Double VAT, high theft make rental cars expensive
But rental car companies said that the other side of their business - renting to tourists - would take off in Poland under reworked tax laws. They cite a double rate of VAT taxation, high insurance costs and a limit of ECU 10,000 for car depreciation as reasons for why renting a car in Poland is often more expensive than in other Central European countries.
"It's more difficult to keep business here," said Joergen Hansen, vice-president of Avis Poland.
One of the main competitors in the market, Hertz, charges DM 349 ($196) to rent an Opel Astra car for a weekend here, far more than it does in Hungary where the weekend price for the same car is $119 (plus optional insurance at $26 a day) for a weekend. That is less than the DM 390 ($219) charged in the Czech Republic.
Car rental agencies said that much of that cost difference stems from the double VAT payments - agencies have to pay the tax once when they buy the car and then another time when they rent it. That increases the price of a single car rental by 22% on average, they said. Hungary and the Czech Republic do not double charge for VAT, said Grzegorz Wenynski, president of Europcar Inter Best in Poland.
"This is a Polish phenomenon," he said.
The situation is unlikely to change soon. Agencies have been lobbying the Finance Ministry for years to get the regulations changed. Avis, Budget, Hertz and Europcar, which have led the lobbying, have not been able to gain any ground with the Finance Ministry, Wenynski said.
"We have been fighting for that with the Finance Ministry for seven years," he said. "I'm counting on membership in the EU" to change things."
Another factor pushing up Polish rental prices is the high risk of car thefts or accidents. Insurance costs are on average 4-6% higher here than in other European countries, Wenynski said. In 1991, its first year of operation, Europcar lost eight cars of its total fleet of 30 vehicles, he said. Now Europcar has a fleet of 400 units and has not lost a car in two years.
The majority of customers renting cars are businesses, which are not as price sensitive as private tourists. Businessmen, both Polish and foreign, make up 99% of all Avis customers, Hansen estimates.
Business people also make up the vast majority of Europcar's customers, though in the summer season Western tourists rent cars too.
A welcomed price decrease would attract more tourists. In Italy, 80% of the customers of Europcar's 18,000 fleet are tourists, Wenynski said. "If the prices are lower, the number of tourists will be higher," he said. The industry estimates that 50,000 cars are rented in Poland per year, and that the number is growing by 20% every year, Wenynski said.
But still, this is very small when compared to Western Europe. There, businesses rent about 60% of the vehicles and private individuals take the balance. It will take five to 10 years before this happens in Poland, said Hansen of Avis.
Despite that, car rental companies said business is still strong. "It always has been (profitable)," said Wenynski of Europcar.
Avis, started in 1991 with a fleet of 16 cars, has now expanded to 1,700 cars and by the end of the year will reach 2000. The firm rents on average about 4,000 cars a week, said Hansen.
The big rental companies said that they are feeling little competition from smaller, cheaper operators. Companies such as Hertz, Avis, Budget and Europcar benefit from their international names and networks, getting foreign customers before they ever land in Poland, Wenynski said.
That international network also enables the larger players to charge their rates in hard currency, typically deutsche marks or dollars, instead of zlotys.
But smaller agencies are finding a thriving market for mid-rate to lower-rate cars, a niche left largely untouched by the big players. Notica Investment, a small car rental company with a fleet of around 20 cars, is booked all the time, said Lena Wojtas, the firm's owner.
"If we had 50 cars, we would rent them," she said.
Notica targets small Polish companies that need cars for a longer term. Working with those businesses gives Notica a steady stream of clients, Wojtas said. "We are happy in that we don't have to search for customers every day," she said.
Notica charges zl 4,500 a month to rent an Opel Astra or zl 3,500 a month for a Honda Civic.
"It's more difficult to keep business here," said Joergen Hansen, vice-president of Avis Poland.
One of the main competitors in the market, Hertz, charges DM 349 ($196) to rent an Opel Astra car for a weekend here, far more than it does in Hungary where the weekend price for the same car is $119 (plus optional insurance at $26 a day) for a weekend. That is less than the DM 390 ($219) charged in the Czech Republic.
Car rental agencies said that much of that cost difference stems from the double VAT payments - agencies have to pay the tax once when they buy the car and then another time when they rent it. That increases the price of a single car rental by 22% on average, they said. Hungary and the Czech Republic do not double charge for VAT, said Grzegorz Wenynski, president of Europcar Inter Best in Poland.
"This is a Polish phenomenon," he said.
The situation is unlikely to change soon. Agencies have been lobbying the Finance Ministry for years to get the regulations changed. Avis, Budget, Hertz and Europcar, which have led the lobbying, have not been able to gain any ground with the Finance Ministry, Wenynski said.
"We have been fighting for that with the Finance Ministry for seven years," he said. "I'm counting on membership in the EU" to change things."
Another factor pushing up Polish rental prices is the high risk of car thefts or accidents. Insurance costs are on average 4-6% higher here than in other European countries, Wenynski said. In 1991, its first year of operation, Europcar lost eight cars of its total fleet of 30 vehicles, he said. Now Europcar has a fleet of 400 units and has not lost a car in two years.
The majority of customers renting cars are businesses, which are not as price sensitive as private tourists. Businessmen, both Polish and foreign, make up 99% of all Avis customers, Hansen estimates.
Business people also make up the vast majority of Europcar's customers, though in the summer season Western tourists rent cars too.
A welcomed price decrease would attract more tourists. In Italy, 80% of the customers of Europcar's 18,000 fleet are tourists, Wenynski said. "If the prices are lower, the number of tourists will be higher," he said. The industry estimates that 50,000 cars are rented in Poland per year, and that the number is growing by 20% every year, Wenynski said.
But still, this is very small when compared to Western Europe. There, businesses rent about 60% of the vehicles and private individuals take the balance. It will take five to 10 years before this happens in Poland, said Hansen of Avis.
Despite that, car rental companies said business is still strong. "It always has been (profitable)," said Wenynski of Europcar.
Avis, started in 1991 with a fleet of 16 cars, has now expanded to 1,700 cars and by the end of the year will reach 2000. The firm rents on average about 4,000 cars a week, said Hansen.
The big rental companies said that they are feeling little competition from smaller, cheaper operators. Companies such as Hertz, Avis, Budget and Europcar benefit from their international names and networks, getting foreign customers before they ever land in Poland, Wenynski said.
That international network also enables the larger players to charge their rates in hard currency, typically deutsche marks or dollars, instead of zlotys.
But smaller agencies are finding a thriving market for mid-rate to lower-rate cars, a niche left largely untouched by the big players. Notica Investment, a small car rental company with a fleet of around 20 cars, is booked all the time, said Lena Wojtas, the firm's owner.
"If we had 50 cars, we would rent them," she said.
Notica targets small Polish companies that need cars for a longer term. Working with those businesses gives Notica a steady stream of clients, Wojtas said. "We are happy in that we don't have to search for customers every day," she said.
Notica charges zl 4,500 a month to rent an Opel Astra or zl 3,500 a month for a Honda Civic.
