x Abu Dhabi, UAEWednesday 24 January 2018

Hertz introduces cap on rental car mileage

Car hire companies say they are forced to bring in the limits after a surge in commuters travelling between Abu Dhabi and Dubai.

One of the country's largest car rental companies has done away with unlimited mileage contracts after a surge in customers using its vehicles to commute between Dubai and Abu Dhabi. Hertz implemented a 4,000km monthly mileage cap at the beginning of September. The limit applies to customers who rent by the month. The limit has since been increased to 5,000km, which Hertz claims shields 98 per cent of its customers from additional charges.

Nigel Johnson, the general manager of Hertz UAE, said the company spent several months studying its customers' driving habits before deciding on the cap. "The strategy to try and avoid passing on unwelcome price increases also needs to be done with some analysis of how our customers use the cars," he said. "Somebody was doing 16,000km a month. I'm not sure how they were doing that, but that almost lends itself to saying the vehicle was being used 24 hours a day."

In comparison, Dubai is 13,000km from San Francisco, California. Such heavy use, Mr Johnson said, increases Hertz's maintenance costs. He said the increase in high mileages was because of a greater number of long-distance commuters. "We've seen the mileage go up across the fleet. There is no doubt at all that a lot Dubai residents now travel more frequently to Abu Dhabi for work purposes." Ashraf Abbas used to commute every day between Abu Dhabi and Dubai in a rented Toyota Corolla.

However, the 30-year-old consultant eventually realised his long daily drives meant he could save money by buying a car. He was driving at least 300km a day, putting him far over the 4,000km monthly allowance imposed by the small, independent Dubai company from which he was renting. At Dh2 for every kilometre over the limit, renting was no longer an attractive option. "I bought a new car in January," he said.

Hertz is only the latest hire car company to implement mileage limitations. Zohra Echaoui, a sales executive at Europcar, blamed declining resale prices. "With the crisis, the resale value is low for used cars," she said. "Leasing is cheaper than renting, so if we can keep the mileage low, that is better." Europcar does not limit the number of kilometres for so-called "spot hires", which include tourists and business visitors.

But for leases of a year or more, a cap of 4,000km a month has been in place for the past two to three years. This is to preserve the cars, giving them either a higher resale value or a longer lifespan in the fleet. Noushad Yoosef, an assistant sales manager at Europcar, said the company sells its cars after two years. In 2008, before the financial crisis, Europcar recouped around half of the purchase price on resale. "Now it is less than that," he said.

He remains hopeful that the hire-car business will stay strong. "Now nobody wants to buy their own vehicle. They are worried whether they will be jobless, so nobody wants to make a commitment [to buy]."