According to Market Research Future, the Canada car rental market is poised to more than double over the next decade, expanding from USD 5.02 billion in 2024 to USD 11.84 billion by 2035 at a compound annual growth rate of 8.1 per cent. This growth reflects a market in transition, driven by recovering tourism, rising urbanisation, and a fundamental shift in how Canadians and visitors access vehicles. The short-term rental segment dominates, valued at USD 2.51 billion in 2024, but long-term rentals are the fastest-growing, reflecting changing patterns of work and mobility that are reshaping the entire industry.

Tourism as the Primary Catalyst

Canada's tourism sector is experiencing a notable resurgence, with the industry expected to generate over USD 100 billion in revenue, a substantial portion of which flows to transportation services. International visitors arriving at Toronto Pearson, Vancouver International, and Montreal-Trudeau often seek the flexibility that rental cars provide, particularly for exploring regions poorly served by public transport. The rental companies that have invested in airport presence and multilingual service have captured a significant share of this demand, and the recovery of international travel has been a powerful catalyst for growth.

Urbanisation and the Shift from Ownership

Urbanisation is a structural driver. Approximately 81 per cent of Canada's population is projected to live in urban areas, and urban dwellers increasingly prefer renting over owning due to limited parking, high insurance costs, and the impracticality of car ownership in dense cities. Short-term rentals cater to this demand, offering flexibility without the burdens of ownership. The rise of car-sharing services complements traditional rentals, creating an ecosystem of flexible mobility options that appeals to younger demographics.

Digital Transformation Reshapes Booking

Online booking has become the dominant channel, valued at USD 3.01 billion in 2024 and projected to reach USD 7 billion by 2035. Consumers now expect to compare prices, select vehicles, and complete bookings through mobile apps in minutes. The integration of digital payment systems and contactless vehicle access has streamlined the rental process, reducing friction at airport counters. Approximately 60 per cent of rental transactions are expected to occur through digital platforms, reflecting a shift toward a tech-savvy consumer base.

The SUV Dominance and Luxury Growth

SUVs command the largest share of the vehicle type segment, reflecting consumer preference for space, comfort, and versatility. Economy vehicles also hold a substantial share, catering to price-sensitive customers. Luxury vehicles are the fastest-growing segment, driven by increasing disposable income and a desire for premium experiences. The rise of social media has amplified demand for luxury vehicles, as consumers share their experiences online, creating aspirational demand that rental companies have been quick to capture.

Electric Vehicles and Sustainability

Sustainability is becoming a defining theme. Consumers are increasingly interested in eco-friendly options, and rental companies have responded by expanding their electric and hybrid fleets. Hertz has partnered with electric vehicle manufacturers to accelerate fleet electrification, and Avis Budget Group has launched initiatives to expand its EV offerings across major Canadian cities. However, range anxiety and charging infrastructure gaps remain barriers, particularly in rural areas, and higher depreciation on electric vehicles affects profitability.

The Business Travel Resurgence

Corporate travel is recovering, with spending projected to reach USD 30 billion, a significant share of which is allocated to transportation. Businesses increasingly recognize the cost-effectiveness of rental solutions for employee travel, meetings, and client entertainment. Rental companies have responded with corporate accounts, loyalty programmes, and streamlined booking processes tailored to business travellers. The business segment, while smaller than leisure, is the fastest-growing application segment.

Challenges on the Path

The market faces challenges. Economic uncertainty affects discretionary travel spending, and the cost of fleet electrification is substantial. Competition from ride-hailing and car-sharing services pressures traditional models. Depreciation on electric vehicles has been higher than expected, affecting profitability. And the ongoing transition to electric vehicles requires investment in charging infrastructure and consumer education.

The Road to 2035

The trajectory toward USD 11.84 billion by 2035 assumes continued tourism recovery, growing demand for flexible mobility, and successful fleet electrification. The integration of AI-driven pricing algorithms, the expansion of electric vehicle rental options, and the development of subscription models all offer growth pathways. The companies that thrive will be those that combine digital convenience, sustainable fleets, and competitive pricing.

For investors and operators, the Canada car rental market offers a compelling opportunity. Its growth rate is robust, its structural drivers are sound, and its transformation is well underway, making it one of North America's most interesting mobility markets to watch.

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