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Insight: Rental opportunities

Is a daily rental operation a useful addition to a franchised dealership? When many motor retailers are looking to broaden their revenue streams, could this be an additional source of income?

Many fleet-focused brands such as Ford and Vauxhall have their own rental programmes available to dealers. In addition, a number of independent national rental companies offer franchise opportunities to motor retailers.

Most rental programmes provide field support to dealers, discounts on stock, training for rental staff and some form of marketing assistance, such as point of sale leaflets.

The majority of rental business comes from the corporate sector, in a combination of spot hires and longer-term rentals spanning weeks or months, which plug gaps in company car fleets.

Consequently many operations run alongside dealers’ business centres. Nevertheless, retail hires are an important element of the business, and one that carmakers hope may lead to new car sales.

Volvo Rental was launched in 2002 and now has 38 sites. Rental and leasing manager Margaret Small says the dealers made more than £1.2m in rental revenue last year. She adds: “Our main objective is to provide more profit for our dealers, and to increase registrations for us.”

Joining the programme costs £950, which includes training and stationery. Dealers get funds to spend on Volvo Rental marketing material, such as flags. Minimum fleet size is five cars, which are eligible for an additional discount and which can be funded through Volvo car finance. All the current range is available, including the XC90.

Dealers typically target their local business community, however Small has found some displaying real initiative. Kings Volvo in Bournemouth has established a wedding car service offering the S80 executive saloon on hire for half the price of most typical wedding cars. Another dealer has built links with Oxford University and rents cars to visiting professors and lecturers.

#AM_ART_SPLIT# Ford Rental is 25 years old this year. Catherine Blee, Ford Rental programme manager, would not reveal typical profits but she insists rental will provide a useful and profitable extra revenue stream for franchised dealers.

“Ford Rental gives dealers another set of services to add to their portfolio, it’s another reason for customers to visit their showroom,” she says.

Last year, it achieved more than 10,000 hires and Blee expects growth to come in 2007. Already it has opened 24 new corporate customer accounts and signed commitments with seven more dealers this year. Blee says there is growing demand for Ford’s products across its passenger car and light commercial ranges.

New Mondeo is one weapon in Ford Rental’s armoury. Ford has given it an exclusive head-start, supplying the car to its hire fleet months before it will supply other rental companies. Blee says this will form part of a marketing campaign and dealers will be encouraged to organise their own local marketing.

“This demonstrates how importantly Ford of Britain views the programme,” says Blee.

In comparison, Renault Rent is a mere three-year-old upstart. But it’s one which the carmaker would like to grow in the coming years. It has 12 branches in operation, with another three due to open this year.

Chris Gayton, rental development manager, says the additional revenue created could be as much as £1m this year. Last year, 10 sites achieved more than £500,000 revenue.

“Experience has shown that a Renault Rent operation can make a significant financial contribution to the dealer’s business, along with improved brand awareness, additional used vehicle stock opportunities and increased dealer awareness in local markets,” he says.

#AM_ART_SPLIT# Opportunities are out there

Opportunities are available in the independent daily rental sector for motor retailers who represent carmakers that do not have a rental arm. A number of private rental operators offer franchise or agent opportunities.

National Car Rental is seeking operators of garages or dealerships in major towns or cities to add to its 158-strong network. Its agents earn commission on revenue and can lease vehicles from its 45,000-unit fleet, as well as receiving training, marketing support and access to its global reservations system.

Thrifty, which operates a fleet of 16,000 cars and vans, already has more than 90 rental outlets in the UK and is seeking to expand further. It prefers all its franchisees to have experience of either the motor retail or vehicle rental industry.

Operators lease vehicles from its central pool and earn revenue from a percentage of rental time and mileage, plus incremental sales.

In any case, daily rental clients consider service is more important than headline price. So operators will be expected to supply cars fit for purpose and clean, in according with the hirer’s time, collection and delivery requirements.

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