Fleet News

Brokers may be victims of rental industry shake-out

DAILY rental brokers could become the victims of daily rental companies' radical overhaul of their approach to business in the fight to remain profitable. Intense competition is forcing down rental rates at a time they should be rising to counter collapsing residual values, leaving the industry mopping up massive losses on disposal vehicles.

But the industry is still plagued by cut-throat rates that are increasing slower than inflation. The British Vehicle Rental & Vehicle Leasing Association's Industry Review found that over a seven-year period, the price of the average rental transaction of just over five days increased from £111 in 1991 to £123.14 in 1998. But during that time, the 10.9% increase of £12.18 was outstripped by inflation running at 25%, forcing the daily rental industry to find savings through lower margins.

Furthermore, the large discounts once commanded by daily rental companies from vehicle manufacturers are drying up as manufacturers also fight for profitability as new car prices come under pressure. As rental firms see profits falling away, they are reconsidering the benefits of the fast-churn low margin style of business that has become their trademark.

Instead, many now want to see a profitable result from each rental which takes place. According to Avis Rent-a-Car fleet director Chris Fisher, many brokers carry responsibility for driving prices down to unacceptable levels and they will find business drying up in future. He said: 'The people in this sector who will be losing out will be the brokers. If you are pricing at a loss so that someone else can make a margin, there is no point. There is plenty of core rental business that can be sourced direct, rather than having to go through brokers.'

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