Car Rental - Business Models

Business Models

Car rental companies operate by purchasing or leasing a number of fleet vehicles and renting them to their customers for a fee. Rental fleets can be structured in several ways – they can be owned outright (these are known as ‘risk vehicles’ because the car rental operator is taking a risk on how much the vehicle will be sold for when it is removed from service), they can be leased, or they can be owned under a guaranteed buy-back program arranged directly through a manufacturer or manufacturer’s financial arm (these are known as ‘repurchase vehicles’ because the manufacturer outlines the exact price of original sale and of repurchase at the end of a defined term).

At the end of a rental vehicle's useful life, rental companies will often sell them into the used car market to dealers across the country via several methods, including direct-to-dealer and via specialized wholesale auctions companies (such as Manheim Auctions in the USA). Dealers generally will go through an inspection of the vehicles to make sure they comply with the safety standards of that dealership and then sell the car to the public. Many of these are known as program vehicles in the representation by the selling dealer.