Zipcar Is Driving Competition in Rental Cars

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Zipcar, the world's largest ride-sharing service, continues to expand, and now covers 16 cities. Zipcar, which rents vehicles by the hour, presents a fresh alternative to renting a car by the day from a traditional chain. It allows travelers to skip the rental counter and save cash. But in recent months, Hertz has amped up its efforts to compete with a new offering.

Zipcar has had a good year as a company, posting its first profit. It added two new major urban markets, and now has more than 8,000 vehicles, including L.A. It also merged with a company in Britain, giving Zipcar members access to about 1,700 vehicles across London. (U.S. Zipcar members can reserve and unlock cars in London using their U.S. membership cards.)

Yesterday, the company added cargo vans, called Zipvans, to its fleet of vehicles in San Francisco and Oakland, experimenting to see if it can win business away from traditional moving vehicle rental companies like U-Haul.

The ride-sharing service is popular for its paperwork-free reservations and flat, no “gotcha” pricing—often as cheap as $8 an hour— including gas, insurance, parking, and roadside assistance. The damage deductible for common accidents is $750.

Here's the deal for travelers: If you rent cars more than a couple times a year for travel to major US urban areas and London, it may be financially smarter to rent cars through Zipcar than a major rental car chain. On the downside, you'll need to take public transport to go downtown from the airport to locations where Zipcars are available for rent, as the company doesn't service major airports. On the upside, you'll skip the delays of waiting at lines at airport rental car counters—plus the hefty taxes and charges for renting at an airport location.

Rental car companies are starting to face up to the challenge posed by Zipcar. In September, America's largest rental car chain, Hertz, replaced its faltering attempt at car-sharing, Connect by Hertz, with a new offering called Hertz on Demand. The new service has no enrollment or membership fees, compared to Zipcar, whose annual fee are typically $60 with $25 application fee. Its hourly rates are approximately the same as Zipcar's. Hertz on Demand also differs from Zipcar by offering one-way rentals, such as from New York City to area airports, and between cities. Hertz on Demand rents by the hour in a dozen US cities, Berlin, London, Madrid, and Paris. By the end of the year, most of the cars will be fitted with NeverLost GPS devices that give turn-by-turn directions plus tips on the hottest attractions and restaurants for major cities.

But Hertz only has 850 active vehicles worldwide right now—about an eighth the size of Zipcar. In Chicago, for instance, it has only one location. As first reported by Mark Vanhoenacker, now through the end of the year, you can use this coupon (which opens as a PDF) to get a $75 Hertz credit for trading in your Zipcar membership. Now that's aggressive competition.

Zipcar continues to roll on, though.

The company's apps for smart phones enable to use your iPhone or Android to beep the horn of the car to find it in a parking lot and then unlock the car with a touch of a button.

For many of the services's 300,000 members—who pay annual fees of $60 on average—Zipcar is a better known car brand than rental car companies like Dollar and Thrifty. Young people especially like the service. Drivers 21 to 24 years old don't pay additional fees to use Zipcar, while they are charged about $20 a day extra to rent from major rental car companies.


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