including theft, accidents and natural disasters such as fire. 

What else do you need? 

Since the world is going digital, you will need an online platform to advertise your business. A good-looking website is a great way to start. 

You also need to advertise your business to get potential customers. You can use online ads on social media, Google and online marketers with a good experience in Search Engine Optimization. 

Rewards and drawbacks 

If you decide to join this business, first of all, study the business area in detail after all, every business has its rewards and drawbacks. The biggest reward from this business is the availability of demand, as a number of travellers or tourists prefer renting cars than use public means. 

This business saves time – running it does not require a lot of time, and the number of business processes and their relative simplicity makes it possible to manage with a small staff. 

According to Sebuufu, the car rental business is a fast payback and if you carefully analyze the market at the start, create a detailed business plan and follow an effective strategy, it can pay off in a short time.  

However, he says expect stiff competition from other companies, which in the long run might affect the quality of service delivery. Some companies tend to lower prices to catch up with the competition and attract more customers. 

Other costs 

You must be ready to meet all breakdown costs when any of the cars get into an emergency on the road. This might involve unplanned repair costs. Unscrupulous customers can even turn out to be scammers, so you should better be keen about your clients.  

Lastly, some clients do not take good care of the cars, while others fail to pay their parking fees or commit a crime in the cars and do not report when they return.