Avis Budget To Acquire ZipCar for $491 Million

ZipCar, the car-sharing service that works almost like a short-term car rental in concept, may end up becoming more like a traditional car-rental company soon.  Why?  Avis Budget has acquired the company for $491 million.

Last year, Avis Budget attempted to buy Dollar Thrifty, but was thwarted for months until Hertz swooped in and bought the competitor.  (As an aside, do you remember when each of these names meant an individual company?  Avis, Hertz, Dollar, Thrifty, Budget…)

ZipCar, founded in 2000, is coming off its best year ever in 2012.  Nonetheless, its scale made it difficult to compete against the giants of the car-rental industry; many of the traditional car-rental companies have been dabbling in hourly rentals that were similar to ZipCar’s service over the past few years.  With the scale of Avis Budget, ZipCar will be able to leverage the parent company’s larger purchasing power when buying its cars.

The ZipCar acquisition should improve Avis Budget’s earnings by $50 to $70 million annually, almost solely on the back of saving money on vehicle-acquisition costs.  ZipCar currently boasts 760,000 members, is active in 20 cities across the U.S.

I can’t comment firsthand about the quality of the cars that ZipCar provides, or on their customer service, but a former colleague was a Manhattan resident who did not own a car, so he and his partner would occasionally borrow a ZipCar for a trip to the suburbs where they’d stock up at Costco in a way that was just not possible in the city, and he found the service useful.  He did mention a few customer-service snafus, such as having trouble getting roadside assistance in a MINI Cooper that had a damaged tire (MINIs have runflat tires).

As someone who doesn’t need car-sharing services (Full Metal Autos is headquartered in suburban Philadelphia), when I do see the distinctive ZipCar badging on a car, I tend to steer clear under the assumption that the driver is someone who most likely has less behind-the-wheel experience than the average motorist.