5 Major Issues Top Rental Car Industry Event

Rental car industry leaders and participants covered the major issues and challenges facing the $40 billion auto rental industry during a two-day conference last month in Washington, D.C.

This year, five primary areas affecting rental car companies emerged to the forefront: operations, taxes, electric vehicles, fleet theft and recovery, and legal issues.

The annual America Car Rental Association conference Sept. 16-18 — which focused mostly on legislative, legal, and regulatory matters — brought together more than 100 industry executives, managers, operators, and vendors from both the major and independent rental car brands.

Participants held two days of sessions at the Westin Arlington Gateway and then in the historic Kennedy Caucus Room of the Russell Senate Office Building on Capitol Hill. 

NO. 1: The Latest on Rental Fleet Best Practices

Starting off the conference, the ACRA Industry Outlook session featured four panelists who discussed the post-pandemic changes in the car rental industry: Moderator Sharky Laguana, ACRA President and CEO and owner of Bandago; Jim Shalberg of Auto Rental Solutions; Ian Kusinitz of Empire Rent A Car; Cindy Trennery of First Source Bank; and Julio Valcarcel of Sofiac Travel.

The panelists noted the following changes and challenges for rental car operators:

• Travel has resumed with businesses reverting to pre-pandemic norms.
• An influx of operators is starting their own businesses, highlighting the need for training and basic setup.
• That underscores the importance of setting up corporations, credit card processors, rental management systems, and rental agreements.
• Risk insurance and proper setup is needed for new operators, especially since some may be using personal insurance for rental vehicles which can lead to lack of adequate liability coverage.
• New operators should keep operations simple and focus on walking around cars, checking them out, and maintaining them.
• Inflation has increased operating expenses and spurs the need for operators to monitor their costs more closely.
• Providers need to put thorough and consistent policies in place to streamline operations for success. Operators should look for more conservative growth opportunities.

One solution to operational challenges is to tap technology tools:

• Technology can help meet the demand to do more with less, but operators should devise a strategy before implementing new programs or products. They should understand business fundamentals first.
• Technologies can be integrated to provide streamlined experience for renters.
• In selecting new technology products, operators should choose those that can automate processes and reduce costs.
• Some rental car companies are using technology to adjust pricing based on vehicle availability.
• Integrating digital signature processes and automated risk reduction activities can reduce liability for rental operations.

Among other best practices, panelists cited:

• Be fluid and nimble, focusing on diverse product lines and capitalizing on trends.
• Control expenses and reconsolidate core product lines.
• Navigate the challenges of availability of rental vehicles and the need to avoid over-fleeting.
• As the start-up phase can become overwhelming for new operators, they should clearly pinpoint and understand their goals and set up the proper processes to pursue them.
• Operators should have a solid financial foundation and a clear strategy for success. Personal finances should never be combined with those of a rental car business (or any other business).
• To appeal to banks that can provide financing and capital, rental operations should be aware that the standards to qualify with banks are higher than before, with a preference for operators with regular experience and a solid financial track record and a sophisticated approach.
• Rental car company banking customers should maintain a two-way street of communication with financial institutions to understand and adapt to changes.

Four key areas that the rental car operators should consider:

1. Seek training on operational basics like financial set-up and fleet management and consult with legal counsel.
2. Evaluate pricing strategy and consider automating based on vehicle availability.
3. Reevaluate fleet strategy and consider divesting vehicles to reduce debt and expenses.
4. Educate banking clients about all the nuances of financing, capital, investment, and debt.

NO. 2: Industry Faces Possible Tax Cliff

The foremost tax issue relevant to the rental car industry is the expiring provisions in the form of expensing.

 A panel led by Josh Dover, vice president of government affairs for Avis Budget Group, and including Jesse Mahan, senior policy advisor to Sen. James Lankford (R-OK); Justin Lumadue, vice president of government affairs for the U.S. Chamber of Commerce; and Whit Askew, partner, Avoq, Economic Investment Alliance, explained the federal tax landscape to attendees on Sept. 17. 

The conversation highlighted that in 2025 there will be an extended debate in Congress regarding how to respond to the expiration of multiple primarily individual and small business tax provisions that were included in the 2017 Tax Cuts and Jobs Act (TCJA). While virtually all of the corporate tax provisions will remain, making the expiring TCJA provisions for individuals and small businesses permanent is estimated to cost over $4.5 trillion. The expiration of these tax policies is referred to by some policymakers as a “Tax Cliff.”

Among key points and provisions:

• The phase-out of full expensing also referred to as “bonus depreciation” would seriously affect rental car business by diminishing growth, investment, jobs, and competitiveness. A permanent solution is to reinstate full expensing at 100%.
• Eliminating the current phase-out and reinstating 100 percent full expensing has bipartisan appeal.
• Results of the Nov. 5 election will determine the nature of the tax debate in 2025. 
• Divided government could force real conversations and compromises on tax policy.
• Rental car company owners and operators can help highlight the issue by telling the stories and showing real-life examples of how full expensing allows businesses to grow and invest.
• Continue educating members of Congress and staff on business community priorities including full expensing.

NO. 3: Spurring More EV Usage and Charging Infrastructure

Two sessions held in the Caucus Room on Sept. 17 delved into electric fleet vehicles’ current state and future potential. The day kicked off with Laguana interviewing Gabe Klein, the executive director of the Joint Office of Energy & Transportation.

Later that afternoon, Steve Shur, vice president of government affairs for Hertz, led an EV Update panel that featured representatives from zero emissions, electrification, and clean cities organizations.

If rental car companies and their customers want to use EVs with confidence, then the U.S. will need universal charging infrastructure and more public access.

The two sessions provided attendees with the following key insights and takeaways:

• Due to the complexity of transitioning to electric vehicles (EVs), electrification will need interoperability, payment systems, and cybersecurity.
• Federal money can be used to fill gaps in urban, rural, and other areas, ensuring equity in charging infrastructure. EV charging should be accessible to everyone, not just for people in densely populated areas.
• Charging infrastructure needs to be future proofed to accommodate technological advancements. Innovation in charging technology will include faster charging speeds and more energy efficiency.
• EVs can act as distributed energy storage systems, especially in urban areas. Integrating charging infrastructure with vehicle technologies could create a seamless experience for users.
• Solid-state batteries could eventually yield more energy density and capacity.
• High quality hybrids can act as a bridge to EV adoption by providing a transitional experience for drivers and car renters nervous about charging infrastructure.
• Rental car companies can be aligned with government agencies that want to use EVs for travel.
• The government can play a larger role in developing booking tools displaying EVs as a travel option for government employees and making them accessible to travelers.
• AI could help optimize energy usage across power grids and reduce the strain from increased consumption from electrification and power-hungry AI data centers.
• Continue work on building cloud infrastructure to allow different networks like ChargePoint and auto company platforms to communicate about functions like payments and demand response.
• The main challenges to fleet electrification and EV adoption include consumer confidence, charging reliability, and the levels and effects of federal funding on infrastructure.
• Governments and EV advocacy groups need to work together to promote electric vehicle exposure and access in more communities across the country, including rural areas.
• Federal and state governments should support EV manufacturers by defending and extending EV tax credits and incentives

NO 4: Recovering Fleet Vehicles with Better Technology Solutions

A Sept. 16 session titled, “Fleet Recovery and Telematics,” highlighted the benefits of integrating telematics with rental systems to manage vehicle availability and prevent theft. Rental car operations need protections and deterrents against theft and tools for faster vehicle tracking and recovery.

Participants included: Moderator and ACRA board member Phil Spink of Tom Wood Automotive and SIXT franchisee; and panelists Mariana Ribeiro Eichel of Robert Bosch, LLC; Colm Brady of RentalMatics; Denis Gjoni of Tollaid; Mark Novak of Zubie; and Brian Hoffman of Geotab.

Participants batted around insights and solutions as technology evolves:

• Not all telematics solutions are the same. They are distinguished by the quality and frequency of their ping rates for successful vehicle recovery.
• Geofencing can help provide context on vehicle locations and prevent damage in specific areas. Ping rates determine the performance of geofencing and underscore the need for devices to ping within the geofence.
• A robust telematics solution with geofencing can provide context on vehicle locations and prevent damage in specific areas. It can also help with fleet vehicle management and recovery.
• Integrating telematics with camera systems can help provide context on vehicle behavior and usage.
• A rental car computer software system integrated with telematics can help manage vehicle availability and prevent tampering.
• The use of APIs should enable the segregation of customer data when sharing with third parties to ensure security and privacy.
• Platforms should allow two-way data with rental management systems to manage vehicle status and recovery.
• Real-time tracking for vehicle recovery can benefit rental fleet operations by saving time on the phone with law enforcement.
• Using third-party collection companies for vehicle recovery can simplify the process and offer potential for faster vehicle return.
• AI can evolve as valuable tool in predicting vehicle recovery and other issues; provide real-time data and damage detection; appl credit card data and other insights to understand customer behavior and prevent problems; predict driver behavior and maintenance needs; enhance data analysis; and improve fleet management and vehicle usage.
• Telematics can set up new ways to engage customers and provide safety alerts in case of accidents; deliver a better vehicle experience and using data to anticipate maintenance repairs; and improve customer satisfaction and retention.

NO. 5: Handling Legal and Operational Challenges

Rental car operators are facing more legal questions related to the shift to contactless rentals and the use of electronic signatures, with such agreements requiring clear consent mechanisms.

A “Legal Issues” session led by ACRA board member Jennifer Gelder of Budget Car & Truck Rental in Atlanta drew upon the expertise of speakers Kim Scott of Basham & Scott; Tristan Wolbers of Basham & Scott; Wes Hurst of Polsinelli; Leslie Pujo of Plave Koch; and, Don Hublicki of Global Toll Services.

The session emphasized that operators can mitigate risk by  maintaining detailed records, with a focus on ensuring all documents match and are easily accessible.

The discussion brought out the following information and observations, not to be construed as legal advice or guidance:

• Contactless rentals, electronic agreements, ID verification, and cashless tolling combine to create an environment that requires thorough documentation, communication, verification, and recordkeeping.
• Consider implementing electronic signatures and document storage procedures to address the difficulty in obtaining physical signatures on rental agreements in a contactless rental.
• Provide a checklist of recommended documents and records to retain for potential claims or litigation involving rental operators.
• Dash cams and telematics could provide additional evidence in litigation.
• Implement policies to obtain signatures (physical or electronic) on rental agreements because of potential problems if they are missing. In addition, consider adding language to provide that the renter agrees to the rental agreement terms and conditions by taking possession of a vehicle. (A recent federal case found similar language to be enforceable.)
• Develop protocols for visual inspection and verification of renter driver’s licenses.
• Take necessary steps to verify identities and prevent rentals involving ID fraud.
• The rental car industry faces more challenges in accurately handling and accounting for frequent tolling and congestion traffic pricing in addition to varying rates on HOV and carpool lanes.
• Develop clear policies and disclosures around toll charges and fees to include in rental agreements.
• Prepare to handle attempts by toll agencies to recover unpaid tolls and the potential impact on rental car operations.
• Set up a clear process for documenting vehicle exchanges and maintenance.

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