Zipcar reshapes the rental car industry

A Zipcar is parked at a lot in A Zipcar is parked at a lot in New York. (Jan. 2, 2013) Photo Credit: AP

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Talk about sneaking in the back door to crash the financial fun reserved only for rental-car giants such as Avis, Enterprise, National and Hertz.

Told by many transportation "experts" that their Zipcar plan would never roll, Robin Chase and Antje Danielson still believed a fresh approach to vehicle rental was long overdue. It turns out they were right.

In the span of just 12 years, the women turned their little plan and a modest $75,000 investment into a transportation gold mine that recently sold for half a billion dollars.

Zipcar wasn't a brand new idea; car sharing had been popular in Europe and Canada since the 1990s. Zipcar's success came from fresh technology that helped to rewrite the rental rules by giving drivers the options and freedom never offered before.

Need a BMW only for an afternoon business meeting? Got you covered. How about a pickup truck for a two-hour furniture move? No problem. Need a big wagon for a weekend getaway at the beach? Check that.

"I have a fleet of cars available to me that I can have at my beck and call. And I pay only for what I need," said Chase, explaining that the average vehicle still piles up bills, even as it sits parked for 92 percent of its life. "All those hours with a car sitting idle (with Zipcar), I'm not paying for it."

Situated mainly in densely-populated metropolitan areas, Zipcar - and other car-sharing operations like it - eliminates the long lines and frustration at the rental-car office, and gives its members the grab-and-go convenience of renting a vehicle 24 hours a day, paying only for only as long as needed, and usually with little advance reservation notice.

And with no fuel, insurance or maintenance costs, Zipcar has become a great option for drivers with minimal transportation needs, and those with no interest in the price and parking headaches of vehicle ownership.

According to a story in Time magazine, the average U.S. household paid more than $4,000 gassing up their vehicles last year. Add to the turbulent fuel costs the price of insurance, vehicle payments, maintenance and repair bills, and the annual vehicle cost approaches $9,000.

Launched in January of 2000, the Zipcar fleet has grown from four cars in the Boston area, to more than 11,000 vehicles in 49 U.S. cities, as well as Vancouver and Toronto in Canada, and throughout Europe.

Popularity and profits for Zipcar grew so rapidly - membership has increased from 50,000 six years ago to about 760,000 today - Avis bought the company and its entire car-sharing network in January for $500 million.

"We see car sharing as highly complementary to traditional car rental," said Ronald Nelson, Avis chairman and CEO, "with rapid growth potential."

With the idea of putting the cars on its rental lots at airports, Zipcar has the potential to chew into cab and shuttle-bus revenue as members simply land and drive away. Getting to the airport is just as simple.

How's It Work?

Ease and convenience are the greatest advantages of car sharing, behind the obvious financial savings. Unlike a traditional rental-car office, Zipcar clients climb behind the wheel and drive off the parking lot in seconds with no lines, no waits, no paperwork. 

Members reserve their car by computer, phone, text message or cellular app. Simply fill in the preference blanks - what time, how long, pickup point, type of vehicle - arrive at the Zipcar lot (which might be the most difficult part depending where the lot is) and unlock the doors with a wave the membership card over the scanner. Then grab the keys from the glove box, drive around to complete your business, return the car, scan the card again. Billing is automated and we'll see you next time.

"The rental transaction takes 30 seconds, and the car only opens to the renter," Chase said. "So it's self-service, autonomous, and takes only a few seconds."
Zipcar membership starts with a $25 application fee and a screening review that takes about a week. Driver eligibility varies between countries and car-share companies and commonly include a minimum age, a valid driver's license and a solid driving record.

Most car-sharing companies offer a variety of policies and payment plans to fit a client's driving needs and preferences. Some charge on a pay-as-you go plan, some include a monthly and/or annual fee. Others, like a taxi service, start with a base rate and add fees for every mile or kilometer driven past a specified distance.

In addition to urban areas, Zipcar has also become widely popular on college campuses, where driving demands for students are few and vehicle ownership is more of a luxury than a necessity.

According to a Zipcar representative at the University of Notre Dame - one of about 200 college campuses around the world that hosts a car-sharing outpost -- vehicles rent for about $9 an hour and $80 a day (any 24-hour period). The first 180 miles are "free" with a 40-cent-per-mile charge beyond that.

The per-hour and per-mile fees seem high at first glance, but considering there are no residual costs such as refueling or insurance - and that the minimum period is less than the standard rental of 24 hours - the savings can add up quickly for the right kind of driver.

If you commute to work daily, serve as the family chauffer, drive long distances or live in a rural area, car sharing is not a viable transportation option compared to the obvious advantages of vehicle ownership.

But if driving needs are minimal, and the cost of car sharing outweighs the price of ownership, then this latest transportation option might be perfect choice.

"It's like the car you always wanted that your mom said you couldn't have," Chase said. "All the good stuff, and none of the bad."

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