A report released this week by ratings agency Fitch says that while the rental car industry has been restored to pre-9/11 levels, the financial deterioration of U.S. vehicle manufacturers and rising interest rates have combined to produce growing rental car fleet expenses and depreciation costs, only a portion of which have been passed on to the vehicle renter.
The report, “The Rental Car Industry: Time to Kick the Tires,” takes a close look at the major rental car companies, whose profit margins have been negatively impacted by these economic developments, namely Hertz Global Holdings and Vanguard Car Rental Group.
Leverage ratios and funding costs are on the rise, but Fitch's outlook on the industry is not totally unfavorable. According to the report, a rental car company can achieve success in the current operating environment if it can diversify vehicle manufacturer relationships, implement competitive pricing strategies, appropriately manage the size and age of its vehicle fleet and achieve some level of funding flexibility.
The report is available on the Fitch Web site at www.fitchratings.com.