How New York Strangled Its Mom-and-Pop Rental Car Companies.

Author:Epstein, Jim

WHEN SAM CYGLER started AllCar Rent-A-Car in 1979, New York City was home to over 100 mom-and-pop rental car companies. Cygler, who at the time was running an auto repair shop in Brooklyn far from the subway, noticed that his customers often needed loaner vehicles to get to work. So he bought a couple of cars and put them up for rent. The idea took off, eclipsing the repair business altogether. AllCar Rent-A-Car grew to have 12 locations in the Big Apple with a fleet of about 2,000 vehicles.

Chains like Hertz and Avis, with their national reach and corporate partnerships, have long dominated the car rental industry. But New York's low rate of vehicle ownership provided plenty of market opportunities for local operators. By constantly "nipping at the heels of the majors," says Sharon Faulkner, executive director of the American Car Rental Association (ACRA), the independents helped keep overall rates down.

Then, a decade after Cygler got started in the industry, a series of punitive state laws started wiping out New York's mom-and-pop rental car shops. AllCar was able to stay afloat for quite a while, thanks to a couple of lucrative contracts. But when Cygler's son, Gil, finally sold the company to Enterprise in 2015, it was among the very last of a dying breed. Today, the national chains operate virtually unchallenged in the New York market--and it's no wonder that renting an economy vehicle from Avis on a weekend day in Manhattan costs an astonishing $161.

Trouble for the independents started in 1989, when the state passed a law limiting what rental companies could charge for vehicle damage to a mere $100. Customers could total a rental car and pay less than the cost of a steak dinner for two in Midtown Manhattan. Compounding the risk, Albany set the minimum age to rent at just 18 and prohibited companies from requiring that customers hold a personal car insurance policy or even a credit card. According to Faulkner, some 200 operators in the state went out of business shortly after the law went into effect.

Under its so-called "vicarious liability law," New York also exposed rental car companies to the risk of having to insure for unlimited damages when their customers were found negligent. In 1997, Faulkner was running an independent outfit in upstate New York when she got sued because an unauthorized driver--the 15-year-old son of the woman who had actually rented the vehicle--hit a pedestrian. (Faulkner's insurance company settled for...

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