Rising costs pose challenges for car rental firms

Avis rental rates are likely to rise by as much as 12 percent this year in South Africa, due to rapidly increasing overhead costs, including higher interest rates and augmented expenses associated with buying new cars. Wayne Duvenage, Avis’s CEO, noted that interest rates have skyrocketed by nearly 70 percent in under two years. This, combined with the depreciation of the value of cars in the Avis rental fleet, has meant that the firm’s overhead costs rose by about 35 percent in South Africa. Various supplies, location rental rates, wage increases for the firm’s employees and high petrol costs have all made running a car hire business a much more expensive proposition. This, however, means that renters will now have to share some of this burden, as they see prices rise by between 10 percent and 12 percent in the coming months.

Despite these anticipated increases, Duvenage noted that it is still much cheaper to rent a car in South Africa than to book most medium range hotel rooms. In fact, Duvenage observed that on average a car hire costs about one third the price of a one night stay in a hotel. As such, when people go on vacation, they should keep in mind that car rentals usually form only a minority of their overall expenses.

Avis is hardly the only major car rental firm in South Africa to have experienced an exponential increase in overhead costs. Budget, for example, noted that simply maintaining their fleet of rental vehicles now costs approximately 25 percent to 40 percent more than it did in early 2007.

www.avis.com