The US Car Rental Market is Crying Out for Disruption


Supply is low, demand is high — but that alone cannot explain the weird indignity of renting a vehicle. From a report: The present situation is “the most challenging in the history of car rental,” says Chris Brown, the digital editor of the industry trade publication Auto Rental News. “Last year … it was a disaster.” Nobody could have planned for such a catastrophic revenue loss, he told me, and while the airline industry received a government bailout, the rental-car industry did not. “Hertz had 3,000 cars burned to the ground because someone lit a match, and they just burned in a field,” he added. (Something like this did happen in Florida, though only around 1,000 of the 4,500 cars destroyed in the fire belonged to Hertz, and investigators blamed the episode on a hot exhaust pipe and dry grass.) Given the context, some negative customer experiences were to be expected, Brown argued. “But I think it’s really impressive how car-rental [companies have] been able to pull themselves out of this very difficult time managing as well as they are.”

Well, I’m not trying to be unfair to any companies, but many car-rental businesses did receive funds from the Paycheck Protection Program. And many of their negative customer experiences have nothing to do with a car shortage or a pandemic. Why is that car-rental employee typing for so long? We’ll never know. Why are the printers so old and loud and broken? Who could say! Will you ever get a straight answer as to how much insurance to buy, or whether to prepay for gas, or why it’s forbidden for you to drive this rental car out of the state of Florida? What does the pandemic have to do with Avis allegedly repossessing a rental car from someone’s driveway in the middle of the night in Teaneck, New Jersey, and then allegedly claiming to know absolutely nothing about it, in one of the oddest stories I have ever read? And what does the pandemic have to do with the stream of complaints about rental-car companies on the Better Business Bureau website, a surprising number of which come from people who insist that they do not smoke yet they have been charged as much as $450 for allegedly smoking in a car?

I reached out with questions of this kind to the three largest rental-car companies, which control the large majority of the rental-car business in the United States. Enterprise Holdings did not respond. Avis Budget declined to comment about either the state of the industry or the alleged incident in Teaneck. A Hertz spokesperson said, in part, “Hertz is working closely with our automotive partners to add new vehicles to our fleet as quickly as possible amid the microchip shortage that continues to impact the car rental industry. We’re also purchasing low-mileage, pre-owned vehicles, and moving vehicles to the areas with highest demand.” The financial structure of these companies is as inscrutable as a contract printed on a dot-matrix printer and signed in a dim underground parking garage. Some of them have gone bankrupt; at least one has done so multiple times. Take Hertz for instance: Private-equity firms acquired the company from Ford in 2005, then made a profit of $1 billion with an IPO while the company itself remained deeply in debt. The company is also on its sixth CEO since 2014 and has been deemed a “Frankenstein of financial engineering” by Axios. Most of the cars that Hertz rents out are owned by “special-purpose” subsidiaries of Hertz, from which Hertz then leases them. When Hertz was sliding into bankruptcy in spring 2020, it was because the company had missed lease payments — to put it crudely — to itself. I can barely understand this, yet I will walk into a rental-car office and suffer for it.



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