Amex GBT Forecasts Car Rental Price Hikes to Moderate

During the peak years of the pandemic, prices for car rentals increased significantly after providers reduced fleets and supply-chain issues became headline news. Volatility continued for a few years, but price increases in the coming year are expected to moderate as supply chains recover, according to a new report from American Express Global Business Travel.

The cost of buying and operating cars also is easing, according to the travel management company's Ground Monitor 2024-2025 report, released Thursday. Amex GBT in the report projected rate changes for select countries in North America, Europe, Latin America, Africa and Asia-Pacific. 

Car Rental Rate Forecasts

Amex GBT projects average car rental rates to grow 2.5 percent year over year in the United States for the 12-month period ending in March 2025, with possible higher increases for larger cars. This rate is half the 5 percent figure forecast for the company's 2023-2024 report. 

Rental price increases in Canada also are less steep than they were for the TMC's previous report, coming in at 3.4 percent through March 2025 compared with the previous 5 percent forecast. But the growth rate is higher than for the U.S. as the Canadian economy picks up speed, according to the report. Montreal, Toronto and Calgary may see moderately higher growth rates.

Mexico's rate increase is forecast at 3.1 percent following a period when prices were flat or falling, according to the report. "As global auto production recovers, the country's car rental providers may be seizing this opportunity to renew their rental fleets, passing on the cast in higher rates," according to the TMC.

Amex GBT expects the United Kingdom's car supply to fully recover by the end of the year and for demand to increase, leading to a 6 percent rate increase forecast through March 2025, with prices slightly higher in London. With nearly two years of "frequent and severe" rail disruptions, the company's transaction data shows "pronounced growth" in U.K. rentals in 2023 and 2024, suggesting that the rail troubles were "encouraging business travelers to rent a car rather than take a train."

Germany's rental rate increase is forecast at 5 percent. Deutsche Bahn and Lufthansa "faced industrial action through 2024," and similar to the response in the U.K., the company's review of transaction data found a pronounced rise in rental volumes for the first quarter of 2024 compared with the same period in 2019. In addition, planned infrastructure renewal on Germany's key rail corridors could spur rail travel disruptions for the rest of the decade, pushing up the demand for car rentals, according to the report.

For France, the projected price growth rate is just 0.5 percent, as the sector already was moderating at the time of the previous forecast, though rates differ across car types. Rental rates for economy and compact vehicles are projected to increase 3 percent to 4 percent, while premium and standard car prices could decline by as much as 15 percent "as these categories become less popular among environmentally conscious companies and drivers."

Sourcing Tips

With the car rental sector moderating, Amex GBT suggested it may be a good time to revisit car contracts or consider finding a new provider.

The company found that in recent years, car rental companies were reluctant to commit to long-term fixed rate agreements. Amex GBT said those deals are back on the table. 

It also suggested that "you could expect to get a better deal if you renegotiate" a contract negotiated in 2022 to 2023, when prices were increasing sharply.

For those with a fixed year-over-year increase agreement, with prices moderating, there also could be better deals with new negotiations, according to the report.

Amex GBT used Prophet time series modeling to generate its car rental price forecasts for the Ground Monitor. The data came from the company's "vast data lake," augmented by inflation and gross domestic product forecasts from the International Monetary Fund.