Like many other segments of the travel industry, the U.S. car rental market has begun to feel the pinch from the new presidential administration¡¯s policies.

President Trump¡¯s selective entry bans, stricter visa screenings and other measures that have resulted in widespread negative sentiment toward the U.S. are expected to reduce international arrivals by 9.4 percent in 2025, according to a recent report from Phocuswright.

That development is likely to cut into ¡°high-value rental demand¡± for car rentals, particularly in key markets like New York and California, according to the report.

Meanwhile, business travel, which was already in a fragile rebound, has begun noticeably slowing amid the new policy landscape in the United States. That too, is a blow for the car rental industry, which relies heavily on business travelers.

In a recent interview with TravelPulse, Gabe Rizzi, president of ALTOUR, a premium corporate travel solutions provider, said both Trump¡¯s tariffs and the new administration¡¯s aggressive approach to retaining international visitors at U.S. entry points, sometimes holding them for weeks, has triggered a decline in corporate travel.

¡°More aggressive controls on borders and ultimately immigration have created fears that entry will be denied, which is deterring inbound international corporate travelers,¡± Rizzi told TravelPulse.

On top of these headwinds faced by the car rental industry this year, the looming potential of a recession that could weaken domestic demand, would significantly impact airport rentals¡ªone of the industry's main revenue drivers, says the Phocuswright report.?

Traveler signing a rental car agreement. (Photo Credit: Puwasit Inyavileart/Adobe)

That drop however, may be eased somewhat by the sudden renewed interest in road trips among travelers, says Phocuswright. It¡¯s unlikely however, that roadtrippers can totally soften the potential blow.

And there¡¯s still one more bit of bad news for car rental companies.

Trade policy shifts in 2025, including potential tariffs on imported vehicles and parts, may drive up fleet costs for rental companies that are already facing tight consumer budgets, says the Phocuswright report.

As a result, Phocuswright analysts expect the year to bring flat to marginal growth for the industry.

Car industry resilience?

Industry experts offer a more nuanced outlook for the remainder of the year. Gavin Sweeney, chief revenue officer for CarTrawler, a car rental provider with offices in New York City and a network of more than 2,200 rental service providers across 150 countries, says in many places demand remains strong despite the U.S. political climate.

¡°The car rental market, particularly in North America, is nothing if not resilient,¡± begins Sweeney. ¡°While the administration¡¯s policies are indeed affecting inbound travel to the U.S., our car rental booking data points more toward variability between destinations rather than across-the-board declines.¡±

As Sweeney explains it, ¡°there continue to be bright spots in the U.S. car rental landscape, despite the headwinds emanating from Washington.¡±

For instance, the average five-day car rental prices at several top U.S. destinations continued to climb during the second quarter of 2025, according to Car Trawler¡¯s platform data.

The number one destination by volume last quarter was Orlando International Airport, which saw a double-digit increase in average rental price over 2024 levels, as did Los Angeles¡¯ LAX airport and the Las Vegas airport. Those types of increases signal sustained or rising demand in each market, suggests Sweeney.

Other top 10 airport destinations however, such as Seattle, Honolulu and Chicago, saw average prices decline. A development that may be more in line with the Phocuswright research.

There¡¯s another reason Sweeney remains optimistic as well. Like the Phocuswright experts, he too thinks increased demand among consumers for road trips will help soften the blow to car rental business. And that¡¯s not all.

Group of young people going on a road trip. (Photo Credit: Adobe Stock/Alessandro Biascioli)

¡°Couple that with the fact that 24 percent of North American car rentals are for everyday (non-travel) purposes, and the car rental market seems particularly well-positioned to weather the current administration¡¯s policies,¡± said Sweeney.

Presidential policies create some challenges

None of which is to say that the car industry has been completely unscathed by the dramatic shift in the political environment in the United States. Sweeney and others have indeed witnessed at least some impacts.

¡°The new and expanded travel bans, stricter visa enforcement and ongoing tariff uncertainty are creating challenges for inbound US travel, which is having the most immediate impact on the car rental industry right now,¡± said Sweeney.

¡°Looking ahead, tariffs may also have an impact on rental fleet composition and upkeep, which may affect prices in the medium to long term,¡± he added.

Additionally, various policies removing support for electric vehicle (EV) adoption, including charging infrastructure and purchase incentives, will have an effect on the industry¡¯s ability to keep up with consumer demand for EVs, which rose to nearly 6 percent of all US rentals in June, said Sweeney.

Patrick Peterson, auto expert and team lead at Goodcar.com, says the industry has ¡°absolutely¡± experienced some fallout.

¡°Phocuswright flags a 9.4 percent drop in inbound arrivals for 2025 tied directly to the White House¡¯s selective-entry bans and beefed-up visa screenings,¡± says Peterson. ¡°In practice, that means fewer tourists touching down in hubs like LAX, JFK, and SFO hubs, which underwrite much of the premium, airport-desk business."

¡°The policy tightening hasn¡¯t been subtle: tighter rules for certain passport holders, more invasive interviews, and broader negative sentiment driven by shifting rhetoric. All of that is translating into empty airport-lot lanes and under-utilized fleets,¡± added Peterson.

Moreover, Peterson is not as optimistic as Sweeney about domestic travelers and road trippers picking up the slack created at airport rental locations amid a lack of international arrivals.

Airport locations, he says, normally account for 35 percent to 40 percent of all rental revenue, according to Peterson. But airport rental hubs have taken the brunt of the drop in international and business travelers.

¡°Operators in Chicago O¡¯Hare, Miami, and Los Angeles are reporting utilization rates down 5 percent to 7 percent year-over-year, and fleet turn days have stretched out noticeably,¡± says Peterson. ¡°The shake-out is real. Without the high-margin inbound traffic, airport desks can¡¯t make up the difference on purely domestic leisure business.¡±

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