So, what exactly is a rental and leasing business? Rental and leasing businesses offer products, or assets, to customers on a temporary basis. Airbnb is a perfect example. It is famous for brokering deals so that homeowners can rent out their spare rooms to short-term visitors. Car rental firms, as another example, hire out cars to travellers, or locals, who are in need of a vehicle. Interested? Here’s how to start up a rental and leasing business:
However, rental and leasing businesses have the potential to go far beyond motor vehicles and housing. Most products you can think of can be turned into profitable items that could be leased out temporarily. This could be:
- Vintage crockery to rent out for weddings and parties
- Photography equipment that professionals can hire for photo shoots
- Cleaning and decorating equipment that homeowners may want to use on a short-term basis
There is a real possibility of building a successful rental or leasing business from nearly anything.
Legal requirements for setting up companies
In order to set up a private limited company, you must come up with a name for your business, and register it with Companies House. To register, you must have at least one director and shareholder, and a range of legal documents that can be put together by a business lawyer.
You must also have sufficient and relevant insurance coverage for your business. This will include insurance to cover the items you are renting out. This means that if the photographer drops your lighting rig and it shatters, you can replace it. It also includes public liability insurance. So if the cleaning equipment you rent out damages some property, you can cover your company’s liability.
If you are unsure about the insurance your company would require, speak to a specialist insurance broker who can advise you about what you need coverage for and how to get it in an affordable way.
Types of leasing and renting
If you are entering into the rental and leasing sector, you need to understand the different types of leases and rentals that are available.
Contract hire and lease hire
With these hiring options, you hire a vehicle, or a piece of equipment, for a specified (contracted) length of time. The lessee (the person who owns the equipment) allows the lessor (the person doing the leasing) the right to use a piece of equipment during that specified period.
With hire purchase, the item being leased is paid for over a period of time in a number of instalments. Unlike leasing, the person making the payments owns the vehicle or equipment at the end of the period of payment.
From the point of view of the leasing and hiring business, these two main options are quite different. The company should consider which fits its business model most effectively.
For small businesses, a hire purchase agreement can be lucrative if the overall cost of the item being bought is inflated over the payments being made. However, with contract and lease hire, the business gets the equipment back at the end of the period of the agreement. This allows it to be rented out again to another customer. This is the usual model of leasing and hiring companies, as hire purchase companies are more about sales than rental.
What to consider when setting up a leasing or rental business
It’s important to assess interest from your potential audience before setting up your company so that you can accurately identify whether or not you have a profitable business idea. If you want to rent out baking equipment, for example, you might struggle. Most people who are interested in baking have their own.
Set up a website
You will also need a decent website to not only showcase what you do. This can also let customers book their rentals online. Good management software is essential and will allow you to accurately track exactly where each piece of equipment, or vehicle, is at any one time. For expensive items, you may want to consider attaching GPS or other tracking devices.
Look at your price points
Also, look at the price points of your competitors, too. If you don’t have any competitors, consider whether that’s because you’re an innovative genius, or whether it’s that nobody else has been able to make your business idea work. That shouldn’t automatically put you off, but preparation, planning and a realistic outlook will be crucial.
What makes you different?
Finally, if you do have competitors locally, identify an aspect of your business that differentiates you from them. Note that this doesn’t always have to be the price. If you offer additional services, or better conditions, you will not have to engage in a fight for the lowest-cost rental, and end up pricing yourself out of business.
If you are considering setting up your own rental and leasing business, but want a bit more advice about where to start, take a look at our help centre or get in touch with our customer service team.