As rental car fleets shrink, rates they charge drivers are rising

— -- Rental car rates are climbing, despite sluggish demand resulting from fewer people traveling.

The higher rates are hitting leisure travelers who don't get the lower corporate rates that businesses negotiate with the rental companies.

"Leisure (rate) increase is through the roof," says industry consultant Neil Abrams.

The reason: Rental companies have fewer cars.

Prices have come down from July's peak summer rates. But Abrams' weekly price index — an aggregation of eight major rental car companies at 10 airports in the USA — shows a daily midsize car rental reserved a week in advance cost $103 on Aug. 24, or 36% more than the $76 charged a year ago. Compact cars rented for a week cost $322, up 36% from $236 a year ago.

Abrams' index doesn't include corporate rentals tied to annual negotiated contracts. Corporate travel managers still enjoy buying power, and the rates they get have remained relatively stable.

For many travelers, such as Nancy Walters, the prices come as a shock.

Walters, a small-business owner from San Diego, recently shopped for a midsize car and found prices quoted by nationally branded companies too steep. She chose a lesser-known brand, EZ Rent-A-Car.

EZ Rent-A-Car's rate — $187 for two days at Dallas/Fort Worth International, with taxes and fees included — was half of the lowest cost she found on the Internet. Her rental car had 19,000 miles on it and cloth seats. Check-in took longer than she's used to.

"I reminded myself that I was saving more than $200 (during the two days)," she says.

Rental companies have been able to raise rates primarily by buying fewer cars. The rental car industry bought 530,500 cars in the first half of this year compared with nearly 870,000 in the first half of 2008, according to Auto Rental News.

Michael Senackerib, chief marketing officer for Hertz, agrees rates are up from a year ago but says the figures that Abrams quotes are higher than rates really are.