In Nigeria, car rental has long become commonplace and is perceived as an integral national feature of the country. Also, in our country the situation is not far from being the same. Over the past couple of years, the car rental market in Nigeria has grown significantly. By the way, the car rental market is growing by 15-20% annually. And, interestingly, over the past 3 years, dozens of entrepreneurs have taken up car rental, but not one has left this area so far, which is extremely rare.
Car rental as a business in Nigeria
There are several options for opening a car rental company. Or rather, two – to buy a fleet of cars at a time or on lease. The second option requires less start-up costs, but also reduces the net profit. The cost of cars purchased on lease by the end of the second year increases by 17-18%.
Opening your own car rental business is reasonable if you are ready to purchase 30 cars in your fleet, which can also be sold for a price if you find a potential buyer. With such a number of cars, the expected income from car rental will be improve massively. Moreover, the cars in the park should be different in their class – both economy class (foreign subcompact cars), business class cars (Honda Accord, Volkswagen Passat, etc.), and executive class cars (Mercedes, Audi A6, Lexus ).
Many entrepreneurs refuse to buy business class cars for the fleet (especially in small towns), fearing that there will be no demand for them. Based on the experience of car rental shops that have already “rise on their feet”, this fear can be considered unfounded and, as a result, takes away possible profit, and not a small one at that. Yes, expensive cars are rented less often, but the cost of renting them is several times more expensive.
As for whether it is worth buying cars of a domestic manufacturer, this question has both a lot of pros and a lot of cons. The purchase of Nigerian cars, like Innosun, will cost 3 times, or even 5 times cheaper than the purchase of foreign cars. And buying used domestic cars can cost N4,000,000. But maintenance costs can be quite higher than the cost of maintaining foreign cars because it’s not an already fledged appreciation for the Nigerian public. Among other things, the purchase of cheap cars carries the risk of transport downtime (we are talking not only about domestic cars, but also about cheap foreign cars): the car can stand in the service, while bringing only waste, not profit.
How to Start Your Car Rental Business in Nigeria
Having registered a company, you need to find an office, parking space for cars, employees and, directly, cars. For an office, you will need no more than 20-30 sq.m. As for parking, then you need to build on the number of cars in your park. So, for one car you need 8-10 sq.m. The minimum car rental company fleet is 10 cars. Otherwise, the business will not generate income, and will not even go to zero. According to “experienced landlords“, a parking lot for 5-7 cars is enough for a fleet of 10 cars.
To maintain a fleet of 10 vehicles, the following employees are needed:
- An accountant (for small volumes, it can be replaced by the services of a special company, which will be cheaper),
- A technical worker to check the health of cars and their maintenance,
- A driver,
- A contractor who will cooperate with insurance companies, and manager.
If desired by employees and the owner of the company, some positions can be combined.
Simultaneously with the registration of the company, it is necessary to start an advertising campaign for a car rental business.
Potential car rental customers
Renting a car in Nigeria isn’t too much of a big deal and it’s not limited to the rich. Below is the details of how much it costs to rent a car in Nigeria;
|Supplier choice sedan||$598/day|
But, often, wealthy people have their own vehicles. Who, then, are potential customers for a car rental company?
It is the car owners who are the main audience. Due to the current circumstances, car owners are often left without their own transport: either the car is being repaired, or the person is on a business trip, or he went on vacation with his family – there can be a lot of reasons. And due to their habits and the advantages of moving on their own transport, few people agree to change to public transport, and a taxi will cost much more than a car rental. These are the people who are the potential customers of the car rental salon.
Another category of people who are interested in car rental are those who need a car to create the right impression and maintain their reputation. Such people take business class cars when they go to an important meeting or negotiations.
There are also customers who rent cars not for a day, but for several hours. Most often, these are some kind of celebration: wedding, graduation, birthday, etc. In this case, the car is rented with a driver.
You can also mention corporate clients. Such “tenants” are very beneficial for the company: they ensure the workload of your fleet and insure cars against downtime, and therefore – from loss of profit. Therefore, the owner of the company must encourage such customers in every possible way in the form of, for example, discounts. Yes, in this case, the profit from one car will decrease, but only within 1 day. For the whole month, a “corporate” car will bring more than a “regular” car, because it is insured against downtime.
Here is an approximate calculation for a fleet of 10 cars:
Registration of an LLC – $ 500
Parking rental – 7 parking spaces * 4,000 rubles = 24,000 rubles / month. = 1000$/month
Office rent – $ 1200 / month.
Salary to employees – about 200,000 rubles / month.
Advertising – $6
Taxes – 30% monthly.
Purchase of cars – at least $260,000
Summarize. If you decide to start your own car rental business, you can count on the following figures: initial costs – about $ 320,000, monthly cash turnover – about 660,000 rubles, monthly income – from 140,000 rubles. These figures are based on a minimum fleet of 10 vehicles. The big advantage of this business is that the car rental market is not oversaturated, the demand is large and growing every day, and with the right approach, income will not be long in coming.