Car Rental Software - Ultimate Guide (5): Vehicle management

In part 4 we looked at how the operational rental processes should be handled in car rental software. This week we turn to vehicle management. More specifically, we look at the vehicle-related matters you need to be able to record to get a complete picture of the operational and financial status of your fleet. We close with our view on the relevance of utilisation rate.

Purchasing a vehicle

Managing a vehicle starts with the purchase. The vehicle joins your fleet, so you need to record the vehicle's specifications in your car rental software. Assuming the vehicle becomes your own property (not hired in), we strongly recommend that you also record at least the following:

• Purchase or registration date;
• Purchase price;
• Mileage at purchase;
• Depreciation period;
• Monthly depreciation.

Among other things, the above are needed to determine the return on the vehicle. We come back to this later in the article.

Going a step further, you could think about setting reminders for things like periodic maintenance and the APK (the Dutch periodic vehicle inspection). It is also useful to be able to upload documents belonging to the vehicle, such as the registration certificate, transfer certificate and insurance papers, into the rental software. That way you always have all documents to hand. All you need is an internet connection.

Finally, it is a good idea to 'tag' the vehicle with certain distinctive characteristics. This lets you find the vehicle easily later on by filtering, for example in the planning board.

Rental period

For most rental companies the rental period is the most exciting time. This is where you incur monthly costs (insurance, tax and maintenance), where you are confronted with damage and where fines come in for the vehicle. Perhaps the vehicle even gets used privately once in a while… 😉

One-off and recurring costs

When we talk to a prospective customer and ask which costs are a thorn in their side, we almost always hear: 'The insurance costs!'

When we then ask where those insurance costs can be found in their rental software, we also often get the same answer: 'We don't record those in our rental software. We lump all insurance costs together under the accounting item "insurance costs".'

At the same time, almost everyone claims to know what the return on their vehicles is…?!

But to be able to determine the return on your vehicle, it is essential to be able to record the costs belonging to the vehicle. This includes all direct costs associated with the vehicle. Road tax, BPM (the Dutch vehicle purchase tax), insurance, but also one-off fuel costs, damage not passed on and unrecoverable traffic fines all belong here.

Damage management

Damage and rental are almost synonymous and are a guaranteed source of trouble.

As a rental company you shoot yourself in the foot if, through carelessness, you cannot recover damage caused by the customer.

On the other hand, customers are often suspicious of 'damage being charged twice'. You know the scene: a renter following you around with a phone to film the existing damage.

For both parties it is therefore important that all damage is recorded properly and that there is transparency about existing and newly recorded damage. This can be done by recording damage (with photos) on a vehicle damage chart. That lets you make clear to your customer, visually and in writing, which damage is present and which damage you are newly recording. Recording this is an absolute must-have for good car rental software.

That brings us straight to the return process for the car. It is important that you do not send a damage file with the final settlement if there is no new damage. This confuses the customer and results in a large number of phone calls.

Fines

Apart from any integrations with the CJIB (the Dutch fines collection agency) and/or other third parties for fines, it is equally important to be able to trace the driver in the event of a fine. Two parameters matter here: the registration number and the date of the offence. If you enter these parameters into the system, the rental software should show which reservation is involved. You can then pass on any additional 'administration fees'.

Sale

After the rental period, all being well, comes the sale of the vehicle. For many rental companies this is the moment the money is made. For tax and commercial purposes the vehicle has already been depreciated to its residual value, but the vehicle is often worth more.

To calculate the 'lifetime value' of the vehicle properly, you therefore need to record the sale proceeds in the car rental software.

Utilisation rate versus Return On Investment

Only after going through the whole cycle can you conclude with 100% certainty whether the vehicle has made money on balance. You calculate this as follows

ROI = Rental income + Sale price – Purchase price – All direct costs belonging to the vehicle.

Make sure you are not subtracting apples from pears. If you include accessories in the rental income, you must also include the costs related to the accessories.

In our view it is therefore important to base decisions on ROI. That does not mean, however, that you necessarily have to aim for the highest possible ROI. It can also be a tactic to aim for a minimal ROI, but in large volumes.

And the utilisation rate?

That is interesting, but should not be overrated. Which would you rather have: a vehicle you can rent out 3 times for € 100, or a vehicle you can rent out 6 times for € 30?

So is the utilisation rate not important at all?

It is. A structurally low utilisation rate can indicate that your prices are too high, that you do too little marketing or perhaps even that you have a poor reputation with your target group. So keep a close eye on your utilisation rate, but do not rely on it blindly!

Bonus: playing with availability

The international car rental companies are masters at this. After you have reserved a 'budget' class, you hear at the desk that you are getting a free 'upgrade'. Few customers complain at that moment.

But what has actually happened? The rental company lets its popular class be overbooked and absorbs this with the availability of more expensive variants. Of course this is not necessarily desirable, since you are now giving away the more expensive variant at a lower price. But when you consider that on average customers fail to show up in 10% of cases, it is a good deal!

Yes, it gets a little more complicated, but that is not so bad if you have good car rental software 😉!