How to Start a Car Rental Business in the UK

In 2025, the car rental industry in the UK is forecasted to reach around $2.37 billion to $7.27 billion, making it an extremely attractive area for business enthusiasts. With substantial demand from tourists, business travelers, and locals, this promising space offers appealing financial rewards and room for growth. 

However, making the first steps can be a challenge, especially if you don’t have much experience in this niche. In the following sections, we show you how to start a car rental business using a practical step-by-step guide. 

Step 1: Conduct Thorough Market Research

Before you can set your prices and promote your services, it’s vital to research the market adequately. Find out what the car rental industry looks like, what services it consists of, what type of customers it attracts, and more. 

Understand the Market

The first area to focus on in your research is the market itself. 

This part of the process will help you determine whether it’s better to focus on renting cars for a short term, leasing cars for longer periods, or concentrating on specialised car rental niches, like wedding car hire or luxury cars. 

For starters, it’s key to note that the car leasing industry and the car rental industry overlap, but are not entirely similar. 

A rental car business makes short-term commitments and usually rents vehicles for a day, a couple of days, a week, or for the duration of a holiday. In some cases, car owners rent vehicles as an alternative solution when their own car is in the repair shop. On the other hand, a car leasing business makes long-term commitments and leases out vehicles for regular personal use. 

For example, specialist car rental agencies provide automobiles for rent, while car dealerships work with car leasing agreements.

In the UK, these two segments form a competitive market. 

Analyse Competitors

Study existing rental businesses and car leasing establishments in your area, but also on a national level. 

When performing your competitor analysis, focus on the following factors:

• What types of car rental or car leasing services do others offer?
• What cars do they have available for their services?
• What are their pricing models?
• What are their unique selling points?
• What are customers saying about them in customer service reviews?
• How big are their fleets?

For example, research shows that the UK’s car rental market is currently shaped by the following services:

• Short-term & daily rentals – at the top with a share of 40% due to tourism and urban mobility
• Long-term & corporate leasing – at 30% as a flexible solution for fleet management solutions to businesses
• Luxury & premium car rentals – occupy 20%, offering exclusivity to the clientele for a variety of specific events
• Electric & sustainable car rental services – constitute a 10% share of UK’s green mobility initiatives.

By gathering as much information as possible on existing businesses, you can identify gaps like underserved markets or specific vehicle types that you can introduce. 

Define Your Target Market

Being able to identify your ideal customers or target market is essential for building a successful car rental business. 

Why? Because it will allow you to create the perfect services for your consumers and market them to a specific audience, most likely to be interested in what you have to offer. 

Depending on the type of service you plan to provide, some possible target markets include:

• Tourists who want to rent vehicles while on holiday;
• Professionals or business travelers in need of vehicles for business trips;
• Individuals who need a special vehicle for an event or a specific type of transport;
• Residents in need of a temporary car;
• Event organisers and film productions.

These are just a few examples of who your ideal clients may be. Once you’ve identified a few relevant groups, dig deeper to understand their habits, interests, spending capacity, occupation, and more. 

Step 2: Create a Comprehensive Business Plan

The second stage of starting your car rental company is crafting a detailed business plan. This document won’t just be useful for you and your team when growing your venture. It’ll also play a crucial role in attracting investors and securing funding in the future. 

As part of your business plan, include sections like an executive summary, business description, services, pricing, marketing plan, financial plan, operations, and management. 

Define Your Business Model and Services

Most importantly, outline all your leasing or car rental services. To do this, you’ll first need to decide on rental models, like daily rentals, long-term leases, or contract hire. 

Also, determine whether it makes more sense to start independently or to opt for a car rental franchise. Other options include purchasing an existing rental business or partnering with car dealerships for collaborations. 

To make the right choice, research all your options and make a list of advantages and disadvantages. Don’t forget to calculate the costs and potential earnings for each model.

Financial Planning

Starting a vehicle rental business requires a substantial initial investment, as you’ll need to acquire the vehicles that you’ll then rent to customers. While some car rental owners have the financial resources to make a personal investment, others require a business loan for their car hire business. 

Apart from the start-up costs for fleet acquisition, insurance, and premises, you’ll also need to consider regular expenses for maintaining your operations on a monthly basis. 

The financial planning section of your business plan should also include details on your revenue streams and pricing structure for different car rental services. 

Legal and Business Structure

Another key piece of information that should be included in your business plan is the legal and business structure of your car rental company. 

In the UK, you can choose from various business structures, including sole trader, partnership, and limited company. Each one has unique advantages and limitations. 

Usually, car rental business owners choose to register a limited company, as this type of structure considers the business a separate entity from the individual. This means that personal assets are protected, and the owner is not held personally responsible for debts. 

Don’t forget that you’ll need to register your business with Companies House and HMRC for tax purposes. We’ll go into more detail about these steps in the upcoming sections. 

Step 3: Set Up Your Car Rental Business

You’re now ready to start setting up your car rental business. This preparation includes building your fleet, getting insurance, and selecting a location.

Acquire a Rental Fleet

Naturally, the car fleet is the biggest asset in a car rental business. It will determine how attractive your services are to customers and whether they’ll be prepared to spend money on renting or leasing your vehicles. 

When building your rental fleet, you can either purchase or lease vehicles. Both options have distinct pros and cons, and the right choice depends on your preferences and financial stability. 

Without a doubt, purchasing vehicles will require a serious investment, making it a reasonable option for those with larger financial assets. At the same time, owning your vehicles gives you more control and flexibility. 

On the other hand, leasing vehicles means that you won’t have to tie up a significant amount of money into your start-up costs. However, it also means you won’t be the owner of your assets, and you’ll need to abide by someone else’s rules. 

When creating your fleet, decide on a mix of vehicles, like economy cars, vans, luxury cars, or specialised vehicles. 

According to research, the top rented cars in the UK are:

• Opel Corsa and Hyundai i30 for economy;
• Vauxhall Astra and Ford Focus for compact cars;
• Skoda Octavia and Citroen Picasso for midsize;
• Vauxhall Insignia and Ford Mondeo for full-size;
• Mercedes CLA and Porsche Boxster for luxury cars;
• BMW X5 and Range Rover Sport for SUV/VAN.

When choosing your vehicles, consider the specific services you plan to offer and think about the maintenance costs of different models. 

Secure Insurance Coverage

Acquiring insurance coverage is a key part of starting a car rental business in the UK. 

Here are the core types of insurance you’ll need to look into as a car rental business owner:

• Commercial fleet insurance; 
• Commercial property insurance; 
• Employer’s liability insurance.

Keep in mind that commercial fleet insurance isn’t part of every business insurance provider’s offering. Make sure you collect information on services and pricing from different providers. The cost of your insurance will depend on things like the size of your fleet, the kind of vehicles you operate, and more. 

Moreover, look into additional options like public liability insurance and extra coverage for drivers. 

Choose a Location

Last but not least, identify attractive locations for setting up your operations. 

Make use of any valuable information you’ve discovered when analysing other rental companies in your area. Ideally, set up your venture in a high-demand area near airports, train stations, and city centres. 

Studies show that rising air travel and continuous investments in the UK’s tourism infrastructure have a direct impact on the demand for rental cars in specific locations. Major tourist destinations like London, Edinburgh, and Manchester are examples of where such services thrive, especially at international airports such as Heathrow, Gatwick, and Birmingham Airport. 

Decide whether a physical office or an online-only operation with delivery services will be more profitable. 

Step 4: Register Your Business and Obtain Licenses

Next, make your business official by registering it with Companies House. To do so, you’ll first need to select a business name that is not used by any other company in the UK. Providing a company address is also a must. 

Keep in mind that if you choose to register a limited company, it’s mandatory to open a dedicated business bank account to manage finances separately. This is incredibly important for tax reasons.  

Although there are no specific licenses that you’ll need to obtain for a standard car rental company, there are some legal requirements rental business owners must be aware of: 

• Vehicle licensing – All fleet vehicles must be properly licensed and registered with the DVLA (Driver and Vehicle Licensing Agency).
  
• Rentals to private hire drivers – If you rent vehicles to private hire drivers (like Uber, Bolt), you may need to obtain additional licenses or permits.
  
• Consumer credit licence – You might need a consumer credit licence if your car rental agreements last longer than 90 days, or if they include terms like delayed or deferred payments. In these cases, the agreement falls under the rules of the Consumer Credit Act, meaning you must be licensed to operate legally.

In addition, you’ll also be held responsible for:

• Ensuring UK GDPR compliance when collecting customer data;
• Establishing a system for verifying drivers’ licenses and eligibility;
• Guaranteeing that all rental vehicles are roadworthy and taxed;
• Ensuring that fleet vehicles over three years old have a valid MOT certificate.

Neglecting these requirements can cause serious business disruptions and legal conflicts. 

Step 5: Implement Payment and Fleet Management Systems

Once your business is up and running, consider ways in which you can improve operations and offer excellent customer service. 

This is where payment solutions and fleet management systems can make a difference. 

Accepting Payments

To gain a competitive edge in an aggressive market, it’s crucial that you offer a seamless service that signals reliability, safety, and speed. Set up a payment system that accepts multiple payment options, including card payments, online transfers, and mobile payments. 

The right payment system depends on how your car rental business operates – whether you manage a staffed rental desk, an online booking platform, or a self-service rental station. 

Here’s how you can tailor your payments:

• Standard car rental office – If your business has physical rental desks or branches, a portable card machine or countertop POS terminal is essential for accepting debit or credit cards, contactless payments, and mobile wallets (Apple Pay, Google Pay).
  
• Online vehicle booking platforms – If your car rental service allows customers to book in advance through your website or app, you’ll need secure online payment gateways for pre-booking payments, deposits, or authorisations.
  
• Self-service or unmanned rental stations – For self-service or 24/7 rental models, investing in an unattended POS solution can transform your customer experience. This self-service payment terminal enables clients to make secure, contactless payments without the need for staff assistance. This can be an incredibly smart way to cut down costs, yet improve customer satisfaction.
  
• On-the-go or mobile car hire – If you manage a mobile or delivery-based car rental service – for example, delivering vehicles to customers’ locations – mobile payment solutions work best. In this case, use a portable POS machine or smartphone payment app to accept payments on-site.

Regardless of the option you choose, make sure your payment provider is reputable, trusted, and diverse in their offerings. 

Fleet Management Software

From day one, your ability to stay on track with vehicle availability and maintenance will have an effect on your performance.

Explore the available fleet management software solutions on the market and select the option that best fits your needs and budget. 

When evaluating software solutions, prioritise these features:

• Real-time vehicle tracking and GPS – Know where each car is, how far it’s driven, when it’s due back, and optimise deployment accordingly. Studies show fleet tracking solutions helped 70% of surveyed businesses improve customer service.
  
• Maintenance scheduling and alerts – Automatically trigger servicing, tyre checks or repairs based on mileage, hours used or sensor-based diagnostics, reducing unexpected downtime and extending vehicle life.
  
• Driver behaviour monitoring – Track metrics like harsh braking, speeding or idling, improving safety and reducing insurance and fuel costs.
  
• Fleet utilisation and cost analytics – See which vehicles are under-used, which trips cost more (fuel, time) and where you can cut waste. 
  
• Booking, dispatch, and return management – Integrate your software with your booking system so vehicle availability aligns with reservations and you avoid double‐booking or idle inventory.

Make sure that your fleet maintenance software provider offers 24/7 support and can provide customisable solutions that will match the specific needs of your fleet.

Step 6: Market Your Car Rental Business

To grow your car rental business to the heights that you’ve always dreamt of, you’ll need to make sure it’s discoverable and visible to potential customers. 

Build an Online Presence

The best way to position yourself in front of a wider audience is to invest in digital marketing. 

In 2024, online bookings accounted for roughly 67.5% of the UK car rental market, growing at a strong annual rate of 10.81% – a pace notably faster than traditional offline reservations. This demonstrates how crucial it is to strategically build an online presence.

Start by creating a business website that shows people who you are, what you offer, and what makes you stand out from the rest. Dedicate a page to explaining your rental process and pricing structure. Most importantly, showcase your capabilities by sharing customer reviews, feedback, and success stories of happy clients. 

Although your website should be built to attract and engage, it should also have functionalities that meet your needs. Beyond information, your website should serve as a functional sales tool. Integrate booking capabilities, secure payment options, and live fleet availability for a seamless user experience.

Boost your visibility by listing your business on popular travel and booking platforms:

• Google Business Profile – appear in local “car hire near me” searches and on Google Maps.
  
• TripAdvisor and Yelp – reach international travellers looking for reputable local services.
  
• Expedia, Kayak, and Rentalcars.com – connect with customers booking full travel packages.
  
• GetYourGuide or Airbnb Experiences – promote your rentals alongside tours or local travel activities.

These listings not only help potential customers find you but also improve your brand’s credibility online.

Last but not least, you can invest in SEO and Google Ads to increase your website traffic and attract potential customers searching specifically for rental cars. 

Leverage Social Media and Reviews

Social media is an incredibly powerful tool for car rental companies in 2025. 

Some of the most popular platforms for this sector include Facebook, Instagram, TikTok, and LinkedIn. 

Instagram and TikTok are ideal for showcasing vehicles in action – from road-trip reels and behind-the-scenes content to short videos demonstrating booking convenience or highlighting eco-friendly models. Facebook remains effective for community engagement and special promotions, while LinkedIn helps attract corporate clients and travel partners.

No matter which channels you choose to pursue, be consistent and share valuable content about your brand, team, services, vehicles, and clients. Experiment with different presentation styles, tone of voice, and topics until you discover what works best for your brand on each channel. 

Aim to express yourself genuinely and create a community of like-minded people who truly connect with your message.

Where possible, explore opportunities for partnering with influencers who can promote your car rental services. Most importantly, encourage existing customers to comment on your posts and leave reviews, as this is the quickest way to build trust in potential clients. 

Local Advertising

Leverage your location and explore different avenues for local advertising. 

For example, speak with local hotels, travel agencies, and other companies that attract people who are part of your target market. Reach out to local newspapers for advertisement options and distribute flyers in local coffee shops, libraries, museums, airports, and other locations. 

Step 7: Scale Your Business

Now that you’ve laid the foundations of your car rental business or leasing company, it’s time to consider scaling. 

The good news is that there are many ways to grow and scale in this industry. One option is to expand your fleet by investing in more vehicles to diversify your offering based on customer demand. In this case, think about niche services, like electric vehicle rentals, luxury cars, or wedding rentals. 

Another opportunity to consider is targeting corporate clients for contract hires or long-term lease agreements. Build relationships with corporate travel managers and enjoy recurring bookings over time. 

Scaling can also be a result of additional value-added services. Turn your business ideas into reality by providing GPS systems, child seats, and even additional insurance options to make your brand attractive to more customers. 

Conclusion

Overall, starting a car rental business in the UK can be incredibly rewarding. At the same time, it goes hand in hand with the challenges of setting up a new company and making it attractive in a competitive market. 

By following this step-by-step guide, you can go through the process with minimal obstacles in your way. Don’t underestimate the importance of steps like proper registration, payment systems, and customer service. Never fall victim to your comfort zone. 

Exploit the full potential of the UK’s car rental market and turn your new company into a success story. 

Frequently Asked Questions

Do I need a licence to start a car rental business in the UK?

You don’t need a special licence, but you must register your company with HMRC or Companies House and ensure all vehicles are insured, taxed, and roadworthy. Some local councils may have additional regulations.

How much does it cost to start a car rental business in the UK?

Startup costs vary depending on fleet size and location, but typically range from around £10,000 to above £100,000. This includes vehicle purchases or leases, insurance, branding, and setting up an online booking system.

What payment systems are best for a car rental business?

Use modern, flexible systems that support tap to pay, online bookings, and even unattended POS terminals for after-hours service. Offering multiple payment methods helps improve customer convenience and trust.