One of the first references to the car rental is found in the Minneapolis Journal of July 22, 1904 when a bicycle shop devoted a line in the advertisement to announce about offering cars for rent, and already in 1912 the company SIXT began operations with three rental cars. Joe Saunders of Omaha, Nebraska, first started with only one borrowed Model T Ford in 1916 Saunders System. By 1926, Saunders had expanded to 56 cities. Saunders company was bought by Avis in 1955.
It is rather paradoxical, but the car rental ideas emerged before Henry Ford developed its own model T in 1908.
The main car rental clients historically were lower-class townspeople who could not afford to buy a car; at that time it conferred social status; renting a car was an explicit indication of lower socio-economic status. However, this situation was to change within a few decades. Cars were usually offered at roadsides, because car rental offices were not yet there. As the industry continued to expand and supply and demand continued to increase, business transformations began. With the expansion of the air travel industry, the number of travellers grew and it has fundamentally changed the customer base of car rentals. Customers who could not afford to buy a car gradually could do it, and the number of travellers forced car rental companies to offer services for tourists for whom it was not economically viable (although they did not even have such an option) to buy a car for a short period of time or use the taxi service when the car is needed for a few days or for driving more than just a few kilometres to the hotel.
Little has changed in this business in the 20th century. Before the start of the rentals, cars traditionally had to be booked, i.e. ordered in advance at the selected car rental company. Cars are rented from rental offices, most of which are located in airports. Cars can be rented for one day or for several days, by completing the necessary papers, signing a contract, and making a deposit for the event of damage. Certainly, it is advisable to return the car in the same location in order to avoid substantial additional costs.
The customer category remained unchanged, tourists comprising the main portion of its customers.
The definition of tourist includes not only vacationers but, for instance, business trips, emigrants, i.e. everyone who temporarily come to another country but do not permanently live there. With increased funding every citizen can afford to buy a car through leasing financed by the bank. This way, rental companies have permanently lost the local customer flow (excluding leasing the car in case of own car damage) and switched to tourists.
In the 21st century the traditional car possession and usage procedures cause inconvenience for the generation Y. On the one hand, young people today travel a lot. Whether it be a study or work abroad, or just pleasure, you cannot take a car to the airplane. On the other hand, not every leasing company will provide a loan to purchase a car for young unemployed. But if you travel a lot, there is no sense to buy a car. For the generation Y the concept of ownership is transformed, but in the 1920s having something new was mandatory in order to affirm one’s social status (now it is happening with smart phones), so after 100 years sentiments are replaced with pragmatism. With increasing popular car-on-demand, or car sharing services, car rental companies rediscover local customers.
For the generation Y the concept of ownership is transformed, but in the 1920s having something new was mandatory in order to affirm one’s social status
With technological developments, the traditional “tourist” customer is also no longer satisfied with old-fashioned service and demands more. When air travel is becoming cheaper than travels by car, tourists no longer need to depart from the same airport where they arrived because tickets are so cheap now. Accordingly, they want to return the car elsewhere. Not to mention the onerous reservations, paperwork or knavish tricks and additional fees of car rental companies in order to survive the competition. And this is justified for instance in Malaga (Spain) where a car hire during the off-season costs from 1.07€ a day.
Thus, serious changes are brewing in the car rental industry. Unfortunately, seasons do not last for 12 months, and maintaining the car fleet and rental offices is a great challenge. Traditional car rental companies are already looking at local customers, for instance, enterprisecarshare.com or even car manufacturers such as Daimler AG offer car2go.com services.
How long it takes until you will buy car as service (C-as-S) from your local dealer?
Car manufacturers are also facing financial difficulties and are looking for new ways to sell their products, while car rental companies are also not pampered by the market. We will soon see to which direction the Y generation will turn and whether they will refuse the 20th century relics.