Renting vehicles is a revenue opportunity no collision repair shop should overlook. Although the car rental business entails some unique challenges, it can contribute significantly to a shop’s bottom line if managed correctly.
“We make more money renting cars than fixing them,” says Michael Penacho, president of Mike’s Auto Body in Fall River, Mass. Penacho’s experience is somewhat unique because his company has 42 cars and offers 24-hour towing and rentals. When necessary, personnel will meet customers at 3 a.m.—and unlike some body shops, Mike’s also rents to non-body shop customers.
Jimmy Lefler, owner of Lefler’s Collision and Glass Repair Centers in Evansville, Ind., may be more typical. The shop offers both collision and mechanical repairs, and Lefler has 20 cars that are rented only to his customers. “It’s not our biggest profit center, but there is profit there,” he says, adding that the rental business helps secure repair business that might not come to the shop otherwise. “The idea of a one-stop shop is very appealing to customers.”
Some major car rental companies and their franchisees or licensees offer body shop owners the opportunity to act as agents. With such an arrangement, body shops have cars on their premises that are owned by their partner. The shops handle paperwork on behalf of the partner. Financial terms are negotiated on an individual basis, but shops handling administrative tasks may earn a commission of as much as 15 percent to 18 percent. The downside is that participation is up to the licensee or to the car rental company’s regional manager—and those people may not be interested in such an arrangement.
Becoming an actual franchisee or licensee of the largest national car rental companies generally is not an option for most body shops. Budget is currently closed to new franchises, while Dollar and Thrifty require an initial fee of tens of thousands of dollars, along with 5.5 percent to 6 percent of total revenues for non-airport locations.
At least two organizations have been created, however, to offer an alternative to large national car rental companies. These include Affiliated Car Rental, which claims 40 percent of its franchisees are body shops, and Xpress Rent-a-Car, which calls itself an “association” and claims 80 of its 300 members are body shops. Despite the differences in nomenclature, both organizations offer similar deals. Body shops pay an initial fee, as low as $1,995 with Xpress or $6,000 with Affiliated. Rather than receiving a percentage of revenues, both organizations charge a flat monthly fee per car—a maximum of $10 for Xpress and $15 for Affiliated. Body shops purchase their own cars, often buying recent model vehicles at auction or from customers.
Participants in either the Affiliated or Xpress program get free training, group rates on insurance and other benefits. Xpress Rent-a-Car President Bob Holt says body shops with more than 25 cars should be able to net a profit of 20 percent, while Affiliated National Sales Manager Michael Miller says shops should, “look to net $200 per car per month.” Cars typically rent for between $20 and $30 per day and should be rented between 70 percent and 85 percent of the time. Ongoing expenses include maintenance, which runs about $60 a month per vehicle—or about half that if the company contributes its own labor—and insurance. Insurance costs vary, depending on location, but average about $80 per car per month when a company is part of a group.
Because renting cars is a competitive business requiring a unique skill set, body shops should think hard before making such a move. Nonetheless, the customer service opportunities should make renting vehicles an option worth exploring
