1 of 16

Car Rental Business Model

Prepared for Lariat Auto Rentals

by Elizabeth Coker

2 of 16

Background

Lariat Auto Rentals has contracted with us, to perform some analysis of auto rental data for the past year.

​

  • The company owns 4000 cars
  • 50 branches
  • Locations across 22 states

​

​

3 of 16

Goals

The company’s management team is looking to make better business decisions about the vehicles that they purchase for their national fleet

The primary goal is to get suggestions for minimizing costs and maximizing revenue

4 of 16

The Data

The following datasets were provided:

​

5 of 16

The Data

  • A sharp drop was observed in the number of transactions in November
  • The data for November is incomplete
  • There is data for only 11 days in November
  • Data filtered to exclude November transactions

6 of 16

Model: Strategy 1

  • Cut insurance cost
  • Filtered cars with above $145 insurance cost per month
  • Incurs huge losses

​

 

BASELINE

CUT INSURANCE COSTS

NUMBER OF CARS

4000

3787

NUMBER OF TRANSACTIONS

78510

74323

 

 

 

INSURANCE COST PER MONTH

$ 402,698.58

$ 371,297.65

OTHER COSTS PER MONTH

$ 2,353,692.14

$ 2,227,061.29

TOTAL COST PER MONTH

$ 2,756,390.72

$ 2,598,358.94

 

 

 

TOTAL REVENUE PER MONTH

$ 5,101,649.50

$ 4,829,097.80

 

 

 

PROFIT

$ 2,345,258.78

$ 2,230,738.86

DIFFERENTIALS

$ -

$ (114,519.92)

7 of 16

Model: Strategy 2

  • Increase price per day
  • Pro-rated prices based on each car’s
  • Least price per day was $125
  • Analysis was based on $2 increase
  • Cost remains unchanged
  • Revenue and profit go up

​

 

BASELINE

PRO-RATE PRICE PER DAY

NUMBER OF CARS

4000

4000

NUMBER OF TRANSACTIONS

78510

78510

 

 

 

INSURANCE COST PER MONTH

$ 402,698.58

$ 402,698.58

OTHER COSTS PER MONTH

$ 2,353,692.14

$ 2,353,692.14

TOTAL COST PER MONTH

$ 2,756,390.72

$ 2,756,390.72

 

 

 

TOTAL REVENUE PER MONTH

$ 5,101,649.50

$ 5,183,249.54

 

 

 

PROFIT

$ 2,345,258.78

$ 2,426,858.82

DIFFERENTIALS

$ -

$ 81,600.04

8 of 16

Model: Strategy 3

  • Cut losses
  • Filtered cars with low or no profit
  • Reduced cost
  • Reduced revenue

​

 

BASELINE

REMOVE LOW PROFIT CARS

NUMBER OF CARS

4000

3933

NUMBER OF TRANSACTIONS

78510

77618

 

 

 

INSURANCE COST PER MONTH

$ 402,698.58

$ 395,559.16

OTHER COSTS PER MONTH

$ 2,353,692.14

$ 2,308,122.40

TOTAL COST PER MONTH

$ 2,756,390.72

$ 2,703,681.56

 

 

 

TOTAL REVENUE PER MONTH

$ 5,101,649.50

$ 5,055,383.00

 

 

 

PROFIT

$ 2,345,258.78

$ 2,351,701.44

DIFFERENTIALS

$ -

$ 6,442.66

9 of 16

Model: Strategy 4

  • Combine 3 strategies
  • Filter high insurance and low profit cars, and raise prices
  • Reduced cost
  • Reduced revenue
  • Decrease in profit

​

 

BASELINE

3 STRATEGIES

NUMBER OF CARS

4000

3724

NUMBER OF TRANSACTIONS

78510

73482

 

 

 

INSURANCE COST PER MONTH

$ 402,698.58

$ 364,746.42

OTHER COSTS PER MONTH

$ 2,353,692.14

$ 2,184,341.86

TOTAL COST PER MONTH

$ 2,756,390.72

$ 2,549,088.28

 

 

 

TOTAL REVENUE PER MONTH

$ 5,101,649.50

$ 4,860,662.25

 

 

 

PROFIT

$ 2,345,258.78

$ 2,311,573.97

DIFFERENTIALS

$ -

$ (33,684.81)

10 of 16

Model: Strategy 5

  • Combine only 2 strategies
  • Filter low profit cars and increase price per day
  • Minimize cost
  • Maximize revenue
  • Maximize profit

​

 

BASELINE

2 STRATEGIES

NUMBER OF CARS

4000

3933

NUMBER OF TRANSACTIONS

78510

77618

 

 

 

INSURANCE COST PER MONTH

$ 402,698.58

$ 395,559.16

OTHER COSTS PER MONTH

$ 2,353,692.14

$ 2,308,122.40

TOTAL COST PER MONTH

$ 2,756,390.72

$ 2,703,681.56

 

 

 

TOTAL REVENUE PER MONTH

$ 5,101,649.50

$ 5,134,814.67

 

 

 

PROFIT

$ 2,345,258.78

$ 2,431,133.11

DIFFERENTIALS

$ -

$ 85,874.33

11 of 16

Observations

​

​

  • Filtering for low insurance cost cuts off too many cars, less revenue is made

​

  • Increasing price and cutting off low profit cars makes the most profit

​

​

12 of 16

Recommendations

Strategy 5 presents us with the most ideal scenario

  • Cost decreased by 1.91%
  • Revenue increased by 0.65%
  • Profit increased by 3.66%

​

 

BASELINE

2 STRATEGIES

NUMBER OF CARS

4000

3933

NUMBER OF TRANSACTIONS

78510

77618

 

 

 

INSURANCE COST PER MONTH

$ 402,698.58

$ 395,559.16

OTHER COSTS PER MONTH

$ 2,353,692.14

$ 2,308,122.40

TOTAL COST PER MONTH

$ 2,756,390.72

$ 2,703,681.56

percentage change

 

-1.91%

 

 

 

TOTAL REVENUE PER MONTH

$ 5,101,649.50

$ 5,134,814.67

percentage change

 

0.65%

 

 

 

PROFIT

$ 2,345,258.78

$ 2,431,133.11

DIFFERENTIALS

$ -

$ 85,874.33

percentage change

 

3.66%

13 of 16

User Scenarios

  • The user may consider increasing the price further, and/or increasing or decreasing the profit filter.
  • what-if scenarios can be experimented from this workbook

​

These values can be changed to adjust for various scenarios

INSURANCE CUT-OFF

145

Dollar amount which filters every car which insurance cost is higher

INCREASE PRICE PER DAY

2

Dollar amount which pro-rates an increase in price per day based on the old price

REVENUE - COST

0

The value entered filters cars where the difference is less than the value selected

​

^values in the yellow cells can be changed^

​

14 of 16

Call to Action

​

  • The chart shows the effects on costs, revenue and profit after reducing monthly costs from non-profit making cars and increasing price per day on each car.

​

​

15 of 16

Next Steps

There is other information that Lariat management may find useful, such as profitability of car makes or branch locations.

It will also be interesting to analyze the impact of competition, distance driven, and customer demographics on the overall performance of the company

These are out of the scope of this project, but it could be considered as a next step for analyzing profit models.

Please contact us DA Elizabeth Coker, for your future analytics needs!

16 of 16

Thank you!