History of Car Rentals

History of Rental Cars - 1916-1945

The history of the U.S. rental car industry is often tied to year 1916, when a Nebraskan native Joe Saunders started a car renting business with a Ford Model T he owned, renting the car to local and visiting businessmen.

He affixed a mileage meter to the left front wheel and rented the car for 10 cents a mile. The world's first rental car customer was a traveling salesman who had a date with a local girl.

By 1925 Saunders had car rental operations in 21 states. By then, The Chrysler Company ran full-page ads boasting that Saunders had purchased $1 million worth of Chrysler automobiles.

Later though, Saunders went bankrupt, during the Great Depression of the early 1930s.

Another major early development began in 1918 when Walter L. Jacobs started renting about dozen Model T Fords in Chicago.

By 1923 Jacobs' business was grossing over $1 million in annual sales.

This attracted the interest of John Hertz, who owned The Yellow Cab and Yellow Truck and Coach Manufacturing Company. Hertz bought the business from Jacobs.

Mr Jacobs stayed at the company as Hertz' top operating and administrative executive.

Later, General Motors bought out Hertz's Yellow Truck Company in 1926, and named the car renting business as the Hertz Driv-Ur-Self System.

Before the World War II, railroad industry facilitated the growth in rental car demand by creating Railway Extensions, Inc.

The company allocated space for rental booths at railroad stations, and provided telegraph service for customers to reserve cars at one station and pick them up at the destination station.

History of Rental Cars - 1946 - 1970s

After the second World War, the growth of the car renting business matched growth rates in in the airline industry.

As air passenger numbers grew, car rental companies started opening rental franchises at airports.

The first airport rental car franchise is often credited to the 1932 Hertz opening of the rent-a-car facility at Chicago's Midway Airport.

Later that same year, to facilitate the increasing demand for travel by air, Hertz introduced the first Fly/Drive car rental program.

Avis has been credited at being the first airport rental car focused agency, starting operations in 1946 with the Avis Airlines Rent a Car System at Detroit's Willow Run Airport with three cars.

The founder, Mr. Warren Avis, was in fact an Army pilot, and focused almost all of the company's operations to airports and used airlines themselves for promoting their rental cars.

Another major rental car agency, National Car Rental System, was formed in St. Louis, Missouri, on August 27, 1947, by 24 independent car rental operators who hoped to broaden their market influence by teaming together. Among the original founders of the company was, again, Joe Saunders.

In the early 1970s, the industry also moved into the used-car business, selling used rental cars directly to the public.

Traditionally, the companies had sold their cars to wholesalers, which auctioned them off to used-car dealers.

This lead to Hertz becoming the largest used car dealer by year 1980 in the United States, selling 70,000 cars at 139 locations annually then.

History of Rental Cars - 1980s - present

Increased competition in the rent-a-car industry in the 1970s and 1980s led to price wars and innovative give-away and bonus programs. This competition lead to many companies struggling financially by 1985.

The 1980s saw the automobile makers purchasing controlling interests in many of the leading car rental companies.

This acquisition interest rose from the fact that rental companies were auto manufacturer's single biggest customers and purchasing these companies locked in the sales.

In fact, it has been estimated that car rental companies accounted for about 10 percent of all domestic auto sales in the early 1990s.

Rental car industry was also an effective marketing tool, as millions of potential car buyers were exposed to the newest models from the manufacturers every year.

Overall, the growth of the car rental industry has continued to this day, partly in harmony with the increase in air travel.

The industry now carries an inventory of about 1.7 million cars in the U.S. market alone (up from about 135,000 cars in 1965), according to Auto Rental News, which aggregates information on public and private car rental companies.

According to 2003 data from rental companies, online bookings have become important for the industry, with 21% of the bookings coming from online agencies and 15% directly from the companies' web sites.

Importance of online bookings is expected to grow further, aided by the ability to compare several rental companies easily online, which should also keep prices in check for the sector in general.

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