An upbeat e-mail arrived this week from my friends at Zipcar, and it made me so sad. “Add a damage fee waiver for smooth sailing, Lisa,” it said. “Be prepared and enjoy the ride.” Zipcar, launched in 2000 to transform a maddening industry, was selling me collision insurance I probably don’t need. It was (at least to me) a sign that the Cambridge, Massachusetts–based company is already adopting some of the unlovable practices of its prospective new parent, Avis Budget Group. What began—and was beloved—as a communitarian, ecominded, high-tech experiment in urban transit threatens to become yet another exercise in buyer beware.
The bad old car-rental companies don’t really make money by renting cars. Like the airlines, the industry is both capital intensive and fiercely competitive, vulnerable to suicidal price wars. So Avis, Hertz, and the rest squeeze out profits via the dark art of up-selling. You agree to a daily fee via the reservations system, but once you’ve bellied up to the crowded, dingy counter, dazed from waiting and eager to get on the road, you are faced with a brutal truth. Anything that might make your travel more comfortable or convenient costs more. That goes not just for satellite radio and GPS, but for basics like toll transponders and the ability to have one of your passengers share the driving. Fail to return the car with the gas level where it was when you started and you pay the difference plus a penalty. (Or, out of an overabundance of prudence, you return the car with eight-tenths of a tank when you only needed six-tenths and subsidize the rental company’s fuel bill.) Then there are the insurance packages. “Relax. We’ve got you covered!” says the Avis website, eliciting images of roadside disasters before listing the five different kinds of protection on offer, most of which are replicated by renters’ auto- or health-insurance or credit-card policies. “There’s so much profit” in those insurance packages, says Chintan Talati, who runs communications at the car-sales website TrueCar.com. Just how much is impossible to say, but “it would be fair to say they are making up a growing portion” of the companies’ bottom lines, adds Nima Samadi, a senior analyst with research firm IbisWorld in Santa Monica.
Zipcar liberated situational drivers from the dread of the rental-car counter by rolling most charges—including insurance and gas—into one, incrementally costlier price. And it was worth it! With Zipcar, you could reserve your car online for the precise number of hours you needed it, retrieve it from a garage near you, and drive away without ever sensing that you’d been ripped off, somehow. I did sometimes wonder, wheeling down the highway in a new-model Jetta or Prius, how the hell the folks at Zipcar ever made a dime. It turns out that they didn’t—the company lost $7 million in 2011 and in the past year had its stock downgraded by six different analysts. For all Zipcar’s idealism and promises of enlightened conveyance, letting members share a cool car with like-minded neighbors is insufficiently lucrative to please investors. A Zipcar spokeswoman says that the insurance I was offered is not a new product, but something has shifted. It seems clear that the drive to the future is not going to be smooth sailing after all.