How to Rent to Credit-Challenged Customers

Photo via iStockPhoto.com/BTownChris
Photo via iStockPhoto.com/BTownChris

So, you want to get into the car rental business. How are you going to do it? Buy an existing business; buy a franchise? Or start from scratch as “No Name Rent A Car”?

Articles in Auto Rental News and other publications have demonstrated how to buy an existing business or a franchise. This article will discuss one way to go at it alone as an “independent,” by serving an underserved market niche — customers with less than perfect credit.

Understand the Pitfalls

All rental companies require more than just a valid driver’s license to entrust a car to a potential customer. Many companies will only rent to someone with a major credit card in the renter’s name that can be authorized for the amount of the rental. This qualification excludes a large part of the population; therefore, many independents are tempted by this niche.

As credit-worthiness is a measure of a person’s responsibility, studies have shown that low credit-worthiness is directly related to a propensity for accidents.

It is also a good predictor of whether the rental will incur typical pitfalls such as whether the car will be returned on time and in good condition, whether the car has incurred unpaid parking tickets, toll or speed violations or other infractions, or whether you’ll be able to collect on additional charges.

These concerns come with every rental, but the risks increase exponentially as the potential renter’s credit-worthiness decreases.

Nonetheless, many operators transact cash and debit card rentals successfully. What do you need to do to make a profit in this segment?

Qualify the Renter

The first requirement is to properly qualify the potential renter. Because the renter does not have a credit card that can be authorized, you must establish that he or she is a responsible individual in other ways.

A current pay stub confirms that the potential renter is employed. A utility bill confirms his or her residence. If the renter owns a car, a valid vehicle insurance policy is another point in the renter’s favor. A debit card indicates that the renter meets the bank’s requirements for a bank account and accompanying debit card.

Detailed qualification procedures are beyond the scope of this article, but it is very important that you and every one of your employees follow them scrupulously. The rules must have a reasonable, business-related purpose and must be applied every time and to everyone equally. They cannot be based on an employee’s mood, how many vehicles you have idle or a subjective opinion of a renter based on appearance, tattoos, piercings or accent.

And of course, the rules must be applied equally to all races, ethnic groups and genders.

Your qualification procedures, except for the credit card requirement, need to be more stringent than your competitors — and you should never make exceptions or listen to sob stories. You and your staff will, of course, be courteous but firm in turning down a majority of applicants who will be testing you at the beginning.

Even if a potential customer qualifies, your job is not finished until the vehicle is returned safely. You and your staff must pay strict attention to overdue vehicles on a daily basis.

CONTINUED:  How to Rent to Credit-Challenged Customers
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