If you live in a large city where public transportation is frequently available, you probably don’t need the added expense of owning and maintaining your own automobile. With the price of gas rising, and the cost of monthly parking space at a record high in cities, renting a car only when you need one can make a lot of sense.

If any of this sounds like you, Zipcar may be a service you can use. Forget about conventional car rental, Zipcar allows you to reserve cars with just a minutes notice and pay only by the hour if it suits you. Strategically places rental units are available all over the city and can be reserved, paid for, and unlocked using your smartphone or other device.

Zipcar’s CEO, Scott Griffith comments on the service:

“Zipcar represents the most important innovation in transportation in a generation.”

“… just by growing the business we are having a substantial economic and environmental impact,”

It’s is all part of Griffith’s idea that citizens in larger cities can share vehicles rather than own them. According to him, his business has the potential to replace 15 to 20 vehicles with one shared Zipcar. I like how he’s thinking! On average, American households spend almost 18% of their budgets on vehicles that mostly sit idle.

In the following clip, Griffith speaks to Bloomberg about a recent deal with Ford Motors to supply cars to Zipcar:

The concept of two-seconds-notice and smartphone accessible car rentals seems to really be resonating with some because both U-Haul and other car rental agencies, such as Hertz and Enterprise are noticing a chunk missing from their market.

Griffith’s successful business model has not gone unnoticed from competitors in the market. Hertz car rental is keen to the success of smartphone reservations and is ready to offer hourly rentals on their massive fleet of rental vehicles. Just before the weekend, Hertz announced it will be offering on-demand hourly rental as early as mid 2013. With over 375,000 rental units in the US alone, Hertz could pose a serious threat to Zipcar.

Currently Hertz has the service available in select locations, but expansion is imminent. This doesn’t mean we can count Zipcar out; their membership has grown over 25% just since last year, with 55% growth for both previous years.

Griffith comments on the great value in becoming a Zipcar rental member:

“…there’s insurance, upkeep, and parking. It’s not an efficient use of limited income. Some of this is behavioral, and some of it is just people doing the math.”

A Zipcar membership costs $60 for the year and guarantees you access to vehicles with keys in them all over the city. Most members spent around $400 last year on hourly rentals. Hertz on demand program doesn’t charge for membership and offers hourly rates from as little as $7 up to $30.

It should be interesting to see what changes come about from this innovative new way of sharing and renting vehicles. It sounds like a very reasonable and intelligent solution to me.