A car rental, hire car or car hire agency is a company that rents automobiles for short periods of time (generally ranging from a few hours to a few weeks) for a fee. It is often organized with numerous local branches (which allow a user to return a vehicle to a different location), and primarily located near airports or busy city areas and often complemented by a website allowing online reservations.
Car rental agencies primarily serve people who require a temporary vehicle, for example those who do not own their own car, travelers who are out of town or owners of damaged or destroyed vehicles who are awaiting repair or insurance compensation. Car rental agencies may also serve the self-moving industry needs, by renting vans or trucks, and in certain markets other types of vehicles such as motorcycles or scooters may also be offered.
Alongside the basic rental of a vehicle, car rental agencies typically also offer extra products such as insurance, global positioning system (GPS) navigation systems, entertainment systems, and even such things as mobile phones.
Horses, chariots, carriages and the like have been rented since time immemorial. The earliest known example of cars being offered for rent dates to 1904. The German company Sixt was established in 1912 with three cars for rent.
Joe Saunders of Omaha, Nebraska first started with only one borrowed Model T Ford in 1916, but by 1917, his Ford Livery Company was renting out 18 Model Ts at 10 cents per mile. The company name became "Saunders Drive-It-Yourself System" and then "Saunders System". By 1926, Saunders had expanded to 56 cities. Saunders' company was bought by Avis in 1955.
The sector expanded rapidly in the US; in 1926, the American Driveurself Association assembled over 1200 delegates in Chicago.
The growth in travel after World War II led to the establishment of several well known international companies, including National Car Rental (1947), Europcar (1949), Enterprise Rent-A-Car (1957), Thrifty Rent A Car (1958) and Budget Rent a Car (1958).
Car rental companies operate by purchasing or leasing a number of fleet vehicles and renting them to their customers for a fee. Rental fleets can be structured in several ways – they can be owned outright (these are known as ‘risk vehicles’ because the car rental operator is taking a risk on how much the vehicle will be sold for when it is removed from service), they can be leased, or they can be owned under a guaranteed buy-back program arranged directly through a manufacturer or manufacturer’s financial arm (these are known as ‘repurchase vehicles’ because the manufacturer outlines the exact price of original sale and of repurchase at the end of a defined term).
In the UK, the registration of rental cars can be concealed by using unfamiliar initials or subsidiaries, which can increase the resale value via manufacturer or third party dealers. In North America, it is common to see rental companies with their own branded second-hand car dealers where ex-rental stock is sold direct to the public. Alternatively, auctions are often used such as Manheim Auctions in the USA.
Types of vehicles
Most car rental offices offer a range of vehicle sizes to suit a variety of budgets and space requirements and some additionally offer specialized vehicles to suit its location such as convertibles, prestige models, hybrid/electric vehicles or SUVs and passenger vans. At major airports or in larger cities, some independent car rental agencies offer high-end vehicles for rent. Some specialized companies such as Rent-a-Wreck offer older vehicles at reduced prices.
To allow for a uniform classification and easy comparison of car rental prices, the Association of Car Rental Industry Systems and Standards (ACRISS) has developed the ACRISS Car Classification Code coding system. This describes the size, door count, gearbox type (manual/automatic) and whether the car is air-conditioned, encoded into four letters. Additional classifications based on seat numbers and trunk volume were also set by the Belgian Rent a Car association in order to provide a unified system for assessing the car types in online reservation systems such as Amadeus or Sabre.
Car rentals are subject to many conditions which vary from one country to another and from one company to another. Generally the vehicle must be returned in the same condition it was rented in, and often must not exceed mileage restrictions, otherwise extra fees may be incurred.
For insurance reasons, some companies stipulate a minimum and / or maximum rental age. In some cases, the minimum age for rental can be as high as 25, even in countries where the minimum legal age to hold a driver's license is much lower. It is not uncommon for there to be a young driver surcharge for all drivers aged under 25.
The majority of car rental companies require the use of a credit card to charge additional fees should a defect be found with the car on its return or for road tolls, motoring related fines or missing fuel. In lieu of a credit card some companies require a large cash deposit or occasionally a debit card.
Insurance / waivers
Although frequently not explicitly stated, US car rental companies are required by respective state law to provide minimal liability coverage, except in California, where the driver is solely responsible. This covers costs to a third party in the event of an accident. In most states, it is illegal to drive a car without liability coverage. The rental car companies maintain liability insurance on their vehicles; however, some companies will charge for this, should you not provide your own insurance. As an example, in Maryland, the minimal level of liability coverage is $20,000 for bodily injury and $15,000 for property damage.
- Loss Damage Waiver (LDW) - covers the cost of damage to the rental vehicle, up to the full value of the vehicle, in the event of an accident. Typically LDW covers 100% of costs without a deductible additional fees. Note that LDW/CDW coverage is not insurance and is not offer the same coverage product as a damage insurance policy.
- Collision Damage Waiver (CDW) - Generally covers the costs of damage from a moving accident. As the name suggests, non-collision based damage is often not covered. In many cases, in the event of an accident a fee or deductible applies.
- Supplemental Liability Insurance (SLI) – a product often sold in the USA which provides coverage in the event of an accident causing bodily injury or property damage to someone other than the renter and passengers.
- Personal Accident Insurance (PAI) – covers medical costs and accidental death for the renter and passengers in the event of an accident during the rental.
- Personal Effects Coverage (PEC) – insures against risk of loss or damage to the personal belongings of the renter (and sometimes the members of the renter's family while traveling with the renter) during the period of the rental.
- Excess Insurance – When a car is hired in Europe, Africa, Australasia, and most of the Middle and Far East, CDW, Theft and Third Party Liability are generally included in the car rental price. There is almost always an excess (also referred to as Super CDW, Non Waiver or Deductible) on the CDW and Theft portions of the rental. A higher excess usually results in a lower premium on the insurance. Excess is used to discourage drivers from making insurance claims for small damage. If the damage is cheaper to repair than the excess then generally the driver would not claim and the insurer is saved the cost of the repair. The Excess can range from about £500 to £1,600 and is the portion of the loss that the renter is responsible for, regardless of which supplemental insurance / waiver products have been purchased. Excess is just starting to be charged in the USA, it is sometimes charged in Canada, and it is generally charged in the Caribbean, Central and South America. Excess insurance is a secondary insurance (only in place with the CDW and SLI cover) and provides coverage to the renter for the excess amount. The majority of car-rental companies in Europe will sell this cover as a 'top-up' insurance to cover the excess on their standard damage and theft insurance. Not only can this work out quite expensive, it is likely to exclude cover for damage to the windscreen, bodywork, roof, tyres or undercarriage leaving the hirer of the vehicle liable to pay out if damaged. There is however, another insurance alternative that can reduce these risks and costs. Specialist excess protection insurance from a number of other insurers can offer excess protection, much broader coverage and may include cover for those areas often excluded. In the event that the vehicle is damaged or stolen, the rental company will charge your credit card for the excess amount and you then claim for reimbursement on your vehicle hire excess protection policy.
In the USA, the sale of these supplemental insurance/waiver products may be regulated by each states' insurance departments, and a special limited license may be required by the rental company in order to sell them. The specific coverage offered can differ substantially, depending on the state or country in which the car is rented.
Notes and references
- "Car Renting... Its Development... And Future", Automotive Fleet, December 1962 full text
- "About Sixt". Sixt. Retrieved 17 July 2014.
- "Joe Saunders", Omaha Innovators
- "Walter L. Jacobs, 88; Rent-a-Car Pioneer". LA Times. 1985-02-08. Retrieved 21 January 2012.
- "How to Explain Loss of Use to an Insurance Company". Auto Rental News. Retrieved 29 April 2014.
- Swaine, Jon (14 September 2009). "Used-car buyers unwittingly bought ex-rental vehicles". Daily Telegraph. Retrieved 15 April 2013.
- Zielbauer, Paul (2002-02-21). "Car Rental Agency Is Ordered to Stop Charging Speeders Fines". The New York Times.
- AmeriScan: May 1, 2006
- "Car Rental Insurance Tip Sheet". Consumers Unified LLC. Retrieved 29 April 2014.
- "Top tips for saving money on holiday". The Guardian (London). 2009-07-11.
- Charlton, Gill (2009-03-06). "Holiday advice: holiday car hire excess". The Daily Telegraph (London).
- Harris Saunders, Top up or down?: The origin and development of the automobile and truck renting and leasing industry--since 1916, 1985
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- Media related to Vehicle rental at Wikimedia Commons