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Free Minds & Free Markets

How New York Strangled Its Mom-and-Pop Rental Car Companies: New at Reason

Why does an economy car rent for an astonishing $161 per day in Manhattan? Because onerous insurance laws cartelized the industry.

mathisworks/iStockmathisworks/iStockWhen 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, writes Jim Epstein.

Photo Credit: mathisworks/iStock

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