CAR RENTALS:A dramatic drop in car rentals could lead to increased charges for tourists, writes PADDY COMYN
THE TOTAL number of new cars been supplied to the rental market has fallen by 70 per cent compared to the same period in 2008. The car rental market was supplied with 4,272 new vehicles from January to May 2009, compared to 14,235 over the same period in 2008.
As a percentage of the total car market, 10.09 per cent of new cars registered have been supplied to the car rental market, compared to 12.17 per cent in 2008. Nissan supplies the most vehicles to the sector, with 964 units or 22.6 per cent of the market, ahead of VW with 11.5 per cent and Ford with 9.3 per cent. This means that 26 per cent of Nissan’s new car sales are supplied to the car rental market. Further down the list, 56 per cent of Chevrolet’s registrations are supplied to the car rental market.
With such a drop-off in numbers supplied to the rental business, there is a fear that this may lead to increased prices for tourists visiting the State this summer.
A spokesperson for Tourism Ireland confirmed to The Irish Timesthat visitor numbers for 2009 are expected to be down.
“We did a forecast at the end of the first quarter and we did three different scenarios and in the worst case scenario, the numbers visiting the island of Ireland would be down 8 per cent. So we would expect 8 million overseas visitors to visit this year, compared to 8.8 million in 2008.”
“We highlighted the problem to the various ministers last year,” said Alan Nolan, director general of the Society of the Irish Motor Industry (SIMI).
“Dealers put cars on hire drives and the values they bought them at were not matched by the sales because of the destabilisation of used car values following the tax changes and the downturn in the market. With the volatility of the used car market it has been difficult for dealers as when these cars come back they were selling them at a loss. With that situation, who in the current climate was going to take the risk on putting on rental vehicles? The way it worked in the past doesn’t work any more.”
According to Paul Redmond, chief executive of the Car Rental Council of Ireland, dealers who, with support of distributors, have agreed to participate in the car hire programme this year have been met with a blank refusal by banks and finance houses to fund the programme or take the risk associated with the value of the buy back.
“Dealers have cleared their used car stocks and the banks have moved to reduce their credit facilities so having reduced stock to very low levels they are left with no funding to restock or to engage in car hire programmes. A relief allowed to tourists since the early 1990s that meant they didn’t have to pay a proportion of the vehicle registration tax that applies in Ireland is being abandoned by the Government from 2010.”
A spokesperson for car rental company Avis told Motors that a number of factors are likely to lead to an increase in costs to the tourist. “The volatility of the market has lead to a drop in the rental fleet, and with fewer dealers in the position to supply vehicles to the market, a situation will arise where there is a shortage of supply – but there are also other factors, such at the reduction in VRT allowance that can be claimed by the car rental company. With lower rates of VRT on many of the ‘09 fleet, and with the prospect of this VRT allowance being scrapped in 2010, costs are expected to rise for tourists.”
Comparing rates is a difficulty for those attempting to estimate the extent of the impact.
“Any comparison with car rental rates is difficult due to the inclusion or non-inclusion of certain items like CDW, Location charges, waivers and so on,” says Redmond. “Rates change on a regular basis. Yield management throws up different pricing structures almost on a daily basis. I would say that outside of the peak periods of August and Christmas the rates are below average and would move to average during the peak period.”
Many companies are using 2008 – and in some cases 2007 – vehicles on their fleet, but these vehicles aren’t subject to any allowances and as they age are likely to incur more costs to the firms so it is often cheaper to use new models rather than used models as they got a VRT subvention for this.
For the dealer, often there is no benefit in putting a used model onto the rental car fleet. “If there is shortage of cars and there is a much smaller number of hire drive contracts being drawn up, it seems likely that there will be an increase in price for tourists, unless the number of tourists drop by the same degree,” says Nolan.
“There is no simple answer to it – there is difficulty in getting business funded in the motor industry. If we are interested in trying to make Ireland attractive and hire drive is part of the package, there needs to be a look at the model. There is capacity to make the cars affordable and more available but so much of the cost of hiring a car in Ireland is down to the taxation on the car.”
Car hire registrations
Total car hire registrations Jan-May 2009: 4,272
Total car hire registrations Jan-May 2008: 14, 235
Car hire as percentage of total registrations Jan-May 2009: 10.09%
Car hire as percentage of total registrations Jan-May 2008: 12.17%