Avis 2008 Annual Report Download - page 16

Fleet
General . We maintain a single fleet of vehicles for Avis and Budget. We rent a wide variety of vehicles, including luxury and specialty
vehicles. Our fleet consists primarily of vehicles from the current and immediately preceding model year. Rentals are generally made on a daily,
weekly or monthly basis. Rental charges are computed on the basis of the length of the rental or, in some cases, on the length of the rental plus a
mileage charge. Rates vary at different locations depending on the type of vehicle rented, the local marketplace and competitive and cost factors.
Rentals are made utilizing rate plans under which the customer is responsible for gasoline used during the rental. We also generally offer our
customers the convenience of leaving a rented vehicle at a location in a city other than the one in which it was rented, although, consistent with
industry practices, a drop-off charge or special intercity rate may be imposed. We facilitate one-way car rentals between corporate-owned and
franchised locations in the United States that enable us to operate as an integrated network of locations.
Vehicle purchasing . We participate in a variety of vehicle purchase programs with major domestic and foreign vehicle manufacturers. General
Motors is the featured supplier for Avis, and Ford is the featured supplier for Budget. During 2008, approximately 32%, 23% and 14% of the
cars acquired for our U.S. car rental fleet were manufactured by General Motors, Ford and Chrysler, respectively, compared to 34%, 27% and
16%, respectively, in 2007. During 2008, we also purchased Mitsubishi, Hyundai, Kia, Nissan, Subaru, Suzuki, Toyota and Volkswagen
vehicles. The decrease in the portion of our fleet sourced from domestic manufacturers in 2008 is reflective of our continuing efforts to diversify
our fleet and to reduce fleet costs.
Vehicle disposition . We generally hold a vehicle in our domestic fleet for a term of four to 14 months. For 2008 and 2007, approximately 58%
and 73%, respectively, of the rental cars purchased for our domestic car fleet were subject to agreements requiring automobile manufacturers to
repurchase them or guarantee our rate of depreciation during a specified period of time. Cars subject to these agreements are sometimes referred
to as “program vehicles” or “program cars” and cars not subject to these agreements are sometimes referred to as “risk cars” or “risk vehicles”.
The programs in which we participate currently require that the program vehicles be maintained in our fleet for a minimum number of months
(typically four to 12 months) and impose return conditions, including those related to mileage and condition. At the time of return to the
manufacturer, we receive the price guaranteed at the time of purchase and are thus protected from fluctuations in the prices of previously-owned
vehicles in the wholesale market at the time of disposition. The future percentages of program and risk vehicles in our fleet will be dependent on
the availability and attractiveness of manufacturers’ repurchase and guaranteed depreciation programs. We dispose of our risk vehicles largely
through automobile auctions, including auctions that enable dealers to purchase vehicles online more quickly than through traditional auctions.
Of the approximately 373,000 cars from our rental car fleet that we sold in 2008 (compared to 407,000 that we sold in 2007), we sold
approximately 64% back to the manufacturers pursuant to repurchase or guaranteed depreciation programs and the rest through third party
channels such as wholesale auctions. In 2009, we expect the percentage of cars sold back to the manufacturers to decrease as we acquire more
risk vehicles.
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• Sales and marketing systems . We have developed a sophisticated system of online data screens which enables our sales force to
analyze key account information of our corporate customers including historical and current rental activity, revenue and booking
sources, top renting locations, rate usage categories and customer satisfaction data. We use this information, which is updated weekly
and captured on a country
-
by
-
country basis, to determine opportunities for revenue growth, profitability and improvement.
•
Interactive adjustments
. We have developed a multi
-
linked customer data system which allows us to easily retrieve pertinent
customer information and make needed adjustments online for superior customer service. This data system links with other accounting
systems to handle any charge card transactions automatically.