U.S. Car Rentals Shift Gears After 2023 Peak

After reaching an all-time high of $26.9 billion in 2023, the U.S. car rental market has entered a slower lane, slipping to $26.4 billion in 2024, according to Phocuswright’s U.S. Car Rental Market Brief 2025. It marks the first revenue dip since the industry’s post-pandemic rebound, signaling a transition from high-margin pricing to a more strategic, long-term approach focused on operational efficiency and fleet management.

The slowdown reflects a broader recalibration in the travel landscape. Average rental rates have softened, and revenue per day has dipped, prompting rental companies to tighten controls and reassess growth strategies. The focus now is on sustainable profitability rather than riding post-pandemic demand surges.

International headwinds are also contributing to a more cautious outlook. Inbound travel to the U.S. is expected to decline by 9.4% in 2025, largely due to changes in American travel policies and cooling interest in top destinations such as New York and California. This drop in international visitors is likely to impact airport rental volumes, historically a key revenue stream for car rental providers.

Adding to the complexity is the industry’s ongoing experiment with electric vehicles. While EVs promise long-term efficiency and environmental benefits, rental companies have encountered immediate challenges: higher upfront costs, accelerated depreciation and aggressive pricing pressure from automakers. These factors have led to notable financial write-downs, forcing a reassessment of how—and how quickly—electric fleets should scale.

Despite these hurdles, the industry is not at a standstill. Digital innovation continues to reshape how travelers book and manage their rentals. Direct bookings through supplier websites and mobile apps now account for 44% of all car rental reservations, a number projected to rise to 47% by 2028. To capture this growing segment, rental brands are investing in user-friendly app experiences, digital key functionality and enhanced loyalty features that streamline the customer journey from search to reservation.

This digital shift is a critical part of the long-term play. By reducing dependency on third-party distributors and improving margins on each booking, rental companies are hoping to build more direct relationships with travelers. The goal is to drive repeat business, improve customer satisfaction and gain more control over pricing and inventory in a highly competitive market.

While growth may be slower than in the past two years, the car rental industry appears to be entering a more sustainable, tech-driven phase. Companies are focusing on smarter fleet allocation, strategic pricing and digital engagement to navigate a landscape shaped by changing consumer behaviors, evolving travel trends and economic uncertainty. The road ahead may not be record-breaking, but it’s far from stalled.

Tags: phocuswire

U.S. Car Rentals Shift Gears After 2023 Peak

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