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Rental companies facing a green dilemma

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Short-term corporate renters have been warned that if they want greener cars they are going to have to pay extra for them.

“Costs are going up and if you want a greener fleet you are going to have to pay for it,” said Tim Bailey, fleet director of Europcar UK Group.

Most of the major rental companies offer a green vehicle package in one form or another.

But costs across the entire rental sector, including providing low emission cars, are rising and these need to be passed on to customers.

“Our biggest challenge is that people are not prepared top pay – the Prius for example isn’t cheap and therefore will cost more to rent,” explains Mr Bailey.

But if it is driven in an urban setting, those extra costs can be recouped.

“Businesses should also be looking beyond the cost of the rental, to the overall efficiency of the car," he said.

Rental companies acquiring green vehicles such as hybrids are finding that they not only cost more at acquisition but this additional outlay is not always recouped through higher residuals.

“And it is getting tougher – the landing cost is getting higher and residuals are heading further south,” explained Mr Bailey.

“2009 is going to be very tough and these extra costs will eventually have to be passed down to the customer.”

Rental companies are also dealing with a contradiction in terms of what renters say and what they actually do.

While corporate clients say they want a choice of green vehicles, when it comes to booking a car, many fail to put their money where their mouth is.

“The difficulty is that business renters still favour traditional lower medium hatchbacks and the upper medium saloon,” explains Mr Bailey.

“Our own figures show that while there has been a 10% decline in rentals of upper medium saloons for short-term rentals of a day or so, when it comes to longer term rentals of a few weeks or a month or more, demand for upper medium vehicles has actually increased by 6.5% over the same period.”

There may be other factors at play, but Mr Bailey suggested that when it comes to vehicle rental, the car is still regarded in some quarters as a status symbol and selected according to the engine and vehicle size.

“Choosing a smaller, lighter model is not only a smart business choice but renters selecting newer models will also benefit from greater choice and availability,” he said.

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