The American Rental Car Cartel

Published in concentrated corporate power, rental cars, monopoly, on Jul 28, 2021

Renting a car takes forever. Last week we rented a car, there was a huge line, then we got transferred to another line. By the time we got to the front desk the agency was out of car seats even though we'd specifically reserved them online with our booking. The guy at the front desk helping us was obviously stoned my wife had to read off credit card and reservation numbers multiple times. The process took forever. It wasn't cheap either.

This isn't our first issue with long lines and rental car headaches. I don't think we're unique with our American rental car horror stories. When we rented a car in Hawaii waiting to pick up the rental car took longer than our flight from California. Even returning a rental car can be a process if they're backed up. As Americans if we rent cars we wait in long lines and pay through the nose.

In American economic terms the solution to high prices and poor service is to "vote with your dollar" and take your business elsewhere. Though from the above sign it looks like there are a ton of different choices, turns out all the rental car companies are owned by three international conglomerates: Avis Budget Group, Enterprise, and Hertz Global Holdings. The below graphic is from Economic Liberties report on the illusion of choice in America.

Now there are definitely alternatives to renting a car, like Uber and Lyft. With kids and car seats on a vacation though renting a car can be nice to have. There are some peer to peer marketplaces not owned by the major conglomerates, notably Getaround and Turo but you won't find kiosks for them available at airports. Zipcar was one of the first movers in shaking up the rental car space, but it was bought by Avis-Budget for $500 million in 2013. Zipcar, Getaround and Turo have raised over $1 billion from investors ($1,143,129,392 to be percise) so there's definitely appetite from Venture Capitalists and financiers for shaking up the car rental space. Despite decades of development though the car rental industry is still controlled by three players. For whatever reason consolidation has been the name of the game in the American rental car market.

The major car rental companies use market power to buy up rivals around the world, keeping prices high and wages for workers low. The economic consensus of both political parties, since President Reagan has been that bigger is better and corporate consolidation should be encouraged, but I believe that's changing. I did a bit of digging on car rental mergers and acquisitions and this is a timeline of how the three big car rental firms were able to monopolize the rental car market in America.

Timeline of Rental Car Mergers and Acquisitions

  • 1918:
    • Hertz founded.
  • 1946:
    • Avis founded with an $85,000 investment. This is the first car rental operation located at an airport.
  • 1947:
    • National car rental founded by 24 independent rental car agents.
  • 1958:
    • Thrifty Car Rental founded.
  • 1965:
    • Dollar Rent A Car founded.
  • 1971:
    • Payless Car Rental founded.
  • 1974:
    • Enterprise founded.
  • 1985:
    • Hertz sold to United Airlines' parent company.
  • 1986:
    • Budget Rent a Car sold to a Private Equity firm in a leveraged buyout.
    • Avis sold to a Private Equity firm.
  • 1987:
    • Ford buys Hertz for $1.3 billion.
    • Budget Rent A Car goes public.
    • Investment bank takes controlling share of National car rental.
  • 1989:
    • Thrifty Car Rental buys Snappy Car Rental for $40 million.
    • Thrifty bought by Chrysler Corporation for $263 million.
  • 1990:
    • Hospitality Franchise Systems (HFS) launches as an affiliate of Blackstone Private Equity firm with the express purpose of buying up hotel franchises, starting with Ramada and Super 8 (important for the story later).
    • Chrysler buys Dollar Rent A Car.
  • 1992:
    • HFS goes public via an IPO. Stock prices soars. and HFS begins buying up real estate firms like Coldwell Banker and Centrury 21.
  • 1996:
    • HFS acquired the Avis car rental company for $793 million.
    • National buys Tilden car rental.
    • National acquired by AutoNation.
  • 1997:
    • HFS merges with CUC International to become Cendant Corporation in a $10.9 billion stock swap.
    • Team Rental Group acquires Budget.
    • Dollar Thrifty Automotive goes public in IPO.
  • 1998:
    • Massive accounting scandal, CEOs of both HFS and CUC are indicted by a federal grand jury and sent to prison. Cendant sued by the Securities and Exchange Commission (SEC) for defrauding investors.
  • 1999:
    • Avis buys Cendant's car rental business for $1.8 Billion in cash and stock.
  • 2000:
    • Cendant buys out Avis for $935 million.
    • Zipcar founded.
    • AutoNation spins of its car rental properties (including National and Alamo) as ANC Rental.
  • 2001:
    • ANC Rental files for bankruptcy.
    • Ford buys Hertz for $710 million.
  • 2002:
    • Cendant buys Budget for $107.5 million to become nation's second largest car rental company.
  • 2003:
    • ANC Rental changes its name to Vanguard Car Rental.
  • 2005:
    • Private Equity group buys Hertz from Ford for $5.6 billion.
  • 2006:
    • Cendant breaks off its other business lines to focus on car rentals and becomes the Avis Budget Group.
  • 2007:
    • Enterprise, the largest car rental company, buys the fourth largest car rental company Vanguard Car Rental Group, owner of National and Alamo.
  • 2012:
    • Avis-Budget buys Apex Car Rentals for $29 million.
    • Hertz buys Dollar Thrifty Automotive Group for $2.3 billion.
  • 2013:
    • Avis-Budget buys Zipcar for $500 million.
    • Avis Budget buys Payless Car Rental for $50 million cash.
  • 2015:
    • Avis-Budget buys Maggiore Group for $160 million.

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