What guarantees the depreciation rate for program vehicles at Dollar Rent A Car?

According to Dollar Rent A Car's 2025 Franchise Disclosure Document, the depreciation rate for program vehicles is guaranteed by the vehicle manufacturers. These guarantees are in place during established repurchase or auction periods. However, these guarantees are subject to certain conditions, including vehicle condition, mileage, and holding period requirements.

For Dollar Rent A Car's non-program vehicles (vehicles not subject to repurchase agreements), the company estimates the holding period and the residual value of the vehicle at the expected time of disposal. This estimation considers factors such as the vehicle's make, model, options, age, physical condition, mileage, sale location, time of year, and overall market conditions. Depreciation for these vehicles is recorded over the estimated holding period, and these rates are reviewed quarterly based on management's assessment of market conditions and residual values.

The distinction between program and non-program vehicles is important for a Dollar Rent A Car franchisee because it affects how depreciation is calculated and the level of risk associated with vehicle values. Program vehicles offer a more predictable depreciation expense due to the manufacturer's guarantee, while non-program vehicles require more active management and estimation of residual values, introducing a degree of uncertainty and potential financial risk.

Dollar Rent A Car mitigates residual value risk through manufacturer repurchase and guaranteed depreciation programs, the use of diagnostic and repair equipment to maintain vehicle condition, and periodic reviews of vehicle depreciation rates. This multifaceted approach aims to manage the financial impact of vehicle depreciation, which is a significant expense in the car rental industry.