Hertz and others are just introducing new rental car AI technology that promises to generate more revenue, but will customers stick around?

The AI technology that has everyone in a tizzy

When you go to return your rental car, the current process is fairly simple:

• You drive the car into the parking lot
• An employee typically does a cursory review of the vehicle
• You hand over the keys

In reality, there is some minor scuffing that occurs by customers. Historically, this minor scuffing is forgiven, especially if the rental company isn’t sure who exactly did it.

However, there is a new AI technology entering the picture this year that promises to catch that minor damage to the car. The program then also generates a bill. Of course, many are now finding out the hard way that the sensitivity of the scan is catching quite a lot.

Hertz alludes to it generating revenue and raves about the tech

It’s not just one company implementing this AI technology, but we’ll pick on Hertz. During Hertz’s Q1 earnings call, they pointed out that they’re generating revenue from this. Their presentation called out they’re using technology to “bolster collections around damages”.

And during the transcript of the call, they briefly touched on the technology:

This quarter, we announced our partnership with UVeye, a global leader in AI powered vehicle inspection systems. This collaboration will enhance the speed and accuracy of our vehicle inspections and damage assessments, while also creating a more transparent digital first experience for our customers.

Transparency? UVeye says it will come from the following:

• Clear proof of vehicle condition before and after your rental
• Vehicle scanned before and after–no surprise charges for damage you didn’t cause
• Confidence that your vehicle is safe, clean, and roady-ready (not sure they mean “road-ready”?)

On top of that, UVeye thinks it will create “stronger customer relationships”. That seems far from what we’re seeing.

Where the erosion of goodwill comes in

If Hertz and UVeye are convinced customers will appreciate the transparency, why are there plenty of examples online accusing it of a scam? I think the argument comes in multiple places:

• Car rental companies are charging for something that used to be forgiven
• Non-transparent charges are added as tack-on fees
• Paying immediately upon receiving the bill gives a discount
• Cars are not taken out of service to repair between rentals
• One party controls all the information

Let’s tackle these one by one.

Car rental companies are charging for something that used to be forgiven

Yes, there are real dollars lost on each rental because cars are damaged. There’s a reason why the common knowledge says not to buy a car that once was a rental. These cars are beat up, and it’s fair that damage should be assigned to the person who caused the damage. Sometimes people get annoyed that they’re now on the hook. This isn’t the argument to make against the industry.

Non-transparent charges are added as tack-on fees

The Drive detailed some of the first public claims, including a breakdown of the charge for a tire repair:

• $250 for the repair
• $125 processing fee
• $65 administrative fee

For some curb rash, a $440 bill seems overly excessive. And it feels almost insulting that $190 of the bill (43%) is just fees. Perhaps it’s a fee to recover the cost of the technology, but nothing about this screams transparency. Or at least, not the transparency that’s promised by either Hertz or UVeye.

Paying immediately upon receiving the bill gives a discount

Just as atrocious, that same article detailed a discount if you pay the fee without challenging it.

• Acceptance within two days gives a $52 discount
• Acceptance within a week gives a $32.50 discount

Oh, and there is up to a 10-day wait to receive a response from the inquiry. So it becomes a bit of a game of chicken, almost by design. If the damage is real, and the fees are legit, shouldn’t the price directly tie to what it costs the rental company to repair it? The only stretch argument you can make is if they’re factoring in admin expenses for debating the repair, and then removing the admin cost if you don’t need to debate. But it feels weak.

Cars are not taken out of service to repair all damage between rentals

The point I think everyone wants to make is that these cars are not taken out of service to repair all damage. If someone gets curb rash and is charged $440, is Hertz going to repair it before renting it out again? Not likely since the intent is to generate revenue. Perhaps the next person is going to incur similar damage to the car, leading to one tire generating $880 in extra revenue. In fact, there is an incentive for them to not make the repairs–or at least not change their current repair methodology.

In this example, Hertz has overcharged customers for damage to their vehicles. That’s quite an overcorrection from what was happening before. And that doesn’t feel fair to customers. It’s arguably an easier pill to swallow if Hertz and others guaranteed all repairs after being charged.

One party controls all the information

How can a process be considered transparent if there is a black box process involved? Here, the black box is the AI technology itself. Customers generally are not given a detailed printout of every nick and scrape on the car when leaving the lot. But when they return, accusations of car damage may appear. It would be nice to see a before-and-after image consistently with each rental. But good luck getting it so you can evaluate its accuracy.

Remember, this is about revenue generation more than anything

I think it’s fair that if someone damages a car, they should be held responsible for the damage incurred. However, this isn’t that ideal state. This is the rental company charging an excessive amount for repairs, but not necessarily making those repairs, and hiding behind an AI tool. Then, when you want to challenge the findings, it will cost you money to do so (due to removal of the discount).

In an era where consumer sentiment about corporate greed is not exactly positive, the car rental industry is heading down a slippery slope where it may be tough to recoup the goodwill lost in exchange for a few extra bucks per rental. Is it worth it? Only time will tell for them.

I’d rather not rent cars anymore if I can avoid it

The erosion of goodwill leads right into my own personal feelings on the matter. I’ve always had some apprehension about renting cars. I don’t like being accused of damage I didn’t cause and so before every rental, I spend quite a bit of time documenting the condition of the car. That slows down every rental by default. And if I need to have a conversation on the damage I didn’t cause? Even more time wasted.

Not to mention that I don’t like the way much of the car rental industry works. We once rented a car and they wanted to upsell me on the size of the car. Sure, that’s a normal practice, but what wasn’t normal was that the agent stood behind the counter and burst out laughing at my decision to not upgrade. The public humiliation he tried to impose upon me was an attempt to encourage me to upgrade. It didn’t work, and I never rented from them again (sorry, Advantage).

On top of that, there’s no guarantee they even honor your reservation. So I just have a base level of stress with renting that doesn’t go away. And this AI technology just makes it even more difficult to say yes to renting.

Does Turo have more appeal with this change? I can’t imagine Turo will adapt to this change as it’s individuals renting out their own cars. So perhaps that’s where I’ll be forced to go for rentals going forward.

What are your thoughts about the AI technology?

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