Rental car operators face the challenges of making money in an economic environment with rising expenses and flatter rental rates. The best business approach going into 2025 is steady and conservative growth.
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If you want to keep a pulse on industry trends, then listen to what car rental company owners and operators are talking about.
What’s top of mind will point to or involve industry trends and shifts. Two events in 2024 collected many of those topics and insights on the present and future state of the auto rental industry: The American Car Rental Association (ACRA) annual conference in Washington, D.C., Sept. 16-18, and the International Car Rental Show in Las Vegas, April 15-17.
Industry speakers, leaders, and panelists at the two events shared the following points and best practices on various operational topics gathered for the 2025 Auto Rental News Fact Book. [They also delved into technology, which will be the subject of the second part of this article soon.]
Rental Car Industry Now Fully Recovered
- The rental car marketplace and overall travel business sector have recovered from the peak years of the disruptive pandemic period, 2020-2022. Business and leisure travel have vaulted to 2019 levels, and businesses are reverting to pre-pandemic norms.
- Rental car operators face the challenges of making money in an economic environment with rising expenses and flatter rental rates. The best business approach going into 2025 is steady and conservative growth.
- Inflation has raised operating expenses and heightened the need for rental car companies to closely monitor operating costs. Companies should follow financial practices that can adjust to success in different regional markets.
- An influx of rental car operators is leaving peer-to-peer platforms to start their businesses, highlighting the need for industry training and basic business set-up. That involves forming corporate entities, rental management systems, rental agreements, and credit card processing procedures.
New and Wholesale Used Vehicle Market Dynamics
- The wholesale used vehicle market should fully return to normal within mid-2025-27.
- Rental companies are prioritizing SUVs and trucks over sedans due to the shift of automotive market demand.
- Higher new vehicle inventory levels will continue for several years, leading to lower prices, while increased demand for trucks and SUVs will determine the levels of incentives and prices.
- OEMs prioritize higher trims, leading to fewer affordable standard vehicles in rental fleet markets.
- Operators should look for potential greater bulk discounts on fleet purchases from manufacturers as incentives increase.
- Rental car companies should explore ways to restore vehicle category ratios in rental fleets through strategic vehicle purchases based on shifting OEM production plans.
- Inventory shortages will likely increase used car prices for the next 24 months.
- Wholesale and retail channels will see increases in used rental fleet volume and higher mileage vehicles.
- OEMs are expanding CPO programs to include older rental units, which creates more opportunities for dealers and remarketers.
Evaluating Fleet Risk and Insurance Options
- The auto insurance industry is seeing more high-value claims, and some companies are pulling out of the market due to the increased risk.
- Operators should contact rental insurance companies to understand their claims payment and reimbursement policies better.
- Rental fleet operations can streamline claims and save time by standardizing forms and processes across travel insurance providers.
- Companies should keep rental agreements updated with state regulations and any changes in case law.
- Rental companies must choose customers carefully and maintain proper records to avoid liability.
- Consistent training of employees can help avoid inconsistencies that could lead to litigation.
- Rental companies should consider renewing rental agreements every 30 days to maintain protection under the Graves Amendment, a federal law that protects rental car companies from blame and liability for accidents involving their owned or leased fleet vehicles rented and driven by customers.
- Operators should stay updated with technological advancements and regulatory changes to maintain a strong position in the rental industry.
- Banks and finance institutions seek higher thresholds to qualify for vehicle loans. For example, two to three years of rental experience with payment history, a profitable track record with a leasing company, longevity in the car rental industry, holding clients more accountable with their finances, clear financial and business models, solid financial metrics and cash accounting, a firm financial foundation, and a clear strategy for success is required.
Aiming for Quality Franchises, Affiliates, and Customer Service
- Operators should focus affiliate operations on one or a few primary brands to avoid customer service inconsistencies.
- Companies must set up and provide additional training and support to affiliates struggling with poor customer reviews/scores.
- Operators should try to develop more strategies to solicit online reviews from customers.
- Rental car affiliate networks should aim for a holistic approach to customer service, including transparent communication and preemptive measures to address issues.
- Franchising requires precise terminology, intellectual property, contracts, and indemnification agreements.
- Well-developed franchises draw on precedent and good training to protect the brand.
- The trend focuses on consistent service and representation with a few brands to ensure everything is clear.
- Training and support must constantly be structured to improve customer service and address issues promptly.
- Transparency and clear communication in booking will manage customer expectations and avoid bad reviews.