How Recalls Affect Small Rental Companies

As a rental car operator, it’s essential to properly maintain vehicles to keep them safe for customers. But what happens if an open recall — with no end in sight — causes an operator to ground all of his vehicles in a particular car class?

Take Matt Pendergast, a Rent-A-Wreck franchise owner in San Francisco.

While at present Pendergast is not obligated to ground any vehicle under a recall, the recent Takata air bag recall prompted him to remove two Ford Mustang convertibles from his fleet during the summer high season, when renters want them the most. “I didn’t want to take any chances when it came to that type of thing,” he says.

Two vehicles might not sound like a big deal, but it’s a big loss to a small rental company, especially when Pendergast’s two Mustangs make up his entire convertible class.

“The recall has been stressful and difficult for us,” says Pendergast, who runs a fleet of about 50 to 55 vehicles. “As a small business, we don’t have the purchasing power to go out and replace the convertibles.”

In May, Takata Corp. expanded its national recall of its defective air bag inflators, which included Ford Mustangs (2005 to 2014 model years). According to the National Highway Traffic Safety Administration (NHTSA), it is the largest U.S. vehicle safety recall. “It was hard to keep track of what vehicles were affected since the makes and models were revealed slowly in stages,” Pendergast says.

After receiving news of the recall, Pendergast immediately took his Mustangs to the local Ford dealership. Due to the far-reaching extent of the recall, the air bag inflators are currently not available from Ford — and won’t be for months.

“In the meantime, I had to contact every person who had a convertible reserved for the summertime season,” says Pendergast. “We are a service business, and it looks negatively on us when we can’t fulfill a reservation that was made months ahead of time.”

In addition to disappointing almost a dozen convertible customers and losing $3,000 to $4,000 in revenue, Pendergast is also losing money each day as the cars decrease in value.

“I have the Mustangs just sitting on my lot depreciating in value,” says Pendergast. “I could try to sell them on the open market, but they still have open recalls so their value will be down.”

One Viewpoint on Legislation

Pendergast expresses his frustration that it puts him — and other rental car operators — in a tough situation when the recalled parts aren’t available.

“If the automakers don’t have the part and it’s going to affect a large portion of your fleet, you are stuck,” he says. “You have to take reservations assuming that the vehicles you own will be available for customers. But what happens if there is a law that suddenly says that they aren’t available to rent anymore?”

The American Car Rental Association (ACRA) as well as several other consumer safety advocates — Consumers for Auto Reliability and Safety, AAA, Center for Auto Safety — support the “The Raechel and Jacqueline Houck Safe Rental Car Act,” pending legislation in the U.S. Senate and House.

The legislation would require car rental companies to ground vehicles subject to a federal safety recall until repairs are made and prohibit car rental companies from selling vehicles with open safety recalls.

In the bill, there is no designation of degree when it comes to the recall.

“With an air bag issue, the vehicle should be immediately grounded. But you are telling me that I can’t rent out vehicles with any open recall, like a latch for a rear window, when the part isn’t available?” says Pendergast, citing an actual recall for Dodge Caravan and Chrysler Town & Country models to replace the rear quarter vent window switch. “It took a while to get those parts,” he says.

Pendergast also takes issue with the bill because it doesn’t hold automakers to any more responsibility, nor does it mandate compensation to rental companies for lost revenue on recalled vehicles.

“I don’t have an issue with grounding vehicles that could be potentially dangerous to customers, but we are the ones who are suffering,” he says. “I’m losing thousands of dollars in revenue, experiencing devaluation of my cars and getting negative publicity, and it’s not my fault.”

Disclaimer: The views expressed by Matt Pendergast do not represent the position of the American Car Rental Association or Auto Rental News in regards to the vehicle recall process or recall legislation. 

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