Car & Truck Rental Industry Trends

Branding

National brands in the rental industry are associated with a particular type of customer. Hertz, Avis, and National, for example, are marketed as premium brands that provide special services to business travelers. Alamo, Budget, Dollar, and Thrifty market themselves to cost-conscious leisure and small-business travelers. Enterprise grew by serving only the local market.

Fleet Management

Typically, car rental companies have high use during the week and low on weekends, high use in summer and low in winter. Companies need enough of an inventory of cars to supply customers, but the cost of carrying a large inventory is high. Some rental companies use sophisticated computer programs to determine how many and what type vehicles they need to have on hand by the day and hour.

Residual Values

Cars typically have the highest loss in value during the first year of use, and can lose as much as 75 percent of their retail value in three years. Different car brands decrease in value at different rates: Japanese brands typically hold their value better than US brands. In three years, the Honda Accord loses about 45 percent of its value, while the Dodge Intrepid can lose 70 percent. Rental rates can be lower for cars whose residual value remains highest.

Rapid Growth of Internet Rentals

An increasing number of customers make rental reservations over the Internet. The rapid growth of airplane bookings over the Internet, in particular, has increased Internet car rentals. Some airlines now sell the majority of their tickets online; 62 percent of Dollar Thrifty's non-tour reservations were from Internet sites in 2005. To take advantage of this trend, many rental companies have invested in upgraded computer systems and altered their marketing strategy.

More Residual Risk Held by Rental Companies

In the past decade, car manufacturers have pushed more of the risk of disposing of used cars onto rental companies. Dollar Thrifty assumes the used-car market risk on 15 to 30 percent of its fleet, and expects the percentage to increase as manufacturers tighten repurchase programs.