Auto giants often behind rental price increase

Auto giants are, in part, behind the rise in rental fees at large car hire companies, like Hertz and Budget, according to the Financial Post. The over-all cost of renting a vehicle in North America has gone up in 2007 and prices will likely remain high and possibly increase further in 2008, because some of the largest auto makers are selling their vehicles to rental firms at higher rates. Ford and General Motors have both cut back the number of passenger vehicles they make available to car hire firms at preferential prices. Major automobile manufacturers often sold those cars to rental companies that were not as profitable or popular with buyers. According to the Financial Post, many of these car hire firms were seen as “dumping grounds” for all of these vehicles that auto dealers found difficult to sell. As such, the cars would be bought up by rental companies at lower prices. These good rates allowed major firms like Hertz and Budget to continually upgrade their fleets with new vehicles, while at the same time ensuring a healthy profit, thanks to the reasonable price of a new car. Both Ford and General Motors, however, have now decided that instead of producing and trying to sell cars with lower profit margins, they will simply cut back on the production of these vehicles.

This leaves car hire firms in a challenging situation. According to Dennis DesRosiers, an automobile industry expert, the average car rental in the US used to cost under $50 per day. With increasing prices, however, many customers may find themselves paying closer to $70 for a vehicle.

www.hertz.com