HUGE increase in rental car rates, and nothing about in on Flyertalk???
Jul 7, 2008, 1:25 pm
#16
Join Date: May 2005
Posts: 1,031
lets be fair guys. I am an industy insider (former) from the avis brand. The truth is that the car manufacturers have been raising their rates since 2005. There are tons of articles about it all over the internet, go search for them.
I have said all over flyertalk that at straight bare cost, its around 14-15 dollars a day to own and operate a single vehicle whether it rents or not. This includes manpower, insurance, lease, etc etc. 15 per day *7 days= 105 dollars per day. That was based on the traidtional model of car turnback/lease programs.
In the past 2 years, manufacturers have changed that model. Avis alone had to absorb additional costs in excess of 50-100 dollars a month per car in the summer of 2006 alone. We had a huge meeting discussing it. Companies like ford and Chevy who traditionally gave cars away suddenly had less inventory due to closures, better practices (union renegotiations) which no longer guaranteed factories be open year round. There was a glut of SUV's on the market even back then and the only cars the rental companies could get cheaply were SUV's.
Pay attention now...
Starting this year with the gas prices climbing, the manufacturers knew they would be hurting, so on their more efficient models, they further diluted the availability by keeping more of them for sales to people who want to move to smaller cars. This left a much more expensive fleet for the Car rental companies to absorb. So either they get SUV's for cheap, practically given to them, or they buy/lease mid and compact size rentals at rates that push the average cost of renting a car up to 20 per day, or 150 per week(ish). That alone is a 1/3 increase in costs which rental companies try like hell to pass onto the renters, but competitive pricing models and the lack of travel usually makes it hard until demand (summertime peak) arrives.
Now REALLY pay attention now.
Rental car companies do not have fixed costs on these cars. The most glaring cost is the mileage overage. Depending on the model, the mfg has several different plans they can purchase for their buyback program.
For most mid size cars, 12-24k miles and 6-24 months on a sliding scale determines the buyback price. The buyback program is a program where the car rental companies buy cars with contracts that state the mfg will "buy back"the car so long as the rental company returns the car within certain parameters. (if you want to learn more about this, check out the avis forum and search for ezmonee, circa 1-2 years ago).
If the rental car company doesnt want to limit itself to these parameters, they buy the car straight up, which means they must sell it on its own, which in the tight car sales market currently isnt nearly as good as one would think. The sales of cars right now (new and used) is down across the country double digits.
To tie it all together....
1> Car fleet price has gone up
2> mfg's are releasing less cars to buyback programs
3> smaller fleets mean rental companies need to buy cars to supplement the buyback programs.
4> greater demand for more fuel efficient models means those models get more miles in less time, meaning that to get the most money from them, the rental companies need to turn the back faster and carry a greater fleet.
5> Obtaining a greater fleet in spite of 1,2,3 means what little buyback cars out there are bieng sold at greater prices, self fulfilling prophecy...
timing- most rental companies get cars around the first of the year in order to return them after the summer swell.... because of number 4, those cars arent making it through the summer, so right during the peak, the fleets are losing cars or making decisions to keep cars and risk them bouncing from the buyback program.
6> because of the risks, and the peak of use which ALWAYS happens around the 4th (july 1-mid august is the busiest part of the summer renting season), prices which naturally spike around that time are spiking in higher quantities.
7> even if a particular rental company is in good shape for cars, every rental company gears its prices off the two industry leaders (price leaders), avis and hertz. weekly they look at the prices of those two and then they adjust their own price model based off of what they are doing.
I hope this helps.
I have said all over flyertalk that at straight bare cost, its around 14-15 dollars a day to own and operate a single vehicle whether it rents or not. This includes manpower, insurance, lease, etc etc. 15 per day *7 days= 105 dollars per day. That was based on the traidtional model of car turnback/lease programs.
In the past 2 years, manufacturers have changed that model. Avis alone had to absorb additional costs in excess of 50-100 dollars a month per car in the summer of 2006 alone. We had a huge meeting discussing it. Companies like ford and Chevy who traditionally gave cars away suddenly had less inventory due to closures, better practices (union renegotiations) which no longer guaranteed factories be open year round. There was a glut of SUV's on the market even back then and the only cars the rental companies could get cheaply were SUV's.
Pay attention now...
Starting this year with the gas prices climbing, the manufacturers knew they would be hurting, so on their more efficient models, they further diluted the availability by keeping more of them for sales to people who want to move to smaller cars. This left a much more expensive fleet for the Car rental companies to absorb. So either they get SUV's for cheap, practically given to them, or they buy/lease mid and compact size rentals at rates that push the average cost of renting a car up to 20 per day, or 150 per week(ish). That alone is a 1/3 increase in costs which rental companies try like hell to pass onto the renters, but competitive pricing models and the lack of travel usually makes it hard until demand (summertime peak) arrives.
Now REALLY pay attention now.
Rental car companies do not have fixed costs on these cars. The most glaring cost is the mileage overage. Depending on the model, the mfg has several different plans they can purchase for their buyback program.
For most mid size cars, 12-24k miles and 6-24 months on a sliding scale determines the buyback price. The buyback program is a program where the car rental companies buy cars with contracts that state the mfg will "buy back"the car so long as the rental company returns the car within certain parameters. (if you want to learn more about this, check out the avis forum and search for ezmonee, circa 1-2 years ago).
If the rental car company doesnt want to limit itself to these parameters, they buy the car straight up, which means they must sell it on its own, which in the tight car sales market currently isnt nearly as good as one would think. The sales of cars right now (new and used) is down across the country double digits.
To tie it all together....
1> Car fleet price has gone up
2> mfg's are releasing less cars to buyback programs
3> smaller fleets mean rental companies need to buy cars to supplement the buyback programs.
4> greater demand for more fuel efficient models means those models get more miles in less time, meaning that to get the most money from them, the rental companies need to turn the back faster and carry a greater fleet.
5> Obtaining a greater fleet in spite of 1,2,3 means what little buyback cars out there are bieng sold at greater prices, self fulfilling prophecy...
timing- most rental companies get cars around the first of the year in order to return them after the summer swell.... because of number 4, those cars arent making it through the summer, so right during the peak, the fleets are losing cars or making decisions to keep cars and risk them bouncing from the buyback program.
6> because of the risks, and the peak of use which ALWAYS happens around the 4th (july 1-mid august is the busiest part of the summer renting season), prices which naturally spike around that time are spiking in higher quantities.
7> even if a particular rental company is in good shape for cars, every rental company gears its prices off the two industry leaders (price leaders), avis and hertz. weekly they look at the prices of those two and then they adjust their own price model based off of what they are doing.
I hope this helps.
Jul 7, 2008, 2:07 pm
#17
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Like $60 a day for a compact during the week? I had trouble with my coffee when that quote came up recently . . . I guess I might do hotel shuttles if it comes to that.
Jul 7, 2008, 5:11 pm
#18
Join Date: May 2005
Posts: 1,031
and thats the only way the prices will come down. they charge that much because they can. during peak times, cars are in demand.
Jul 7, 2008, 5:21 pm
#19
Join Date: May 2005
Posts: 1,031
I rent cars 365 days a year. From ALL rental companies, including Thrifty. I've been doing this for years. So suddenly my $94/week rental in PDX I see is as high as $300+ if I was crazy enuf to book it for next week. I see rates also have been hiked in SEA.
So what gives? Don't tell it's the summer, it has NEVER been like this. Don't tell me it's the olympic trials in Eugene...the rates there are LOWER. High gas prices? Uh, how does that relationship work? I saw a news item that rental car companies are losing their ......so they hike prices twice or three times higher? Nah.
So what's the explanation. Do a search for rates in PDX or SEA and you'll see what I mean. Haven't looked elsewhere. $94 vs. $300... something is going on, what???? by the way, I called the local thrifty office in PDX and the guy stuttered, said "I dunno...summer?"
So what gives? Don't tell it's the summer, it has NEVER been like this. Don't tell me it's the olympic trials in Eugene...the rates there are LOWER. High gas prices? Uh, how does that relationship work? I saw a news item that rental car companies are losing their ......so they hike prices twice or three times higher? Nah.
So what's the explanation. Do a search for rates in PDX or SEA and you'll see what I mean. Haven't looked elsewhere. $94 vs. $300... something is going on, what???? by the way, I called the local thrifty office in PDX and the guy stuttered, said "I dunno...summer?"
in regards to rates in seattle/pdx eugene, depending on when/where your rental dates straddle, your rates will fluctuate because in anticipation of a huge rental influx many companies probably transferred cars to locations closer to the Olympic trials. once the cars were rented, and slowly returned, prices drop and soon one way rentals from eugene to sea/pdx will be much cheaper as they start transferring cars back.
meanwhile, with the thinned out fleet in those two airports due to transfers, prices naturally "yielded up" according to straight macroeconomics. as demand increases and supplies dwindle, prices escalate.
the same thing happened in San Jose. due to a huge .com conference in San Jose, Avis had to transfer in almost 3,000 cars from as far away as LAX and Reno. During the week, demand thinned and prices dropped in San Jose. While the complete lack of cars made it more expensive in SFO/RNO/LAX
Granted, this is probably a small part of the mix, but if your reserving with 1 week notice in peak demand times, usually your price isnt nearly as good as it should be.
Jul 7, 2008, 6:14 pm
#20
Original Poster
Join Date: Apr 2002
Location: Las Vegas
Posts: 1,174
Hmm...
Thanks for the post, but I still am muddled. 3 1/2 weeks ago Thrifty rented me a compact car at $94/week at PDX. That same vehicle is now $288-$300+ per week at PDX. So what do I do? This Sunday I'm renting a car from Budget under their 10,000 mile Delta promotion for a 1 day rental, driving it to the Eugene airport on Sunday (where the Olympic trials are), and picking up a weekly rental at $136/week from Thrifty. Sure, that makes total economic sense to me.
in regards to rates in seattle/pdx eugene, depending on when/where your rental dates straddle, your rates will fluctuate because in anticipation of a huge rental influx many companies probably transferred cars to locations closer to the Olympic trials. once the cars were rented, and slowly returned, prices drop and soon one way rentals from eugene to sea/pdx will be much cheaper as they start transferring cars back.
meanwhile, with the thinned out fleet in those two airports due to transfers, prices naturally "yielded up" according to straight macroeconomics. as demand increases and supplies dwindle, prices escalate.
the same thing happened in San Jose. due to a huge .com conference in San Jose, Avis had to transfer in almost 3,000 cars from as far away as LAX and Reno. During the week, demand thinned and prices dropped in San Jose. While the complete lack of cars made it more expensive in SFO/RNO/LAX
Granted, this is probably a small part of the mix, but if your reserving with 1 week notice in peak demand times, usually your price isnt nearly as good as it should be.
meanwhile, with the thinned out fleet in those two airports due to transfers, prices naturally "yielded up" according to straight macroeconomics. as demand increases and supplies dwindle, prices escalate.
the same thing happened in San Jose. due to a huge .com conference in San Jose, Avis had to transfer in almost 3,000 cars from as far away as LAX and Reno. During the week, demand thinned and prices dropped in San Jose. While the complete lack of cars made it more expensive in SFO/RNO/LAX
Granted, this is probably a small part of the mix, but if your reserving with 1 week notice in peak demand times, usually your price isnt nearly as good as it should be.
Jul 7, 2008, 10:02 pm
#21
Join Date: Mar 2001
Location: Colorado Springs, CO
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Thanks for the detailed explanation. Still wondering about the $125+ a weekend day I saw quoted for a compact by every company listed at LGA, late July, and the economy Thrifty rate that jumped 350% from what I snagged only three weeks ago in IAD. Just summer peaks?
Jul 8, 2008, 3:27 am
#22
Join Date: May 2005
Posts: 1,031
Thanks for the post, but I still am muddled. 3 1/2 weeks ago Thrifty rented me a compact car at $94/week at PDX. That same vehicle is now $288-$300+ per week at PDX. So what do I do? This Sunday I'm renting a car from Budget under their 10,000 mile Delta promotion for a 1 day rental, driving it to the Eugene airport on Sunday (where the Olympic trials are), and picking up a weekly rental at $136/week from Thrifty. Sure, that makes total economic sense to me.
I think your plan of driving to eugene is a winner, right now at least based on the plans. Check back daily, most car rental companies can change the price daily if they wanted to. I know at avis I changed the prices when I knew some flights were cancelled so that we would capture "one day quickie" rentals instead of sitting on a ton of cars. There were times where I was letting DTS cadi's fly out the door at 25 bucks per day for those who were ticketed on cancelled flights (since they were likely to not extend the rental).
Jul 8, 2008, 3:34 am
#23
Join Date: May 2005
Posts: 1,031
thats HOW FAST a peak season and swing and how much. In all honesty 350% isnt hard to achieve in a summer peak season, depending on how tight the travel season is.
June 1-30 at my location we were renting mids for about 250 a week. 4th of july weekend, we were renting compacts for 415.99 per week (when including 4th holiday). The rest of the summer (ending labor day) the rates hovered between 300-400 a week depending on the local events.
LGA and NY in general is a weekend renters paradise. Locals rent the cars to get out of town on the weekends. weekdays the cars generally sit there. So a one day weekend day rental going for that price isnt surprising at all. Last time in NY I rented a car on a saturday during football season and it averaged about 95 per day. when i priced it out individually (single day rentals, it worked out to 130 per day sat and sun, 65 for the monday.
Jul 8, 2008, 3:48 am
#24
Join Date: May 2005
Posts: 1,031
Thanks for the post, but I still am muddled. 3 1/2 weeks ago Thrifty rented me a compact car at $94/week at PDX. That same vehicle is now $288-$300+ per week at PDX. So what do I do? This Sunday I'm renting a car from Budget under their 10,000 mile Delta promotion for a 1 day rental, driving it to the Eugene airport on Sunday (where the Olympic trials are), and picking up a weekly rental at $136/week from Thrifty. Sure, that makes total economic sense to me.
Date: Jul 12, 2008 12:00 PM
Drop-off: Same as pickup
Date: Jul 19, 2008 12:00 PM
Car Type Compact
Car Type & Rate > Change
Car Class: Dodge Caliber or similar
Rate: $179.99/week
Total Base Rate (USD): 179.99
Options > Change
Book It
Rental Time Charge 179.99
Rental Tax (9.7%) 17.80
Sales Tax (9%) 18.12
Vehicle License Recoupment Fee ($0.50 per day) 3.50
Total Estimated Mandatory Charges (USD) 219.41
Estimated Grand Total (USD) 219.41
if you can take advantage of it...found via kayak
Jul 8, 2008, 4:04 am
#25
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Jul 9, 2008, 2:02 am
#26
Join Date: Jun 2008
Posts: 10
This is all very interesting. I work for a car rental comparison site in the UK and have blogged about this very point recently - here's my take on it!
http://go.carrentals.co.uk/blog
And it is going up here too....
Gareth
http://go.carrentals.co.uk/blog
And it is going up here too....
Gareth
Jul 9, 2008, 6:28 am
#27
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LGA and NY in general is a weekend renters paradise. Locals rent the cars to get out of town on the weekends. weekdays the cars generally sit there. So a one day weekend day rental going for that price isnt surprising at all. Last time in NY I rented a car on a saturday during football season and it averaged about 95 per day. when i priced it out individually (single day rentals, it worked out to 130 per day sat and sun, 65 for the monday.
I have noticed that rates have gone way up for the summer. They may drop in the Fall/Winter here in So Cal.
Jul 9, 2008, 7:27 am
#28
Join Date: Jan 2005
Location: MA
Programs: UA 1K, SPG PLT, Avis First
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I've been looking at rentals in LA for a week, sometime in the next week or two, and instead of seeing my typical $100-$150/week rental at Enterprise or Avis. I'm getting rates of ~$350 at Enterprise, and ~$550+ at Avis.
At one point the Avis website was giving me a ~$100 rate but it wouldn't let me book it.
I then tried to look for rates months in advance and it's still giving me rates 2-5x the old normal rates.. Really crazy!
At one point the Avis website was giving me a ~$100 rate but it wouldn't let me book it.
I then tried to look for rates months in advance and it's still giving me rates 2-5x the old normal rates.. Really crazy!
Jul 9, 2008, 8:54 pm
#29
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Re: OP. There was some limited discussion. I started this one in TravelBuzz:
And this thread obliquely references about some countermeasures, at least for National.
Have had ridiculously high quotes for weekend days so far in MSP, HNL and PDX (the last one over that 7/4 weekend). Priceline and Hotwire couldn't ride to the rescue, but it's reported that some "goofy-coding" sometimes works (see the sticky in the National forum). OTOH, MCO still had very low rates, so it's not everywhere.
My first thought is that supply is being artificially limited and there's not enough competition at the affected airports. Something seems to have happened. A new oligopoly?
The way things SHOULD work, dagnabit, is that car makers own the car-rent companies and use them to dump slow-selling models and at least keep the factories going. I remember in the 1991-92 recession renting Chevy Corsicas at $39 or so all-in (with Entertainment coupon) on a 3-day weekend.
Looks like it might become necessary to check for hostile car-rent situations before booking airline tickets for leisure trips.
$60/day on weekends won't work with leisure travelers, especially in a recession.
And this thread obliquely references about some countermeasures, at least for National.
Have had ridiculously high quotes for weekend days so far in MSP, HNL and PDX (the last one over that 7/4 weekend). Priceline and Hotwire couldn't ride to the rescue, but it's reported that some "goofy-coding" sometimes works (see the sticky in the National forum). OTOH, MCO still had very low rates, so it's not everywhere.
My first thought is that supply is being artificially limited and there's not enough competition at the affected airports. Something seems to have happened. A new oligopoly?
The way things SHOULD work, dagnabit, is that car makers own the car-rent companies and use them to dump slow-selling models and at least keep the factories going. I remember in the 1991-92 recession renting Chevy Corsicas at $39 or so all-in (with Entertainment coupon) on a 3-day weekend.
Looks like it might become necessary to check for hostile car-rent situations before booking airline tickets for leisure trips.
$60/day on weekends won't work with leisure travelers, especially in a recession.
Last edited by RustyC; Jul 9, 2008 at 9:03 pm
Jul 10, 2008, 2:31 am
#30
Join Date: May 2005
Posts: 1,031
Have had ridiculously high quotes for weekend days so far in MSP, HNL and PDX (the last one over that 7/4 weekend). Priceline and Hotwire couldn't ride to the rescue, but it's reported that some "goofy-coding" sometimes works (see the sticky in the National forum).
The way things SHOULD work, dagnabit, is that car makers own the car-rent companies and use them to dump slow-selling models and at least keep the factories going. I remember in the 1991-92 recession renting Chevy Corsicas at $39 or so all-in (with Entertainment coupon) on a 3-day weekend.
The way things SHOULD work, dagnabit, is that car makers own the car-rent companies and use them to dump slow-selling models and at least keep the factories going. I remember in the 1991-92 recession renting Chevy Corsicas at $39 or so all-in (with Entertainment coupon) on a 3-day weekend.
I paid 103 per week for a full size car (after AMEX 10% discount), which was courtesy upgraded to a 300 touring edition. A really nice, less than 1000 mile red one. With fees it came out to 240-250 ish for TWO WEEKS. I even bought the full tank of gas because the rate they were offering was 15 cents per gallon cheaper than the local costco.
After memorial day, the prices jumped to around 260 per week for the same reservation and gradually went higher, peaking over the 4th weekend and it hasnt fallen since.