Article

Run a Rental Operation From Within the Dealership: Champion Rent-A-Car Pockets Additional Profit

May 2008, Auto Dealer Today - WebXclusive

by Jennifer Rincon - Also by this author

In the 1933 Laurel and Hardy short “Towed in a Hole,” Stanley struck on a great idea for their fish business: if they catch their own fish, every sale would be clear profit. “Tell me that again,” said Ollie, impressed. Stan tried to repeat: “If you caught a fish and whoever you sold it to, they wouldn’t have to pay for it—then the—profits would—would go to the fish …”

Unfortunately, many dealers think that opening a rental operation will cause the same mental strangle! They fear they will lose money or end up with a fleet of used cars above blue book value. On the contrary, said Pete Montanez of Champion Rent-A-Car in Miami, Fl., “The only drawback is to not have your own rental car operation … especially when you could be generating more profit than many small auto franchises.” If you’re not retailing your own rentals, you’re peddling someone else’s fish.

Founded in 1990, Headquarter Toyota opened its first rental division in 1994 and contained a few loaner cars for service customers. Like many other dealers, they were also paying outside rental agencies to supply cars during warranty jobs. If a repair went wrong or took longer than expected, the dealership had to absorb the costs. In addition, while customers were getting their Toyotas serviced, they were biding their time in other brands of cars.

Two years before Headquarter opened its doors, Toyota Motor Sales, USA, had already started its Toyota Rent A Car (TRAC) program to capture more business and spread brand awareness. Similar to a franchise, the TRAC program allows franchised Toyota dealers to operate a Toyota vehicle rental system.

In 1994, Headquarter joined the TRAC program and opened its retail rental lot, Champion Rent-A-Car, on dealership property with four cars. “Toyota made it easy for us,” recalled Montanez. “It is a top-performing brand and only Toyota dealerships can open up a [TRAC] rental facility.”

Within three years, the fleet averaged 40 vehicles. Headquarter still offered complimentary rentals for service, but the new focus was retail. During some months, profits soared to $3,000 to $5,000, while other months they teetered into the red. The search began for an experienced fisherman (a manager with a well-established rental background).

Montanez, a fixture in the rental industry since 1973, was hired as the manager of operations for Champion Rent-A-Car in 1997. He has always worked hand-in-hand with the dealer to provide transportation for service customers. At the same time, he began heavily marketing the retail end of the business by networking with schools, body shops and hotels. He landed accounts handling replacement claims with auto insurance companies like State Farm, Allstate and Geico. He began running ads in the yellow pages, in print and online, from Fort Lauderdale (32 miles north of the dealership) right down through Miami. “I literally go out to service shops all over the area and solicit their business,” he added.

Supported by the dealer, Montanez eradicated the word ‘loaner’ from staff vocabulary and replaced it with ‘rental’ out of respect for its profit potential.

Within 10 months of hiring Montanez, Champion had doubled its fleet and was making $10,000 to $13,000 per month. Champion now boasts a fleet of 125 to 150 rentals units during high season (November through April) and is one of the largest rental operations in Toyota’s southeast region.

Headquarter continues to see the benefits of their integration strategy, not only by keeping the profits made on each rental car, but also by keeping those cars in the system “which will later be sold as certified used cars,” said Montanez. Rather than handing money to a neighboring rental company, Headquarter is merely passing funds from one pocket to another.

Branding is Thicker than Water
At the Champion Rent-A-Car lot, just steps from the Headquarter dealership, every car is only six-to-eight months old. Mileages are low, topping at 10,000 to 15,000 miles, and the interiors carry no trace of smoke. “Most of my rentals still have that new car smell,” said Montanez.

Montanez, his three rental agents and two porters (who provide a pick-up service) keep the cars clean and serviced in Headquarter’s service bays. Meanwhile, the rentals pull double duty as a subtle plug for the dealership. “It’s all about keeping them in the brand,” reminded Montanez. Rental customers get to drive the latest flagship models, from the efficient Prius to the Y-Generation Scions, and can talk with a salesperson about the car once back on the lot. “Rentals are a golden opportunity to let customers experience other models of your own brand,” he stated. “People very often come back and say, ‘I love the car [I just drove]; I think I’ll buy that car next time.’” Why on earth, he reasoned, would Toyota want (or pay for) their customers to go to Hertz and rent a Honda?

Last year, Montanez began displaying Toyota’s Rent A Car survey on their front counter. Completed surveys are eligible to win a free weekend rental. Champion receives 40 to 45 completed surveys each month, or 10 percent of all total renters. “Question Number Six asks the renter if they planned on purchasing a Toyota in the future,” said Montanez. Of those who responded last year, 40 to 45 percent answered: “Yes, I am interested in purchasing a Toyota.”

“Those that responded ‘Yes’ were turned over to the sales department,” he said. In 2007, roughly 28 quality leads were created this way every month.

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