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Avis Budget Launches Avis Direct

Zacks Equity Research

Leading global vehicle rental company, Avis Budget Group Inc. (CAR) has launched a used car sales program “Avis Direct”, with a dedicated website for automobile dealers. The recent move is part of the company’s ongoing strategy to enhance operational efficiency.

The new program is exclusively available to licensed automobile dealers. It will allow dealers to purchase from a wide variety of late-model off-rental vehicles across the company’s Avis, Budget, Payless and Zipcar rental locations in the United States. Avis Budget will not charge any enrollment fee or purchase fee from the automobile dealers.

The initiative will provide an alternative solution to dispose off the company’s late model vehicles, thereby enabling it to lower fleet costs. This will help in improving the company’s operating margin in the long run.

We remain impressed with Avis Budget’s sustained focus on productivity and cost containment initiatives, which in our view, will help the company achieve its goal of higher operating margins.

Last month, Costco Wholesale Corp.’s (COST) auto sales arm came up with a program for dealers alone, whereby the latter will be able to list used vehicles for sale at the company’s website. However, it applies that the vehicles listed at its site should have a minimum 12 months and 12,000 miles of warranty remaining. Further, for Costco members, the automobile dealers have agreed to offer a rate lesser than the lowest advertised price.

Carrying a Zacks Rank #3 (Hold), Avis Budget is one of the leading vehicle rental company in North America, Australia and New Zealand. Moreover, a formidable network of more than 10,000 rental locations and 350,000 vehicles facilitate in strengthening its position in the highly competitive vehicle rental industry.

This Parsippany, New Jersey-based company follows a core global strategy of collaborating with leading travel brands to widen its customer reach while generating additional demand for its services. In Mar 2013, Avis Budget successfully completed the acquisition of the world’s leading car sharing network company, Zipcar Inc. This strategic move has enabled the company to extend its offerings from car rental to car sharing, thereby helping it to compete with peers like United Rentals Inc. (URI) and Hertz Global Holdings Inc. (HTZ).

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