August 13, 1995 in Business

Consumers Put Brakes On Rising Rental Car Rates Companies Try To Offset Rising Costs, But Customers Resist

Associated Press

Elise Schwartz knows she can rent a car at just about any airport or hotel in the United States. And she can even find several agencies within a few miles of her home in St. Louis.

But her biggest chore is finding a cheap rental - and that has become a little more challenging as rental car companies hike their rates to cover increasing costs.

Car rental rates have risen 19 percent since the end of May, pushing the average rental to about $50 a day, according to the Dow Jones Travel Index. Moreover, two leading companies hiked their rates another $5 a day in late July.

Consumers like Schwartz protest the higher rates, especially the most recent charge, which tacks $35 onto a weekly rental and can put a dent in any traveler’s vacation budget.

Schwartz was in New York recently as part of her vacation to the East Coast. She said she had intended to rent a car once she reached the Boston area and was concerned about the rates.

“The $5 doesn’t seem that bad, but that can surely start adding up,” said Schwartz.

In July, Hertz Corp. was the first to announce that it would raise its prices by $5 a day in the United States. Alamo Rent A Car quickly followed and other rental car companies said they would evaluate rate hikes based on location.

The rental car companies defended the move, saying their rates have remained relatively flat for the past three years while car prices and maintenance costs have escalated.

“The costs of buying and operating the cars have gone way up,” said Russell James, a spokesman for Garden City, N.Y.-based Avis. “But we’ve barely changed the prices over the last year or 30 years.”

Already this year, the rental car companies tried to initiate new policy to raise revenues.

In April, many stopped offering unlimited mileage to renters traveling farther than 100 miles per day, charging about 25 cents for each mile over that. Those charges, the companies said, came after the automakers increased the penalties imposed for high mileage on rental cars that they intended to buy back.

But the mileage cap only lasted for about two months. As customers complained, many of the rental car companies abolished the policy. That left the companies in a bind.

“All their costs were going up - repair cost, taxes, registration costs - but they were nervous about raising the rates because customers are used to getting good deals,’ said Jan Armstrong, executive vice president of the American Car Rental Association in Washington.

Then, Hertz raised its rates, and others were quick to follow, Armstrong said. Still, many industry watchers wonder if the rate hike will last through the summer season.

Renting a car is pricey. If it gets much more expensive, consumers will make other choices.

“I looked into renting a car for a week and driving between Chicago and Pittsburgh to visit friends as my vacation,” said Sandi Gill. “Just the car would have cost me more than a round-trip (airline) ticket to New York, so I chose to come here instead.”

© Copyright 1995 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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