Gas Prices and Rental Car Dynamics

About a week and a half ago, the Wall Street Journal ran an interesting travel story on how some rental car lots are renting hulking SUVs at cheaper prices than little compact cars.

In a demand twist that any Economics 101 student could have predicted, people are becoming less willing to pay more for something that gets crappy gas mileage. When it starts costing twice as much to fill up the car than it does to rent it for two days, something has to give.

The cozy relationship that U.S. auto companies have with the rental car agencies is partly to blame. If the rental car companies had lots full of Toyotas and Hondas, there would be no story. Instead they’re full of inefficient gas-guzzlers put out by increasingly anachronistic Detroit. (Ford used to own Hertz, Chrysler used to have a stake in Dollar/Thrifty. All have fleet sale agreements with the rental agencies.) As is the case so many times in the travel industry, these partnerships are great for company revenue projections, but not so good for consumers. And not so good when the market demands that an outdated business model become more flexible.

Is it time for the SmartCar to make its way onto American rental car lots?

Comments
  1. car rental

    Thanks for tips :)

  2. Budget

    Yeah those smart cars are fun, thanks for the information.

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