Rental car industry hit hard by economic downturn

The Avis car logo.

Steve Chiotakis: Avis Budget group says it's backing off its bid to buy rental car rival Dollar Thrifty because of the sour economy. Avis pulling the plug on the deal speaks a lot about what's happening not only in the rental car business, but also the travel and car business.

Marketplace's David Gura has that.

David Gura: Early on, Avis' interest in Dollar Thrifty -- a low-cost competitor -- made sense.

Henry Harteveldt is a travel analyst with the Atmosphere Group.

Henry Harteveldt: Avis has perennially been number two to Hertz, so this would've allowed them to narrow the gap. They obviously don't see that the financial benefits outweigh the costs -- or the risk.

But the economic downturn has made those potential benefits less attractive. Business travel has changed. Many companies encourage employees to use taxis and public transportation instead of rental cars. But something else may have motivated Avis to drop its bid.

Dave Kilduff is with Partnership Travel Consulting.

Dave Kilduff: The profitability of rent-a-car companies is due a lot to the price of the used car market -- millions of vehicles -- and those have to be sold back to the public.

Kilduff says their overall profitability depends on those used-car sales. And just like the rental car industry, the market for pre-owned cars isn't what it used to be.

I'm David Gura, for Marketplace.

About the author

David Gura is a senior reporter for Marketplace, based in the Washington, D.C. bureau.


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