Understanding the Exotic Car Rental Market

As founder and president of Gotham Dream Cars in New York City, Noah Lehmann-Haupt is surrounded by a fleet of cars befitting British royalty or a Saudi oil baron. And when the mood strikes him, he can take a Ferrari Murcielago, Continental GT or the relatively mundane Porsche 911 twin-turbo out for a Sunday spin.

It is one of the perks of owning an exotic car rental company. Yet those moments are tempered with ones like these:

On the day after Christmas, 2004, Lehmann-Haupt was lying in bed when he got a call from the guy renting his Lamborghini Gallardo. Lehmann-Haupt soon found himself staring at the back of a wrecker, with his $175,000 baby “crumpled into a little ball.” No one was hurt; knock on wood. However, “that started a six-month process of waking up every day wondering if I’d get my $175,000 back,” he says. “I had to fight him and his insurance company. They wanted to nullify the contract.”

Though Lehmann-Haupt eventually did get his money back, the story defines the nature of exotic car rentals: It takes plenty of working capital, extra attention to customer service, and a healthy appetite for risk.

The Market for Exotics

Being rich is not necessarily the rule when it comes to wanting to tool around in an exotic vehicle for a couple of days. Yes, wealthy clients who own expensive sport cars want to drive a similar type of vehicle when traveling. But the majority of customers who rent specialty cars are those who can’t afford to buy one.

Although Gotham Dream Cars caters to a range of clients, Lehmann-Haupt says many are wives and girlfriends who want to get their husbands and boyfriends a unique birthday or anniversary present.

Another typical client is the 30-something, male small business owner who doesn’t have enough disposable income to purchase an exotic car, he says.

John Kiland, owner of Rent-A-Vette in Las Vegas and San Diego, says his Las Vegas location attracts mostly tourists. At San Diego’s Rent-A-Vette, local clients rent the cars mostly for weekend getaways. 

Upping the Ante with Exotic Rentals

Just a couple of years ago the typical exotic vehicles available for rent were Corvettes, Vipers, and Mercedes. Today, it is common to see Ferraris, Lamborghinis and Porsches among the selection.

The Gotham fleet includes a Lamborghini Gallardo, Ford GT, a Porsche 911 Turbo Cabriolet, a BMW M5 and a Corvette C6. Lehmann-Haupt just purchased a Lamborghini Murcielago. For clients who want to really live large, that car will set you back $2,150 a day.

At Specialty Rental Cars in Bellevue, Wash., the bevy of beauties includes a Lotus Elise and Exige, Porsche Boxster 5, Aston Martin Vanquish, Bentley Continental Flying Spur, a Lamborghini Gallardo Spyder (highest-ticket rental at $2,450 per day) and the Mini Cooper S Convertible (least expensive at $235 per day).

In Las Vegas, Rent-A-Vette offers customers four distinct vehicle fleets: exotic sports cars, fun convertibles and sporty roadsters, luxury two- and four-passenger convertibles, and luxury SUVs.

The exotic sports cars run the gamut from the Lamborghini Gallardo and the Ford GT to the Ferrari 360 Modena and the Maserati Spyder F1. The convertibles and sporty roadsters include a replica Cobra Roadster, Porsche Boxster and the Mini Cooper S MC40 Sport Sedan. Vehicles in the luxury two- and four-passenger convertibles fleet range from the Mercedes AMG CL55 Sports Coupe to the BMW M3 convertible and the Mercedes CLK320 Cabriolet.

As far as the most popular rentals, geographic location plays a big part. In the Big Apple, Ferraris and Lamborghinis are the rentals of choice; in Sin City, Corvettes; and in Bellevue, a suburb of Seattle, Porsche Boxsters, and Mini Coopers are in demand.

Starting Up

There is no set formula for opening an exotic car rental company. Every path is different, though each business started with a demand in the local market.

The lack of truly exotic vehicles to rent in the New York City area was the driving force behind Gotham Dream Cars, which opened in January 2004.

“We searched for a place to rent a super car in the Northeast, and we didn’t find any worth a phone call,” he explains. “Sure, there are many places where you can rent what others call an ‘exotic’ car, such as a Viper, a Mercedes or even a PT Cruiser. But when it comes to what we call an exotic vehicle—a Ferrari, Lamborghini, Bentley or Aston Martin—the market fell short.”

Lehmann-Haupt says Gotham Dream Cars started with a foundation of good personal credit, a solid relationship with his banks and investors who were confident in his business model. However, “there’s a huge amount of personal risk. I have to co-sign everything,” he says.

Unlike a traditional RAC, leasing is not an option. “Leasing companies will not lease to me because they’re too scared to hold title on cars they’re unfamiliar with,” Lehmann-Haupt says. “There is a tremendous amount of haggling required. It’s an incredibly capital-intensive business.”

Specialty Rental Cars began as an offshoot of one of the biggest exotic independent highline dealerships on the West Coast. The business arose out of the buyers’ desire to test drive the vehicles before they bought them, says Petherbridge.

The company now owns a motor racing team, and recently started a limousine company in response to Bentley and Range Rover clients requesting drivers.

Though the dealership facilitates the acquisition and remarketing of vehicles in the RAC division, the rental business has to make a profit by itself, and it does.

How to Price an Exotic Rental

“People think we pull the prices out of mid-air,” says Petherbridge, “Though in actuality it’s based on acquisition cost and how quickly the vehicle depreciates.”

The very rough rule of thumb, Lehmann-Haupt says, is that the daily rental is 1 percent of the value of the car. Using that as a base, price is modified based on demand, prestige and public perception.

For the Lamborghini Gallardo, a $175,000 car, Lehmann-Haupt charges $1,750 a day. Though the Porsche 911 twin-turbo lists at $140,000, he only charges $800 a day, or .5 percent of its value. “People aren’t willing to pay $1,400 a day for a Porsche,” he says. “The Porsche brand does not have the prestige of the Ferrari or Lamborghini brands.”

He also bases prices on what other rental companies around the country are charging, though he says it’s “a chicken and egg thing.” He sees newer companies pricing vehicles in $50 increments, a practice he started.

Clients may wonder why they’re paying $230 a day for a non-luxury vehicle such as the Mini Cooper. The client pays extra for the luxury of booking the exact car on a specific date, says Petherbridge. It presents a utilization challenge for the rental company. “If someone reserves a Mini Cooper in two weeks for a one-day rental, I would have to turn away a two-week rental during that time,” he says.

Free Mileage Is Never Free

The industry average is 75 to 100 free miles daily, says Petherbridge. Excess mileage charges start at 40 cents on the low end and can cost up to $2.00 for the ultra-exotics. Lehmann-Haupt gives 100 miles per day free and bills 75 cents for excess miles on cars in the Corvette and BMW range, and $2.00 for the high-end vehicles such as the Ferrari, Aston Martin and Lamborghini.

Unlimited mileage is a Pandora’s Box best left unopened. “Every time I have given somebody an unlimited mileage deal or a discounted rate, they’ve taken advantage of me,” Lehmann-Haupt says.

Lehmann-Haupt recounts the time when a customer asked for unlimited mileage because he “didn’t like the psychology of feeling limited by a mileage cap.”

He cut him a deal and gave him the unlimited miles. The guy drove to Chicago and back in a weekend. Lehmann-Haupt still billed him an extra 80 cents a mile, but not the full $2.00. 

Covering Your Assets

Exotic car rental operators must go above and beyond the usual safeguards to ensure they’re renting to reputable clients.

Gotham Dream Cars does a criminal background check, a driving record check and a credit check. The company also takes a $10,000 security deposit on top.

Specialty Rental Cars does not do a criminal background check. The company makes sure the actual credit card is swiped, and takes a deposit of $1,500 to $5,000.

Rent-A-Vette takes a thumbprint and a scanned copy of the driver’s license. The deposit is equal to a day’s rental.

All three operators have GPS tracking systems installed in their vehicles. All operators require renters to provide proof of insurance for the value of the exotic vehicle, and stipulate that the renter’s insurance is primary.

The Insurance Catch-22

Operators say insurance considerations are the one of the biggest hindrances to entering the exotic car rental business.

Many exotic car rental operators finance their cars, necessitating a third-party insurance policy, as opposed to — gulp — self-insuring. Yet very few carriers insure the ultra-exotics such as Lamborghinis and Ferraris. (Petherbridge says only two companies in the country cover the very high-end exotics.) Rates are high. Third-party collision damage waivers simply aren’t available on the ultra-exotics, meaning operators must put their own policies at risk.

That leaves rental companies in a Catch-22: though they must pay high insurance rates, two or three claims can cancel the policy.

However, like Lehmann-Haupt’s nightmare after Christmas in 2004, extended battles with the renter’s insurance carrier are all too common.

“We work closely with several of the well-known damage collection companies,” Lehmann-Haupt says. “We have to go after our clients. With our insurance rates as exorbitant as they are; if we file claims [our rates] are just going to go through the roof.”

Buying and Selling – The Challenge of Depreciation

Part of being a successful exotic rental car operator is knowing how and when to purchase and remarket vehicles.

Lehmann-Haupt adds to the fleet with sufficient customer demand. He recently got a call from a guy who wanted to go to Atlantic City but needed room for his buddies and their girlfriends. He couldn’t fulfill the request. Realizing highline four-seaters were lacking in his fleet, Lehmann-Haupt bought the comparatively roomy Bentley.

“Every car fits a profile,” he says. “I don’t get two cars that compete with each other. The guy renting the Aston Martin is not the guy renting the Ferrari F430; they’re different customers.”

“We have good relationships with dealerships that offer us new cars for wholesale prices,” says Lehmann-Haupt. “They know we’re repeat customers, and that the cars we purchase from them are rolling advertisements.”

Lehmann-Haupt says he generally purchases new vehicles, though buying a new exotic comes with a warning tag: it can depreciate by $100,000 in one year. He replaces vehicles on a car-by-car basis through private channels and selling to customers “who fell in love with the vehicle they rented.”

Petherbridge typically buys year-old cars and keeps them while they are still under warranty. He remarkets many vehicles through the company’s dealership.

At Rent-A-Vette, Kiland buys both new and low-mileage used vehicles, and sells them at around 30,000 miles while they are still under warranty. To get them to market, he works with brokers, goes to auctions and also sells them himself. 

Spreading the News

In this digital age, exotic RAC operators say Yellow Page advertising is becoming less and less of a smart-money advertising outlet. Having a Web site is essential. Good word-of-mouth is a close second.

Petherbridge invests more than 50 percent of the company’s advertising budget on the Web site. The rest is spent on promotions, local car shows and networking at trade shows. Kiland has found that placing ads with in-room magazines at high-end hotels brings in business. Getting cars in front of the right hotels and the concierges worked well for Petherbridge when the company owned an exotic RAC in Miami.

Web sites catering specifically to exotics, such as exoticcarrentals.com and rentexoticcars.com, offer listings grouped by geographic area and vehicle type. Some basic listings are free, while banner ads that link to an individual RAC Web site range from $40 to $100 a month.

Before plunking down any money to be listed on these sites, get specifics from their salespeople. Ask for:

• Overall site traffic.
• Average number of impressions your site will get for advertising on that specific page.
• Number of impressions for other banners on that page.

The White Glove Treatment

Having an array of clean and well-maintained exotic vehicles to rent may get people through the door, but customer service keeps them coming back.

“This is luxury service business from top to bottom,” says Lehmann-Haupt. “We treat our customers like gold, and they can reach us by phone 24/7. Most of our clients have my cell phone number or the number of one of my managers. I cannot stand companies that are in a service business but are only available to clients during certain days and hours.”

Petherbridge runs his business as if he had a competitor next door. “I grew up in this industry at Enterprise Rent-A-Car so I know the importance of customer service and cleanliness,” he says. “In conjunction with our first-class vehicles, we aim to provide first-class service,” says Petherbridge, “which means going above and beyond our clients’ expectations.”

Excellent customer service also extends to post-rental. “If the client returns the vehicle at our location, we will ask for his or her feedback; if the vehicle is returned at the hotel or airport, we will call the client for feedback,” says Kiland.

Petherbridge sends clients a follow-up thank you letter offering future discounts and a questionnaire for them to fill out and return.

Typical services offered by exotic car rental agencies include:

• Door-to-door delivery (home, office, hotel or local airport).
• 24/7 Roadside Assistance (towing, lockouts, jump-starts and fuel delivery).
• Free automatic toll payment transponders.
• Free in-car GPS navigation systems.
• Maps and tour directions.
• Hotel, restaurant and nightclub reservation assistance.
• Limousine transfer service.
• No refueling requirement, some offer free tank of gas.
• Free cleaning of vehicle during rental period.

Passion Is Essential

“This is a fun industry,” continues Lehmann-Haupt. “I love being in a business that makes people happy and seeing the smiles on their faces. I’m a total car nut and this gives me the opportunity to play with the toys I dreamed about.”

A childhood fascination with cars was also the case for Kiland.

“During my childhood summers, my grandpa would let me drive the country roads of Minnesota long before I was old enough,” he says. “Following form, my first car was a 1965 Mustang, then a Chevelle SS, then a Corvette Sting Ray. Over the years, I have grown to have an immense passion and respect for anything automotive, especially those cars with the prancing horse.”

The goal at Rent-A-Vette is to share that passion and joy with its customers. Whether people like exotic cars for their aesthetic value or for the giddy feeling they get in their stomach when pressing the throttle, Kiland enjoys fulfilling automotive fantasies.