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Nobody Makes Money Renting Cars

Modern MBA

276,121 views

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Nobody has ever enjoyed renting a car. You land, drag your luggage onto a shuttle bus, and then stand in a line that hasn’t moved in 30 minutes while a single agent tries to upsell every customer for insurance they already have. When you finally get to the counter, the car you booked weeks ago is mysteriously unavailable. Then, after your trip, the real bill lands and it’s somehow double of what they quoted online with recovery fees, upsells, and damage penalties for dings that you never saw.

It's tempting to blame it all on greed, but the experience has been like this for decades, and the truth is that it's baked into the economics. The reality is that the rental car business has always been a bad business with margins as low as airlines in good years and as thin as grocery stores in bad years. And in their best years, they make more selling cars than they do renting them. The cost-cutting, barebones service, predatory billing, and inconsistency of modern car rentals all stem from the same rotten unit economics.

The industry has never had a golden age, never a period where consumers can look back on with nostalgia. And for all the talk about technology and Silicon Valley disruption, that’s never worked either. Startups like Turo, which drop the crushing debt, extreme overhead, and crippling liabilities of rental fleets in exchange for asset-light, peer-to-peer sharing all net the same tiny margins. In this Modern MBA episode, we break down the horrifying business of car rentals — from Avis and Hertz to Turo — to explain why no one has ever managed to disrupt this industry, and why no amount of technology can save a business model this rotten.

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20 Comments

@ModernMBA Creator 2 months ago (edited) Pinned

If your revenues are at least in the seven figures, try NetSuite Next for free at https://netsuite.ai/modernmba

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@robbieharris8758 2 months ago

Between this and the airplane video, ModernMBA had a really bad vacation this summer

@duerf5826 2 months ago

Nobody can "fix" the car rental industry because you cannot software-engineer away the physical reality of depreciating assets, insurance risk, and a consumer base that will always choose the absolute rock bottom prices.

@LionelWatson-ji1bf 2 months ago (edited)

I love the YouTube pages trying to convince us why buying cars and renting them out on Turo is a good business idea.

@MickyAvStickyHands 2 months ago

This is one of the few business were it actually is beneficial to be loyal. Once you have a status/history that lets just walk straight to your car and drive out, it almost starts to feel like you have a personal garage at every major airport. It's a night and day experience from the casual renter.

@victorzhou231 2 months ago

I feel like most of the comments here are only addressing the first couple minutes on why the rental car experience sucks for consumers, when most of the video was about why they're fundamentally bad businesses. It comes down to the business being an asset heavy model where the assets can absolutely suck. Depreciation will eat away at your balance sheet and you need high leverage to even get the assets in the first place. Any part of that delicate balance breaks and you're going to lose a lot just based on leverage. Frankly very similar to airlines.

@AnimalKing-n2k 2 months ago

Honestly, I have rented cars 20+ times and have never faced much issues.

@torus318 2 months ago

As a former employee of a mid-sized car rental agency with a fleet of 350 vehicles nationwide, I learned from customer feedback that everything depends on the company's policy. I stayed with the company for five years because we didn't impose unfair penalties on customers. Without the need for constant arguments, the work was much less stressful. Our business model was built on customer loyalty - assuming, of course, that the client cooperated as well. Other agencies treated customers as one-off transactions; they would lure them in with low rates only to hit them with fees for minor details or for no reason at all.

@derekmartin8127 2 months ago

"the optimism of the 2020s" 🤣

@stevencanden2911 2 months ago

for all the people confused by the praise for enterprise / national / alamo praise: it's because Enterprise Group is a privately owned company unlike hertz and Avis, so it hasn't been completely enshittified. You don't see them using bogus AI Scanners at airports like Hertz does for example

@loupnuit1 2 months ago

Rented a enterprise van from a b2b focused location and it was a completely different experience. Booked it entirely onli e, paid, used the van, turned back in. Minimum fuss

@Pressondude 2 months ago

Lmao the last 2 cars I rented, weeks later I was mysteriously billed for damages. 2 different companies. For the first one they claimed that I had called roadside and had the car towed back to them and I’m like “no”. Then after being on hold for 30 minutes they were like “hmmm ok we won’t be charging you”. Second time, they said “glass repair and realignment” and the picture was a missing rear view mirror and sensor package and the photo was taken inside a parking garage but I dropped off to a lot outside. I pointed this out after with an hour on hold. After waiting 30 minutes on hold “due to lack of evidence we won’t be charging you”. Just insanity.

@Qwsgwx 2 months ago

Love all the enterprise customers defending the experience!!

@Ayatoilet_Komplaini 2 months ago

You gotta do a separate segment on rental cars in the uber program. Then your mind will be really blown.

@HoangDuong-mi4ow 2 months ago

Have been a customer of Enterprise for years and can’t complain. Always treated nicely and when I had an accident, they dealt with my insurance without much problem.

@foobarFR 2 months ago

Cars are terrible assets. In France, 30% of new cars registrations, and 60% of total corporate cars are leased, because companies don't want cars on their balance sheets.

@bossman4799 2 months ago

Me watching this in my rental car for my vacation 😐. I actually had a good experience picking it up with a very nice attendant and no wait.

@Foof0811 2 months ago

I've rented dozens of cars in my life

- from National for all personal trips
- home depot and Uhaul for moves

I've never once had a single issue - the experience has always been super easy in and out, pay what was quoted

@northencail2099 2 months ago

Enterprise is the only rental company so far that's been okay. The others doing to much or lie 🤔.

@jbrown7403 2 months ago (edited)

Couple of years ago, we rented a BMW 330d wagon from Sixt for a two week European trip. Great car and great trip! Opted for the comprehensive insurance and really glad we did! While in Italy, someone keyed the heck out of the passenger side. Didn’t notice and returned to Munich for the drop off. Got back home to Texas and received an email from Sixt that included lots of pictures of the damage. I responded saying I had the insurance and they said “no problem” 👍