“Think about it. You can rent a $20,000 car cheaper than you can rent a $500 tuxedo. And you can rent a car for less money than a pop-up tent.” -- Frank Colonna, CEO, Triangle Rent A Car

Driving
Down
Costs

Renting rather than owning
company cars is one way 
to put the brake on expenses


Questions? See our rental car FAQs

By Kevin Brafford

For years, Carolina Power and Light based its 500-car company fleet at a sprawling parking lot in downtown Raleigh. These days the big utility still uses a fleet of cars but it doesn’t own any of them. Heck, it doesn’t even own the parking lot anymore, a vivid example of the changes that have radically altered the equation that determines whether it’s better to own or rent a company car.

Gary Thompson, director of fleet services for CP&L parent Progress Energy in the Raleigh corporate office, says the transformation began slowly about five years ago when the company began reducing its fleet. Two years later, it put its transportation needs out for bid, which was won by Enterprise Rent-A-Car.

Today, Enterprise not only maintains a fleet of vehicles on the downtown lot to service CP&L’s fleet requirements, it also owns the parking lot and leases the space to the giant utility. “They’re using that as their hub for us,” Thompson says about the arrangement with Enterprise. “When we need a car, it’s right there for us. We still have about 100 cars total, and they’re assigned to those who have jobs to justify their use.

“Doing what we did just made a lot of financial sense,” Thompson adds. “We took that capital money that we would have spent on cars and put it back into our core business, which is to keep the lights on.”

You hear the same story from Scott Johnson, a relationship manager with First Union National Bank in Charlotte. He’s not the person you talk to about debit cards, account balances and if a check has cleared, but he does know a lot about getting bank executives from Point A to Point B.

Johnson works for First Union Travel Services, a self-managed agency that makes business travel reservations for the bank’s 75,000 employees nationwide. Specifically, he works one-on-one with account managers at a trio of auto rental companies. “We probably do about 100 rentals a week,” he says, “and that’s good for the auto rental companies we do business with. And it’s good for us. The bottom line is that it wasn’t to our advantage to have fleet vehicles because of the overall costs of the cars, the insurance and the maintenance.”


Why Rentals Are Roaring
With thousands of firms like CP&L and First Union switching from company-owned fleets to rental cars, it’s not surprising that revenue for the auto rental industry hit a record $19.6 billion in 2000, a 10 percent increase over the previous year. And since 1995, revenue has increased by nine percent on average, with the three largest jumps occurring between 1995-96, 1997-98 and 1999-2000.

Still, when’s the last time you read about an auto rental industry executive being listed among the highest-compensated CEOs in the country? Probably never. That’s due in part to stringent federal and state regulations that, coupled with a highly competitive market, have narrowed profit margins.

“The bottom lines are a lot slimmer than the general public thinks,” says Cathy Stephens, executive editor of Auto Rental News, the industry’s sole trade publication. “A big percentage is going to different taxes and surcharges that vary by state. Exactly which companies profit what isn’t really known.”

Among the tight-lipped is Triangle Rent A Car, which was founded in 1979 in a former gas station lot on the corner of Western Boulevard and Method Road by Frank Colonna, a transplanted Yankee who wanted to go into business for himself.

“I lived in upstate New York before I got smart,” says Colonna, still the company’s owner and president. “We had friends who moved here to work at IBM and it seemed like a good idea to me. The economy there was horrible, the weather was worse and the taxes were atrocious.”

Colonna decided to put his stake in the auto rental industry because “I could identify companies that needed to rent cars,” he says. “If you own a car lot, you’re totally dependent on the customer coming into your store. This way, I was able to cultivate clients and prove that what I was offering was good for them.”

Today, Triangle has 20 locations in the two Carolinas and Virginia that maintain a fleet totaling 4,200. While still small potatoes nationally — industry leader Enterprise boasts a fleet of more than 460,000 at 4,018 locations — Triangle nevertheless is the largest independent auto rental company in the southeastern U.S. and showed $38 million in revenue in 2000, according to Auto Rental News.

As for its profit? “Let’s just say we’re doing well,” says Colonna, “although we still have to be cost-efficient in the way we operate. Rates are still a good bargain, and the good side about that is that it gets people in the doors.

“Think about it. You can rent a $20,000 car cheaper than you can rent a $500 tuxedo. And you can rent a car for less money than a pop-up tent.”


Driven by Customer Service  
Progress Energy doesn’t need to rent pop-up tents, even in the midst of a storm. Should such a storm arise, however, its auto rental partner is there and waiting. “If we have a need for four-wheel drive vehicles, they make arrangements to get them to us,” says Thompson of Enterprise. “They’re there when we need them.”

The company, which is headquartered in St. Louis, markets itself through the slogan “We’ll Pick You Up.” And if you’ve ever had to drop off a car at a shop for repairs, chances are Enterprise hasn’t been far behind.

While most auto rental companies make their living at airport locales — $12.8 billion of the industry’s revenue in 2000 came from those rentals — Enterprise has carved its niche doing just the opposite. Ninety-five percent of its business last year was transacted at what the industry terms “local markets,” giving Enterprise a whopping 63 percent of the off-airport revenue market share.

“Enterprise has found something that it really does well and has cornered the market,” says Stephens. “To be that dominant in that segment speaks to the company’s commitment and expertise.”

Geoff Durboraw, the vice president and general manager of Enterprise’s North Carolina operations, says keeping current customers happy is its focus. “Marketing is important, but one of the things we try to focus on is the client and customer base that we already have,” he says. “In these tight economic times especially, making sure our existing customers are satisfied is the best way to weather a storm.”

Durboraw says the industry’s competitiveness has been heightened in recent years by consolidation. We have a smaller number of big players, Durboraw says, noting that Avis was purchased by Cendant, Hertz by Ford, and that Alamo, National and CarTemps now are all rolled into one company called ANC Rental.

“Businesses today are looking at every angle they can to remain competitive. A company’s financial health — and sometimes future — is based on spending every dollar wisely. Everyone’s looking for an edge, including the car rental companies.”

Thus the happy marriage between banks, utilities and municipalities with auto rental companies. “It fits our business plan,” says Progress Energy’s    Thompson, “and it’s been extremely well received by our internal customers. Granted, any time you have change there’s some transition and some people who aren’t happy. But overall, it’s been a good experience. Our people like the fact that they get a late model vehicle that might come with extras as opposed to a basic sedan.”

Colonna says Triangle’s commitment to maintaining a new fleet — cars are rolled in and out every eight months — is essential to reaching new customers. “What we’re seeing today is that a lot of folks are finding it cheaper to keep their older cars and use our new vehicles for their vacations,” he says. “That’s one of the benefits we have in a tough economy. I’m sure in the long run it hurts us, but in the short term it makes us attractive.”


A Diverse Business

To a person, those who watch the industry believes its future growth is tied heavily to improved customer service. “That commitment has never been stronger,” says Stephens, “because they’re learning that one bad experience will cost you a customer. It’s not a business where a customer very often is going to come up and tell you what a wonderful experience they had. It’s usually complaints that you’ll get.”

“The last thing we need is to scare customers away from the rental car business because of negatives, like unfair tax burdens, challenges that inhibit a speedy and convenient transaction, and other regulations that raise costs,” said Andrew Taylor, the president and CEO of Enterprise, in an interview with Auto Rental News. “My advice to other entrepreneurs is make sure you treat your customers well, train your employees and offer them future opportunities, and worry about the bottom line last. If you are taking care of the first two, the bottom line will follow.”

Despite’s Triangle’s continued growth, Colonna says it isn’t his nature to take things for granted. “Every day brings something different,” he says. “No other auto industry business is as diverse. You’re a new car buyer, an insurance adjuster, a used car salesman and a customer service representative.

“If you ever stop running scared, you’re in trouble. They’re always somebody out there trying to do a better job.”


Rental Car FAQs

Q: Do rental car companies provide or offer infant or child safety seats with my car rental?

A: Most do, although you will need to reserve these in advance. They are usually anywhere from $2 to $10 per day on top of your basic rental charges.

Q: What determines how car rental companies set their rates?

A: Most use a rate system called “yield management” which is based on supply (availability) and demand. Rates can change by the day, hour and even minute based on these factors. Internet coupon rates, if available, are usually more stable.

Q: Do rental car rates I’m given cover all of my costs?

A: Not normally. On top of your rate you may pay for airport surcharges applied to some locations, insurance if needed, mileage if not unlimited and, of course, sales tax.

Q: When renting a car, should I accept the insurance offered by an agency?

A: It depends. Find out before you leave what your personal or corporate auto insurance policy will cover since these insurance options are expensive. There’s a good chance you’re already covered for the collision risk. Some credit cards cover collision but it may only be a secondary coverage. Other credit cards provide primary collision coverage if you do not have collision coverage with your personal auto insurance. Collision damage waiver (CDW) is extra insurance priced up to $16 a day, so check before you leave. Here are some important questions to ask your insurance carrier or credit card company before you step up to the rental counter:

1. Does my personal auto insurance policy cover any damage to a rental car?

2. Does my personal homeowners’ policy cover the theft of my personal property from a rental car?

3. Does my personal auto insurance, homeowner’s insurance or employee medical insurance cover injuries from an accident in a rental car?

4. Does my credit card cover me for damages done to a rental car or for third-party liability?

Q: Does the collision damage waiver (CDW) or loss damage waiver (LDW) offered by the rental car agency cover the damages made to another car I hit (third-party damages)?

A: No, not in most cases. Your personal or corporate auto insurance normally covers your liability in damages to another car. You should check with your insurance agent to see if this is the case. If you don’t have your own coverage you should buy the liability coverage offered by the rental agency.

Q: Should I accept the “fuel or gasoline purchase plan” an agency offers?

A: No, unless you think you’ll be in a hurry and can bring the car back near empty. Accepting this option means you’re paying for refilling the car (after return) in your contract and any fuel left in the tank upon return you are paying twice for. You’re usually better off by declining this option and refilling the car before you return it.

Source: BreezeNet’s Rental Car Guide



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