Avis is buying Zipcar in a deal valued at $491.2 million, a move that will allow the traditional car rental company to tap into the increasingly popular alternative of car sharing.
Car sharing is a nearly $400 million business in the U.S., according to the companies, and is particularly popular with city dwellers and college students who don't own cars and may only need a vehicle for a few hours to go shopping or visit a friend in the suburbs.
For travelers visiting large metro areas, car sharing offers a less-expensive alternative to renting a car for a full day.
Zipcar, with more than 750,000 members, says it's the largest car-sharing network in the world, and Avis Chairman and CEO Ronald Nelson says the purchase will boost the traditional car rental company's growth.
"By combining with Zipcar, we will significantly increase our growth potential, both in the United States and internationally, and will position our company to better serve a greater variety of consumer and commercial transportation needs," Nelson said in a statement announcing the acquisition.
The purchase also would allow Avis to better match up against Hertz, which has its own car-sharing operation, Hertz on Demand, with offices in the U.S. and Europe.
With services such as Zipcar, customers can pick up a car near where they live or even on a college campus, rather than trekking to a rental-car outlet where they might have to wait in line.
They can make reservations online or through mobile apps. The cost of fuel and insurance is part of the price, at least for the first 180 miles, unlike traditional rental-car companies that charge for gas and insurance coverage separately.
"Car sharing has become very popular in large cities, especially in areas where you have difficulty owning and maintaining a car," says Mitchell Moss, director of New York University's Rudin Center for Transportation Policy and Management.
Although using a car-sharing service for a few hours can be less expensive than renting a car for a day from a traditional outlet, such services may end up costing more if they're used for more than 24 hours.
For instance, a Zipcar vehicle in Philadelphia cost $8.25 an hour, or $69 a day, Wednesday if the customer did not choose a monthly package, according to the company's website. Renting a compact car from Avis at Philadelphia's 30th Street train station cost $37.99 to $39.99 for a day.
Avis will pay $12.25 per share, in cash, for Zipcar, which will be a subsidiary based in Boston. The purchase is expected to be completed in the spring.
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