To determine if your rental business should consider a cross-border policy, proximity and location should be part of your analysis. Is there a nearby crossing station, and is it safe?
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The U.S.-Mexico border might only be a short drive from your location, but building a fleet of cross-border capable rentals is no simple task. That said, the border is a hot bed for commerce and tourism with an incredible number of vehicles crossing back and forth each year. In fact, it’s the busiest border in the entire world.
Market Analysis: Can the Traffic Support a Cross-Border Rental Fleet?
Whether or not it’s worth allowing cross-border rentals is a big decision. Taking a look at the market and traffic offers insights into the potential. Your exact location and the nature of nearby border crossings and border towns is also important.
Ask these questions while analyzing the market and potential revenue:
- Does the closest border crossing have a friendly destination nearby?
- Is the area beyond the border safe?
- What are the risks of loss?
- How will I hold renters accountable in a foreign country?
- How high is demand and what are the margins?
Determining demand is a bit tricky as every border location is different. Ideally, your location is situated near a safe border crossing with close access to a developed tourist destination or secure destinations like factories and business parks.
For example, renting vehicles from southern Arizona to specifically reach Rocky Point for tourism has plenty of potential. The drive is easy, the border crossing is simple, and the resorts offer secure parking. Look for similar markets where short drives bring your clientele to safe and developed destinations.
How Many Vehicles Cross the Border Annually?
In the grand scheme of things, the number of cross-border vehicles is pretty incredible. The passenger counts also exceed passenger vehicle counts. Keep in mind, this only includes passenger vehicles and not buses, trains, commercial trucks, pedestrians, etc.
Here are a few statistics to show how much traffic flows between the U.S. and Mexico, according to the DOT:
- Over 62 million passenger vehicles crossed the border in 2021.
- Nearly 103 million personal vehicle passengers crossed in 2021.
As passenger vehicles, they are crossing for personal reasons as opposed to commercial, although some of that traffic is related to business as well.
Don’t forget about insurance! You will need a separate policy for Mexico. Lazzari said you can partner with a third party and develop a revenue stream by selling the policies as an affiliate.
Photo: Zach Lazzari/Cross Border Coverage
Common reasons for border crossing in rental vehicles include:
- Medical tourism.
- Visiting family.
- General tourism and travel.
- Shopping.
- Business.
- Moving.
While a few of the big agencies allow for cross-border rentals, only a handful of independent agencies are capitalizing on the market. I spoke with Carlos Garcia at Sun Diego Car Rentals, which limits drives to 150 miles south of the border.
With 30 years in business, Sun Diego’s entire rental fleet of cars, vans, and moving vans are eligible for crossing the border. Many of its customers visit specific destinations like Ensenada or the Valle de Guadalupe, with strict contracts in place to ensure vehicles are used appropriately.
Dual Insurance Requirements and Contract Considerations
Keep in mind that your customers will drive in both the USA and Mexico. That means they will require the standard insurance for the United States and a separate auto insurance policy for Mexico. Your rental contract should reflect the dual requirement and process both policies before being finalized.
On the Mexico side of the border, auto insurance works much like in the United States but through a different set of companies. You can partner with a third party and develop a revenue stream by selling the policies as an affiliate. If you have or are willing to obtain an insurance agent license in your home state, selling the policies as an agent can increase profitability as well.
The minimum requirement for Mexican Insurance is a liability policy but as rental fleet owners, requiring full coverage on every vehicle is a must-do. Day rates are available for short trips, making it easy to cover the vehicle through the entire trip.
Consider these factors for your rental contract:
- Limit distance of travel beyond border.
- Specify destinations to control travel parameters.
- Require full coverage Mexican insurance.
- Only authorize 2-way rentals (return to U.S. drop off).
- Require use of secure parking at night.
- Restrict off-road travel.
Luckily, many of the destinations and main highways in Mexico are paved and in decent shape. The Quota (toll) roads are especially nice and smooth and will limit wear on suspension parts.
Giving Renters Everything Needed to Travel Across the Border
Covering your legal basis is one thing, but helping customers have a successful trip will gain their loyalty. Provide them with the resources needed for a smooth and successful trip.
Here are a few things to consider providing for every cross-border rental:
- Letter of permission with dedicated contact.
- Written guide to crossing with list of approved borders.
- Outline of rules in contract – no off-road driving (Baja), mileage limits, etc.
- Best practice guide for driving in Mexico, refueling instructions, etc.
At most border stations, the driver will need personal documentation like a passport, but rarely will they need the registration documents. Having them readily available along with a letter of permission is important, if only for peace of mind.
Business Expansion to Shuttle Services
Owning a rental fleet near the border gives you proximity to a market of eager travelers. If the prospect of building a cross-border specific segment into your fleet seems daunting, consider expanding to include a border shuttle service that partners with Mexican rental agencies. This way, you only require a single shuttle vehicle and driver to transport passengers across the border to a rental agency where they can pick up vehicles in-country.
Once your drivers are trained and skilled at the border crossing process, you might even grow the operation to include destination drop offs and pickups on specific days and times. Destinations like the Valle de Guadalupe and Puerto Penasco are very reasonable driving distances for a shuttle service.
The market is full of potential for independent agencies looking for new revenue opportunities. If your location is situated within a reasonable distance of the border and any popular Mexican destination, crunch the numbers and see if your business can benefit from border traffic.
About the Author: Zach Lazzari travels full-time and loves exploring Mexico. He owns and operates Cross Border Coverage and helps travelers find auto and RV insurance when driving across the Mexico border.