By on August 7, 2014

rental-car-signs

2014 has been a good year for the rental car industry. A recovering economy has meant more car rentals and more miles traveled by consumers. Volume alone isn’t responsible for the rental companies’ recent success, though. Each of the big three rental chains has been able to raise prices, thanks to the consolidation of an industry that they now collectively control 98% of.

Bloomberg reports that Avis Budget Group, Enterprise, and Hertz Global Holdings have been able to raise prices thanks to a combination of less competition and better inventory management. They haven’t been particularly coy about their increase in leverage over the market. The CEO of Avis Budget recently declared during a conference call with investment analysts that “I’m probably more enthusiastic about our business than I’ve ever been. And one of the reasons is the meaningful change in pricing that we’ve now seen play out over the past six quarters.” His company’s stock has gained in value 50% over the last year, and is now a Wall Street favorite. Currently trading at close to $60, some analysts think there’s still plenty of room for growth. A report released Wednesday by the MKM Partners market research firm pegs the true value at between $75-80 a share.

“Rival” firm Hertz hasn’t been doing quite so well, but isn’t exactly hurting for business. That company’s stock is down slightly as it recovers from a major accounting snafu dating back to 2011. In 2013 Hertz swallowed Dollar Thrifty in a $2.3 billion deal that drew the attention of antitrust regulators in the Federal Trade Commission. Despite concerns about reduced competitiveness in the industry, the deal was allowed to go forward after Hertz agreed to spin off its Advantage sub-brand. Advantage lasted a mere four months on its own before going bankrupt. It was sold to a capital investment firm and then spun off yet again, surviving today as a niche player in select cities.

Avis has also scarfed up competitors. In 2011, the company acquired Payless Car Rental for $50 million, and a few months later bought out Zipcar for $500 million. Some consolidation in the industry was probably inevitable following the 2009 recession. But trade observers now agree that the FTC dropped the ball when it allowed Hertz to buy out Dollar Thrifty. The competitive situation in the car rental business now represents the “Golden Age” of the Detroit 3 automakers in the 50s and 60s: a mostly stable oligopolistic arrangement where everyone has their own slice of the pie, nobody upsets the apple cart, and a few oddballs pick up the scraps.

As an entitled and obstinate Millennial that hasn’t developed the proper respect for the gently used and reasonably priced wares of the rental chains, I find myself wondering how this comfy arrangement might be disrupted. Although still in their infancy, car-sharing services like Lyft and Uber may grow into feasible alternatives to rental cars. One sign that the nascent ridesharing market is worth taking seriously is the interest shown in it by the big rental companies. Besides Avis’ aforementioned acquisition of Zipcar, Enterprise bought Zimride, the predecessor company of Lyft, last year. In any case, from a consumer’s perspective the rental car business could use a little more competition.

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94 Comments on “Rental Car Oligopoly Increasing Profitability at Consumers’ Expense...”


  • avatar

    Just curious, but when does corporate profitability NOT come at the consumers expense? How does that work?

    It is very true that prices are higher and the miles on the rentals we drive are higher. The cars are in worse shape than…… pre 2008. The rental car business suffered greatly for a spell. Are they not entitled to regain lost income and profits? Or should they just write that off and do business as a public service?

    • 0 avatar
      MisterScott

      I agree that supply and demand drive profitability but when excess profitability is blatantly facilitated by a lack of government oversight in preventing these consolidations, then no, they are not entitled to such. A prime example is XM Sirius. How under any circumstances does the government permit the only two competitors in a space (yes, I am differentiating between them and terrestrial radio) merge. My costs have skyrocketed (I have 5 or 6 radios in various vehicles), the content is getting worse (more chatter on music channels and clearly talk that is based on paid promotions by labels) and more commercials on music channels. Competition breeds price efficiency and innovation. So no, just because they suffered, they are not granted the right to make excessive, government fueled (pardon the pun profits). Ask the shareholders of Blockbuster their opinion on such…..

    • 0 avatar
      psarhjinian

      “Just curious, but when does corporate profitability NOT come at the consumers expense? How does that work?”

      When a corporation (or a rival) does something better or different then before, cracking open a new market or increasing efficiencies

      Uber and Lyft would be examples in this industry.

      • 0 avatar

        And they operate as non profit public services?

        • 0 avatar
          psarhjinian

          No, but they cost the consumer less.

          I suppose it depends on how you define “…at the consumer’s expense”. Everything is at the consumer’s expense, but disruptors can reduce that expense, as can operational efficiencies or strategic changes within the service provider.

          Perhaps in this sense, we mean “At the consumer’s additional expense”.

          • 0 avatar

            They cost the consumer less until they go out of business. BTW, Hertz and Thrifty weren’t doing particularly well on their own over the last 5 years.

    • 0 avatar
      87 Morgan

      Why do you say the cars are in worse shape?

      I rent weekly from National, I typically choose as Chrysler T&C. I have yet to have one with more than 15k on the odo, XM satellite radio etc. To date, not a one has had an issue in terms of wear and tear or driveability, broken pieces what have you.

      In 09′ it seemed like all I could get was a turd Corolla that was ussually awful in all respects, except MPG which sometimes is over rated.

      Oddly or in fact sadly….I find the T&C to be a fine driver and could actually live with one as my daily.

      • 0 avatar

        I typically rent about 50 times a year, and primarily with Hertz. Enterprise is a different business model, but there is a paradigm shift that has taken place in the rental business. Most rental cars are now “risk units” as opposed to “program cars.” Risk units entail the rental car company getting a big initial discount, but being responsible for its ongoing value. Program units have a guaranteed value. When OEMs pulled their program car programs, rental companies kept the cars in service longer. Another reason to do so? There was no credit available to replace their fleets.

        Enterprise is a fast growing rental company but they don’t have the prime spots in many airports. Hertz does, and despite the occasional hiccup, I’ve been happy with them. If they assign me a ratty vehicle, I bitch about it and they give me something else. If I spread the business around, I doubt I’d get the same consideration.

        • 0 avatar
          deanst

          Enterprise has essentially the same market share in airports as hertz. Not sure where your credit remark is coming from, but Enterprise had and has excellent access to credit.

        • 0 avatar
          windnsea00

          Enterprise doesn’t really need an airport presence since they own National and Alamo (Enterprise Holdings). They are the heavy weight with fleet size by a WIDE margin compared to Hertz/Dollar/Thrifty and Avis/Budget.

          The cost to rent a car now is cheap just like an airplane ticket compared to where it should be based off inflation.

        • 0 avatar
          krhodes1

          I am also a 50+ times a year Hertz renter, and I can very much second everything Ruggles is saying. The cars are being kept longer, and the rentals are getting noticeably more expensive, even with my company discount. I don’t care, it is not my money and they treat me quite well.

          Note – Enterprise really IS mostly a different business model. While they are at many large airports, they are NOT at very many small airports at all. Hertz and Avis are at very, very, very nearly every single airport that has commercial service in the country. In 10 years of renting from Hertz, and the 10 years prior renting from Avis, I have been to ONE airport for each where they did not have a presence. Enterprises sub-brands are in even fewer small airports. This is important when you are traveling for a living and flying into Podunk, North Dakota.

          • 0 avatar
            Landcrusher

            My experience with Hertz has been the worst, but my big travel days were in the nineties. I thought the emerald aisle was a godsend. I could get in the car, figure out if I fit, and keep it or or take the next one.

            Hertz generally sent me, and my very heavy, large and valuable demo gear on a hike to the other end of the lot to an empty frigging space. When I got in their club, they just forgot my reservation altogether or otherwise screwed things up and it was always lump it or go stand in a long line. More recent experience was more of the same.

        • 0 avatar
          sgeffe

          Enterprise is also the captive provider for Nationwide insurance rentals (and maybe others), and of course, they always advertise “we’ll bring it to you.”

      • 0 avatar
        APaGttH

        I don’t know if I would say cars are in worse shape in general – BUT.

        Five years ago I would never see a rental car past 30K miles on the odometer or more than one model year old. It’s quite common now to see cars over 30K miles, and my last Hertz rental was a Suburban LT with 56K miles! On the other hand, the Suburban looked brand new inside and out and drove as such, beyond some very mild brake rotor warping that would annoy me, but 90% of drivers would ignore or think was “normal.”

        I have had a couple of more ratty cars from mainstream rentals. Dollar in Denver was the worst – a 44K mile Ford Fusion that was already on its death bed and I was told to suck it, we don’t have anything else and you’re lucky you got this car, when I tried to exchange it.

    • 0 avatar
      Landcrusher

      When increased profit comes from being able to charge more for the same or equal value it can rightly be said to be at the expense of consumers.

      Companies not part of highly regulated and commoditized industries very often improve profits while increasing consumer value rather than using leverage.

      The problem is that as fewer and fewer members of our population have regular business with innovative companies, we get more and more hate for corporations. Then more regulation which squeezes out new innovators. It’s an ugly cycle.

    • 0 avatar
      jim brewer

      Its one thing to make money because of your superior “skill,foresight and industry” another thing if you merged with major competitors While the antitrust regulators napped.

      • 0 avatar
        golden2husky

        Jim nailed it. This is why more and more people hate Corporate America. Look at what rental companies charge for insurance. Rape never had a nicer name. Good thing Amex stepped in with great primary insurance. An example of good competition. Yet as the mergers run rampant the consumer suffers. A number of years ago somebody had analyzed the costs of banking on the average consumer. Areas in the country where Bank of America was the prime player had much higher fees and other junk charges levied against consumers. Something they could not do where there was competition.

        • 0 avatar
          an innocent man

          I always hear this about banks, and my first thought is: “Who uses a bank?” I may be wrong, but are there places that have BOA and yet have no credit union? People who pay high fees really have no one but themselves to blame.

          • 0 avatar
            krhodes1

            I use BOA and I pay nothing in fees. You just have to follow the rules regarding minimum balances and such. I use a credit union too, but it is very nice to have a bank that has branches nearly everywhere, and all the other big bank services. But you have to pay attention, or you will PAY.

          • 0 avatar
            snakebit

            You know, BOA works just fine in most metro areas, but I found not in some areas. While in Colo Springs, I found none, the closest one was in downtown Denver, about 70 miles north. Yet on the west and east coast, they’re like Starbucks.

        • 0 avatar
          snakebit

          I, too, use the Amex plan for waiving deductibles and not paying fees to Hertz and Thrifty. It’s IIRC $25/week, and I started using it when I was snagging 2006 GT-H Mustangs at LAX. You just call Amex customer service(the number on the back of your card) and use the Amex card for the rental, and you’re done. You must tell the rental agent that you’ve got the premium plan, and that ends any upsell lecture from the agent, like magic.

    • 0 avatar
      VCplayer

      If the cars are in worse shape it probably has more to do with Detroit not giving away vehicles to rental companies than anything else. Rental companies will keep cars longer when they can’t get new ones as readily (and GM doesn’t need thousands of Aveos stashed somewhere).

    • 0 avatar
      ect

      In the 1990’s, Home Depot set out to consciously reduce their gross margins, to build business – contrary to conventional retail thinking. Over about a decade, they reduced margins from (IIRC) around 24% to 14% – a ridiculously low level in US retail. Consumers benefited, and the increase in business meant that total profits rose.

      Innovation both increased profits and benefited the consumer.

      I witnessed a similar story in Canada in the late 1970’s. A restaurant chain called Swiss Chalet (rotisserie chicken) was forced by the Prices Review Board to lower prices, by rolling back a price increase that the Board found exceeded their guidelines. Consumers saw great value, business soared, they went on a big expansion binge, and have never looked back.

  • avatar
    FormerFF

    It matters not to me, I can’t afford air travel, so I have no need for a rental car.

  • avatar
    dwford

    You have apps like Lyft and Uber as alternatives to taxis, and RelayRides as an alternative to renting a car.

    • 0 avatar
      Mullholland

      I’ll second having a look at RelayRides if you need a car and are retuning it to the same location as you started from.
      For the record, I agree with the opinion stated above: I have no problem with corporations earning profits from a business that does a better job or works more efficiently but when I see these windfall profits powered only by consolidation within a business category that substantially reduces competition (the airline industry also comes to mind) then I call B.S.

  • avatar
    Mandalorian

    If they’re doing so well, how come when I reserve a full size car and then arrive at my destination airport, they’re out of full size cars?

    • 0 avatar
      Land Ark

      One thing I’ve grown accustomed to doing is selecting the next smallest car that I want and getting to the counter or parking lot and getting “upgraded.” I suspect all the midsize renters were given full sizers at check in and took your car.

    • 0 avatar
      snakebit

      I’m not trying to be cute, but define ‘full size’. Crown Vic/Grand Marquis, Chrysler 300/Charger, CamCord, Optima/Sonata?

      I often switch between Thrifty and Hertz. When I was in Denver (DIA)last month, it seemed all Thrifty had was of the Optima/Sonata and CamCord class. I went for a virtually new-car-smell Camry four-cylinder. I think I asked online for a Focus, but the Camry worked out well at the same rate.

      Also, I would tell people to think about joining the rental clubs, and narrowing down who you rent from to just one or two companies. They do track your rental history, you can often join for free, and in my experience, I get lower rates through their online rental offers than I can find with them by inquiring cold online. On the Denver trip, the best cold rate from each was around $550/wk. Using their emailed online code, it was less than $240, same car type. And I only rent about four weeks a year.

      • 0 avatar

        Yes. Typically car-rental agencies overstate the size categories by one, so that what are typically compact cars (Corolla, Focus, Cruze, Jetta) become mid-sized, and consequently mid-sized cars (Camry, Altima, Sonata, Malibu) become full-sized.

        • 0 avatar
          morbo

          I can confirm that.

          Hertz at DCA considers the Dodge journey to be a mid-size SUV (My definition was a Jeep GC or Toyota 4Runner).

          Avis DCA considers the Nissan Altima to be a full size car (My definition was a Dodge Charger or Chevy Impala).

          Enterprise DCA does consider the Chevy Impala to be full size, so long as it comes with 50,000 miles, mold on the carpets, and the smell of smoke and death wafting from the rear.

          I guess what I’m really saying is to take a taxi from DCA and not rent. Although DCA taxi’s are largely Prius, Fusion, or Corolla, so don’t bring a lot of luggage.

        • 0 avatar
          krhodes1

          Hertz even splits it up more than that. A full-size is a Dodge Avenger or rental grade old Impala, but an Altima or a Camry is a class HIGHER than that. So given I get an automatic upgrade for being President’s circle (in theory), if I reserve a “full-size” I will probably get upgraded to an Altima or a Camry (basically the nicer cars in that class). But if I reserve an Altima, I usually get a Maxima (blech) or a Regal (yeah!). Reserve a Maxima, and I may well get a Mercedes. There is usually a $10/day or so difference between the crap full-size and the nicer. And Hertz considered all the panthers to be “luxury class”. So I got waay too many upgrades to a Crown Brick or a MGM or Clown Car.

          • 0 avatar
            snakebit

            When they still had Crown Vics and MGMs, I used to get the ‘let me upgrade you’litany from agents. I’d tell them, no, my company won’t let me rent foreign cars, sometimes the agents got the joke. The Panthers were no upgrade.

      • 0 avatar
        celebrity208

        Next time in DIA check out FOX Rental Car. They’re not located on the same street as the Big 3 but they’ve got a shuttle (same as the others) and their cars were mostly brand new (300mi on my last rental) and, for me, enough of a savings to be a decision point.

        • 0 avatar
          snakebit

          I did see listings for Fox and other less-known rentals on Expedia, and they weren’t much less than Thrifty and Hertz for that particular search (about three weeks prior to departure day). In all fairness, the Thrifty fleet I saw there was
          very new, I even noticed a long row of stickered,unregistered Camrys stored close to the car pick-up area. With the exception of the long TSA lines on the weekend I had to leave, the whole DIA airport experience was top drawer, a very well-planned airport, compared with LAX, SFO, BOS, and Gatwick. Coloradans are lucky folks.

      • 0 avatar
        APaGttH

        Hertz in particular has whacky ideas of what “full size” is.

        I’ve had a number of heated conversations at the counter that a Malibu or Fusion is not a fullsize car. A Charger or an Impala is.

        • 0 avatar
          Mandalorian

          I was in ATL a couple of weeks ago. Rented a full-sizer. Website said Fusion or similar. Expected a Charger, Impala, Fusion, Altima, etc. They said they were out despite the ROWS of Impalas.

          They tried to give me a HYUNDAI ELANTRA. Not even a Sonata. I complained and ended up with a Ford Escape. Not too bad.

        • 0 avatar

          Yup. Last time I booked with Hertz I booked a fullsize (which I actually needed, due to the amount of stuff I had to ship around) and they told me I was getting a Cruze.

          When I said that wasn’t large enough, they told me that I was lucky I was getting a car at all, because their rental stock was so low.

          I had booked the car two weeks in advance, and the other nearby branch was even worse off when I dropped in.

          As I say, this was both the last time I booked with Hertz, and the last time I book with Hertz.

      • 0 avatar
        thornmark

        There really is no “CamCord” class at the rental counters.

        It’s Cam/Fus/Alt class. Cords are as rare as hen’s teeth at rental counters.

        My rental experience has been mostly Fusions and Altimas – they’re usually less expensive than the smaller cars.

        • 0 avatar
          APaGttH

          Only place I’ve seen Accords is Avis in Sacramento at the airport. They always seem to have a lot of them – and a lot of Prii also.

        • 0 avatar
          dal20402

          Honda doesn’t do manufacturer fleet sales, so any Accords you see at a rental counter were sold to the rental company by individual dealers. It does happen, particularly when a dealer over-orders, but not all that much.

          • 0 avatar
            krhodes1

            Hertz has TONS of Hondas. Every major airport will have plenty of them, and a fair number of the smaller ones. Pilots and Civics mainly, but a fair number of Accords. The giant Enterprise near my house has about 25 Accords. New last year. Assume they got a good deal on a bunch of leftovers when the new one came out. Honda may sell to rental on the down-low, but they certainly do it.

    • 0 avatar
      05lgt

      I’m guessing that makes them more profitable. As long as the consumer still pays there’s no downside to not having enough inventory to actually fill the “reservations” they make and instead get you to pay for whatever they have around. My last rental reservation was for a one week road trip and a full size capable of 33+ hwy MPG on regular was a break even with wear and tear being a win for me. Sadly my Costco Travel booked reservation didn’t put a car I could use on the lot so I walked and drove my own. With fewer players the need to deliver as promised or for a slim marginal profit to captive air travelers goes away. The FCC dropped the ball accepting a meaningless token divestiture that led to the near monopolistic behavior we’re paying for.

  • avatar
    the_yeti

    If you are looking for disruption, look at SilverCar. Its everything that the current rental car companies are not.

    A great SmartPhone App, a consistent business model, good cars, reasonable pricing. Its not for Ma and Pa Kettle when they go to Disney, but for business travelers and frequent fliers, it is the future.

    https://www.silvercar.com/#/

    http://www.cntraveler.com/daily-traveler/2013/01/silvercar-dallas-fort-worth-premium-car-rental-service-photos#/slide=1

    • 0 avatar
      seth1065

      Silver car is promising but in very few cities at the moment, I generally use price line to bid on cars and it works very well when I travel for business, the only time I get killed it when I rent in one city and drop off in another , i.e. dallas and houston, but the rental car co would kill me to. FWIW Seattle has the best cars at the cheapest prices it seems this year.

  • avatar
    eggsalad

    My last rental was a one-way from Ft. Lauderdale to Atlanta. All the majors wanted a +$300 drop-off charge.

    I wound up going with a company called Sixt. They’re from Europe, and trying to break in to the American rental market. Their price was about the same for the rental, but with NO ADDED drop-off charge, so I saved $300 on the overall price.

    Also, they rent interesting models. Look for the RCR of a ’14 MINI Cooper coming soon to these pages. Will use Sixt again!

    • 0 avatar
      APaGttH

      I’ve used them in Europe – very happy.

      Just used them in Mexico – never again.

      I noticed they are appearing at more airports – I would say they provide service right up to the level that local regulations allow. I’d rent from them in an industrialized nation – otherwise forget it.

  • avatar

    I rented a car from Hertz a couple of weeks ago so that I could drive down to Dallas and take delivery of my SportWagen. The guy at the kiosk tells me I have a Chrysler 200. I happen to dislike the (old) 200, so I asked him if they could give me something else, and he informed me that they only gave out “certain” cars for one-way trips. Now when I got the car, I noticed that it had Texas plates. And as you know, it costs *a lot* more money to turn in a rental at a different state than the one in which you received it. I’m inclined to think that they needed the 200 transported back to Texas, and charged me for the privilege of doing it. They also wanted an extra *$40* to turn it in at Dallas Love Field Airport (which was very close to the dealership) instead of Dallas/Fort Worth Airport. I should have just taken the bus. It would have been a lot longer of a trip, but whatever…

  • avatar

    RE: Florida – There are states where there are no drop charges, at least with Hertz, unless they’ve recently changed. I must have rented 30 times in FL and turned the car in in another city in FL with no drop charge. Last week I rented a car at Midway and turned it in at O’Hare with no extra charge. I do the same thing in Dallas between Love and DFW. Same with the state of CA.

    • 0 avatar
      Landcrusher

      Hertz conveniently doesn’t serve rural cities with small markets getting rid of the need for drop charges. Enterprise has offices with very few cars so adding or taking away inventory can really cost them.

      • 0 avatar
        krhodes1

        @Landcrusher

        Until recently, Hertz was pretty much ONLY in the airport rental business. That is not Enterprise’ primary business, they are in the replacement rental business. There is now “Hertz Local Edition” which is in the same replacement rental market that Enterprise is primarily in, just like there are Enterprise locations at some airports. Though I suppose in theory you could have Enterprise pick you up at the airport, but that would be a lot of hassle.

        • 0 avatar
          Landcrusher

          It’s actually outlawed for a rental company to pick you up at the airport without some tax or something.

          • 0 avatar
            krhodes1

            That would be a jurisdictional thing. I know it can be done at my local airport. Some airports have a shuttle to the off-premises rental locations, in addition to the on-airport rentals.

    • 0 avatar
      the_yeti

      This has more to do with co-terminals, LUV and DFW are in the same city. Try renting at LUV and returning at MCO. You are going to get nailed with the one way fee.

    • 0 avatar
      krhodes1

      Florida has enough one-way traffic all over the place that they don’t need to charge the fee. And most of the tourist places are pretty close together.

  • avatar
    matador

    Ah, the rental car. When I needed one to go from Cody, WY to Denver, it would have been $750- for a Fiesta.

    We took my Buick, instead. I bought it for less. And, after a week, I got to keep the car!

    Where’s Rent-A-Wreck when you need them?

  • avatar
    dal20402

    If you rent often, make sure that you have access to a corporate contract with one of the majors. It makes things far more tolerable. Rates are guaranteed, some contracts will include LDW, and even one-way rentals are likely to be manageable in cost.

    I rent from National using such a contract. A couple of years ago, I rented a car for two weeks, ending with a one-way trip from Seattle to Jackson, WY. At retail price for that rental I could have bought a nice used car, but with the corporate contract I paid only a few hundred dollars.

  • avatar
    PandaBear

    I wouldn’t worry about competition in the long term. Struggling auto companies will always find ways to dump unwanted vehicles and some private capital group will start a rental car company to take them over.

    I don’t rent enough, but usually orbitz works out well for airport pickup / drop off from remote distance. I typically got 1/2 of the rate from these small mom and pop rental companies vs the large ones.

  • avatar
    87 Morgan

    A lot of the conversation her is why I rent from national. You get to pick your car…

    Open the door and it smells like an ashtray, move on. I typically pay $31.50 per day and as mentioned ussually select a T&C that is loaded.

    On very rare occasions I have to select a car I rally don’t want to be in.

    • 0 avatar
      dal20402

      I rent from National too, for the same reason.

      Usually there’s something tolerable on the lot.

      But occasionally something goes wrong, as happened to me at Houston (Bush) for Christmas 2011. I had my choice of at least 10 full-size Dodge and Chevy pickups, and nothing else — and this on a trip where I needed to carry family members and luggage that I didn’t want to throw into a bed. After much wheedling, the manager offered me the choice of a Compass or a Liberty which had been parked in a back area and forgotten. I took the Liberty, and it was the worst car I’ve driven in the last decade.

      • 0 avatar
        APaGttH

        Our travel policy doesn’t allow National unless they are the lowest bidder.

        Back almost 20 years ago National was my go to choice for the reasons mentioned above. Only once in my life did green not mean go. I got to LAX with no reservation (long story) and they had…nothing. Zilch. I ended up renting an 11 passenger Astro van from Budget that broke down about 45 minutes outside of Palm Springs at 3 AM – it was early September and still as hot as the butthole of the sun.

    • 0 avatar
      krhodes1

      Every time I have rented from National, it has been a choice of what color crap rental Impala I would like, or worse. The other guys on my team use them and like them though. I’ve just been happy enough with Hertz (who now have Gold Choice that works about the same as National) that I can’t be bothered to switch.

      Plus I have a crap load of Hertz Points for free rentals. Nice thing is their points don’t expire anymore – given I rarely rent cars personally, I will have enough for a free around the world in a few years. I have something silly like 30000 now. Though I am approaching 1.5 million hotel points with IHG, and 750K US Airways miles. Going to be a GOOD European Delivery vacation in a couple years!

      • 0 avatar

        Krhodes: How has your experience with US Airways been? Every single one of the flying experiences I’ve had with them has been so bad that I basically refuse to fly with them now. I just will find other ways to get to where I need to go to avoid them. Yes, that bad.

        I just can’t imagine flying with them enough to actually collect points.

        • 0 avatar
          krhodes1

          @Echid

          I am perfectly happy with US Airways. BUT, I am a top tier Chairman’s Elite preferred member, which means I get a somewhat different experience than casual fliers. For example, of 84 flights so far this year, I have been in coach 3 times on flights where there was a first class cabin (which is 90%+ of my flights). Once because I missed a connection, once because I booked the flight the same day (yeah, THAT was cheap), and once because my First Class seat was actually broken on a regional jet. A couple weeks ago I had a flight cancelled in DCA (thunderstorms) – I got on the last flight home that night ahead of a former Governor of Maine. Fly 120 or so flights a year and any airline will treat you VERY well.

          Airlines get blamed for an awful lot that is absolutely and utterly out of their control. Flying in the Northeast is a complete and utter shiteshow. LGA, JFK, EWR, and PHL are right at capacity on a bright sunny day. As soon as there is a drop of precipitation, or the wind is blowing in the wrong direction, it all goes to Heck in a handbasket, orchestrated by Air Traffic Control. The airlines can’t do a thing about it. Don’t EVER book a close connection at any of those airports. Time between flights is your friend – I shoot for 3hrs at PHL. I have a US Airways Club membership, I just relax, have a drink, and get some work done. US has done a great job of getting me where I need to go when things go sideways, but again, I am one of their best customers and am treated as such in terms of re-accommodation.

          One thing to note – I was also top tier (Platinum) on Delta, but became so unhappy with their scheduling in and out of my home airport (PWM) that I started over with US Airways in 2011. US is consistently cheaper too. Plus I will take PHL/CLT/DCA over ATLJFK any day as a main hub. Though I sure do miss connecting at DTW all the time. I was a NorthWest Airlines Gold/Platinum for many years and went to Delta due to the acquisition of NWA by DL.

          • 0 avatar

            Good to know. My experience as a mere pleb as been so bad that I would never endeavour to be in any special program with them. Terrible customer service, perennially late, etc. etc.

            It could be just the airports, but they don’t seem to have the CS capable of dealing with the realities of the airport. Service shouldn’t only be good for the special members, and frankly I’m surprised they are still in business.

            I’m comparing this to Canadian carriers (who are slightly more expensive, but in my experience vastly superior is almost every measure) and other carriers like Delta…which has been working hard in the last few years to manage their flights more efficiently.

            Imagine a world wherein, a CS rep finds you at baggage and tells you that they know you are close to missing your connection, they know where you are in the process of getting to the flight, and how much time you have to get there. This happens. In North America. Without having 12 kajillion flight miles.

          • 0 avatar
            krhodes1

            We are getting waay off topic for a car blog, but…

            You cannot compare the couple of little Canadian airlines that operate in Canada to the US ATC environment. Again, 90% of what people complain about is not the airlines problem, it is ATC and the way our airports are run. We have a HUGE number of planes trying to use a limited capacity of airways and runways. The rest of it is frankly that people are unwilling to pay for a better experience. When the lowest ticket cost gets the sale, it is always going to be a race to the bottom. And I am OK with the unbundling – why should I have a service that I am not using paid for by my ticket? With rare exceptions, flying is unbelievably cheap in the US. Prices today are what they were in the *60s* dollar wise, which means you are often paying nothing for a trip, assuming you have some flexibility and can plan ahead. It has long been said that the best way to make a small fortune in the airline business is to start with a large one. It’s a money losing game in the long run. Delta may be doing OK in other places, but they sure are no better than anyone else here in the Northeast at least at JFK and LGA. They do have the advantage of having a couple of good eastern US hubs outside of the NY-Philly area though.

            Actually, the US airline industry IS in a couple of ways similar to the auto market. You need scale to make money, and most people won’t pay for good service, same as they won’t pay a price for a car that allows much in the way of selection. If we paid European prices for cars, we would have European levels of choice. If we would pay prices remotely similar to what it costs to fly internationally for domestic flights, they would be much nicer experiences. Boston-Amsterdam is not THAT much farther than Boston-LA, but I can fly Boston-LA for under $400 without trying too hard. Boston-Amsterdam is at least a grand usually.

            Ultimately, if you want the same experience I get as a top-tier elite, you just have to be willing to PAY for a first class ticket. It’s only 50-150% more expensive, generally, and you get all the same perks I do, for the most part.

            When in the US would you ever be at baggage claim making a connection? I have been met by a rep on international flights though. But only on an F ticket.

      • 0 avatar
        Landcrusher

        Krhodes,
        The best thing about National is the emerald aisle. If your location is only ever giving you impalas in the aisle, I would complain to them and then push it up the chain if they don’t correct it. Choice is the whole point. Some people just are not comfortable in some cars no matter what the size is.

        • 0 avatar
          krhodes1

          My “location”? I fly to 20+ different places a year.

          You have a choice regardless. If Hertz assigns me something I don’t like, I have the option to “choose a different car” from their e-mail notification link and spin the roulette wheel again, and/or I can go to the counter and see what they have. Not quite as easy as National, but I like Hertz. 90%+ of the time I am happy with what they give me. The big airports have plenty to choose from, and National will be no better at the tiny ones.

  • avatar
    danio3834

    With the amount of extra BS fees they try and charge on top of the rental rate, I’m not shocked at this news.

    • 0 avatar
      APaGttH

      Never mind the fees, the taxes on rental cars can be insane.

      I rented in Oakland last October and the taxes were more than the cost of my Hotwire rental rate.

    • 0 avatar
      krhodes1

      You can’t blame the rental car companies for the fees and taxes, that is purely a cash grab from the airports and municipalities. There is at least one major airport, can’t remember which one, that has a *$50* per rental facility charge, aside from the taxes and fees. At thousands of rentals per day, that is a metric buttload of cash. For me, it is not unusual at all for a “$49/day” rental to end up in the $120 range with taxes, fees, and the damage waiver. Glad it’s not my money.

  • avatar
    jdash1972

    I rent regularly from Avis, usually 5-7 days and drive 800-1000 miles during that time. I typically pay $220.00 for a mid-size car, by my definition anyway, such as a Sonata or a Ford Escape. These are off-airport rentals, which are always a lot cheaper. That’s roughly 25 cents a mile, give it take depending on my travel, and that’s a hell of a deal and less than the true cost of the vehicle. I’m wondering how they make money at all at these rates.

    P.S. Hertz sucks.

    • 0 avatar
      Dan

      I don’t know what Avis’s overhead is but if they can rent that car out two weeks in three for the next two years they’ve grossed $15,000.

      Has a two old Sonata with 60K on the clock depreciated that far? I don’t have access to Manheim listings anymore but the assorted trade in calculators suggest a dealer would pay you around 12 for it – and I’d be shocked if Avis was in it for as much as 20.

      • 0 avatar
        jdash1972

        I’m guessing the average person drives fewer miles and it’s the overall average that counts. At 50 miles a day and a rate closer to $50/day that’s a better proposition. They have all kinds of overhead too for their lot, employees, insurance (for when the cars are waiting on the lot at least) and what little maintenance they bother to do…

  • avatar
    Sky_Render

    I think a lot of their increased profits come from holding onto their vehicles longer. I travel on business. A lot. Five or six years ago, it was extremely rare to get a rental car that was more than a year old or with more than 10,000 miles on the clock. Now, I routinely get cars that are a couple years old with 30, 40, or even 50,000 miles. And you know that rental cars are not maintained well. Heck, in the past MONTH I’ve had to return 2 rental cars on two separate trips due to malfunctions. Both had around 40K on the clocks.

  • avatar
    Hillman

    I can grab a corolla from enterprise for the weekend, drive 800 miles, and it will only cost me $70. Do the math and it is less then 10 cents a mile. If that is what it is like when they are profitable I would hate to see what it was like when they were losing money.

  • avatar
    HerrKaLeun

    If a company is profitable people complain.
    If a company is not profitable it needs to be bailed out and people complain.

    How do you make people happy?

    • 0 avatar

      It makes me happy when a stock I own goes up and pays me a dividend. If not, I sell the stock and buy one that will.

      Consumers take for granted Walmart’s cheap prices, then complain about the economy they helped crater by buying Chinese stuff.

  • avatar

    Considering the HUGE losses taken by the airline industry, it made sense to allow consolidation. Ditto with the rental car industry. They all had a close call with BK court. As I recall one or two went through C11.

    Why not look at corporate profits over a ten year period rather than getting one’s shorts bunched up over a fat quarter or a year?

    Perhaps you want to invest in corporations that operate for the public welfare instead of for shareholder return? How would an economy like that work out?

    • 0 avatar
      VCplayer

      Assuming regulation doesn’t get too extreme (or isn’t already), the rental companies will just set themselves up for a fall exactly as the Detroit 3 did if they adopt uncompetitive practices. I tend to think these things resolve themselves on their own. It’s only when the government starts proping businesses up that should fail that the trouble starts.

  • avatar
    Landcrusher

    I suspect if margins stay high, new competition will enter the game. One big barrier to entry though are municipal airport rules which make it hard for new players to service the most high volume markets.

  • avatar

    RE: “Honda may sell to rental on the down-low, but they certainly do it.”

    There is a HUGE difference between Honda and a Honda dealer or dealers. As a matter of record, Honda does not sell any cars direct to rental companies. Neither do any of the other OEMs.

    • 0 avatar
      krhodes1

      Arguing about Honda’s “fleet sales”, or really anyone’s fleet sales is akin to arguing about how many angels can dance on the head of a pin. There are plenty of Hondas in fleet use, how they got there doesn’t matter. A sale is a sale is a sale at the manufacturer level. This is not the 90s when the D3 owned the rental 3 and used them as a dumping ground.

      • 0 avatar
        geeber

        There are not plenty of Hondas in fleet sales. Registration data consistently shows that a very low percentage of Honda models are sold to fleet customers. Please note that whether the vehicle was sold by a dealer or a corporate fleet department will not affect whether it is registered as a fleet vehicle.

      • 0 avatar
        Pch101

        “There are plenty of Hondas in fleet use”

        “Plenty” is a weasel word. It conveys no meaning at all.

        In 2013, 15.7% of all new US vehicles went to fleet.

        For the Honda brand, that figure was 0.8%. Not even close.

        • 0 avatar

          Yes, and to my knowledge there are no special factory incentives at all for rental car companies. The rental companies must be banking on Honda’s historically high resale value for “protection.” And how does Honda maintain that historically high resale value? By not selling to fleets and rental car companies in any volume. There have been times when Honda would charge back a dealer on his allocation for creating “false volume. Enforcement of this rule probably hinges on dealer orders versus Marysville scheduled production, but Honda has remarkable discipline overall.

          • 0 avatar
            Pch101

            Honda does not have a corporate fleet arm, unlike the other automakers. The fleet activity at the corporate level is limited to special vehicles, such as peddling natural gas Civics to government agencies.

            Only 0.3% of new Honda registrations in 2013 went to rental fleet, versus the national average of 10.5%. There is no law that prevents a rental car company from buying cars at a dealership, but they obviously don’t buy many Hondas.

  • avatar

    RE: “I suspect if margins stay high, new competition will enter the game.”

    Exactly. It is a competitive market with the large consolidated firms all trying to get their share of the pie. Isn’t that how it is supposed to be?

    Interesting that some consumers assume that if a rental company could rent a car at $25. they automatically made enough money on the transaction, otherwise, why would they do it? Higher prices by the few provided pricing cover for new entries Enterprise, Alamo, etc. a few decades ago. Its the market at work.

  • avatar

    RE: “Innovation both increased profits and benefited the consumer.”

    Reducing the price in an attempt to increase volume is not innovative. There is an equilibrium to be found on every product and service and every market. MB is used as a taxicab in Europe. They sell volume at smaller margins. In the U.S. they market as a premium brand at large margins. Which is the best business model? You put your money up and you get to decide. I, for one, eschew large volume low margin businesses. It why I don’t do car dealerships any more.

  • avatar

    RE: “Please note that whether the vehicle was sold by a dealer or a corporate fleet department will not affect whether it is registered as a fleet vehicle.”

    Please note that OEM fleet departments do not sell directly to fleets and rental companies. Also, it is up to the buyer how the vehicle is registered. Whether a vehicle is “registered” as fleet depends on how the dealer “RDR’s” the vehicle, not what happens at the state level. Many private vehicles get “RDRd” as fleet, and vice versa.

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