Car rental companies raise rates, cut workers to keep up

Leck says that in the past few months, several cars he's rented had problems. Two cars from Hertz displayed warning lights, about a transmission problem and improper tire inflation. Other Hertz cars had a flat tire before he left the lot, an empty gas tank and an inoperative blinker. An Alamo car had an inoperative gas gauge, he says.

Milk, who rents primarily from Avis, says he's noticed "lots of road damage on cars," including cracked windshields and large dents and scrapes.

He says cars are dirtier than in the past, and he often receives cars with hazy interior windshields.

Enterprise spokeswoman Laura Bryant says every car the company rents isn't perfect, but the company prides itself on supplying clean and well-maintained cars.

In a November study of airport car renters by J.D. Power and Associates, Enterprise ranked first in customer satisfaction for the fifth-consecutive year. Hertz ranked second and Alamo third.

The study also concluded that customer satisfaction with renting cars at airports "has declined considerably" as "consumers and the travel industry face increasing financial pressures brought on by the sluggish economy."

Besides the weak economy, demand for rental cars has dropped because there are fewer airline passengers to rent cars at airports, and corporations have reduced business travel, says the Standard & Poor's report by analyst Betsy Snyder.

The car rental companies have also been hurt by their fleet-acquisition policies.

In the past, car rental companies bought most vehicles under repurchase programs that allowed them to sell the vehicles back to manufacturers in a relatively short period, Snyder says. But now the car rental companies buy about half their vehicles without such programs and must sell them on the used car market.

"It appears that things may get more bleak before they get better," says Christina Woo, a research analyst at Soleil Securities.

Auto rental consultant Neil Abrams says it's a "somewhat painful" time in the industry, but he's optimistic.

Car rental companies also experienced tough times during the past three decades, he says, but "Every time, the industry has come out smarter and stronger."

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