UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
   |X|               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                     THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
                     For the fiscal year ended December 31, 1998

                                       OR

   |_|               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                     THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
                     For the transition period from ____________ to

Commission file number: 1-13315

                              AVIS RENT A CAR, INC.
             (Exact Name Of Registrant As Specified In Its Charter)

             DELAWARE                                    11-3347585
     (State of Incorporation)               (I.R.S. Employer Identification No.)

       900 Old Country Road
       Garden City, New York                               11530
(Address of Principal Executive Offices)                 (Zip Code)

       Registrant's telephone number, including area code: (516) 222-3000

           Securities registered pursuant to Section 12(b) of the Act:

          Title of Each Class          Name of Each Exchange on Which Registered
          -------------------          -----------------------------------------
          Common Stock, par                    New York Stock Exchange
          value $.01 per share               

           Securities registered pursuant to Section 12(g) of the Act:

                                      None
                                (Title of Class)

      Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

      As of March 22, 1999, the registrant had 31,327,725 shares of Common Stock
outstanding and, at such date, the aggregate market value of the shares of
Common Stock held by non-affiliates of the registrant was approximately
$816,478,833

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders for the year ended December 31,
1998 are incorporated by reference in Items 5-8 of Part II and certain portions
of the Registrant's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held June 2, 1999 are incorporated by reference in Items
10-13 of Part III of this Annual Report on Form 10-K.
<PAGE>

                                      INDEX
                                  TO FORM 10-K

                                                                     Page Number
                                                                     -----------

                                     Part I
Item 1.    Business........................................................  2
Item 2.    Properties...................................................... 12
Item 3.    Legal Matters................................................... 13
Item 4.    Submission of Matters to a Vote of Security Holders............. 13
                                     Part II
Item 5.    Market for the Registrant's Common Equity and Related 
             Stockholder Matters........................................... 13
Item 6.    Selected Financial Data......................................... 13
Item 7     Management's Discussion and Analysis of Financial 
             Condition and Results Of Operations........................... 14
Item 7a.   Quantitative and Qualitative Disclosure about 
             Market Risk................................................... 14
Item 8.    Financial Statements and Supplementary Data..................... 14
Item 9.    Changes in and Disagreements With Accountants on Accounting and
             Financial Disclosure.......................................... 14
                                    Part III
Item 10.   Directors and Executive Officers of the Registrant.............. 14
Item 11.   Executive Compensation.......................................... 14
Item 12.   Security Ownership of Certain Beneficial Owners and 
             Management.................................................... 14
Item 13.   Certain Relationships and Related Transactions.................. 14
                                     Part IV
Item 14.   Exhibits, Financial Statement Schedules, and Reports 
             on Form 8-K................................................... 15


                                       1
<PAGE>

                                     PART I

Item 1.

BUSINESS

      Unless the context otherwise requires, each reference in this Annual
Report to (i) the "Company" refers to Avis Rent A Car, Inc. and its operating
subsidiaries and predecessors, (ii) "ARACS" refers to Avis Rent A Car System,
Inc., a wholly-owned subsidiary of the Company, (iii) "Cendant" refers to
Cendant Corporation and its subsidiaries, and (iv) the "Franchisor" refers to
Cendant Car Rental, Inc., a wholly-owned subsidiary of Cendant. Statistical
information contained herein with respect to the domestic car rental industry
has been derived from publicly available sources, including trade publications,
which the Company has not independently verified but believes to be reliable.

      Cendant owns all of the outstanding equity of the Franchisor which, in
turn, owns the Avis worldwide vehicle rental system (the "Avis System"). In
1997, the Franchisor entered into a 50 year franchise agreement with the Company
granting the Company the right to operate as a franchisee under the Avis System
(the "Master License Agreement"). Cendant, who is the owner of the data
processing and information system (the "Wizard System") used in connection with
the Company's vehicle rental business and which forms a part of the Avis System,
also entered into a 50 year computer services agreement with the Company with
respect to the use of the Wizard System.

      The Company is a holding company which, through its operating subsidiary,
ARACS, operates the second largest general use car rental business in the world,
based on total revenue and volume of rental transactions. The Company rents
vehicles to business and leisure travelers through approximately 660 rental
locations in both airport and non-airport (downtown and suburban) markets in the
United States, Canada, Puerto Rico, the U.S. Virgin Islands, Argentina,
Australia and New Zealand. On May 1, 1998, ARACS acquired the assets of the car
rental business of Hayes Leasing Company Inc., ("Hayes"), the then largest
(exclusive of the Company) Avis System franchisee in North America. During 1998,
including Hayes from May 1, 1998, the Company completed over 15 million rental
transactions with a fleet that averaged approximately 206,000 vehicles and
generated total revenue of approximately $2.3 billion, of which approximately
90% was derived from its operations in the United States. On March 19, 1999,
ARACS purchased Rent-A-Car Company, Incorporated ("Car Co."), the third largest
(exclusive of the Company) Avis System franchisee in North America. See Note 21
to the Audited Consolidated Financial Statements.

      The Avis brand name is owned by the Franchisor and is licensed for use by
its franchisees, including the Company, which is the largest Avis System
franchisee in the world. As an Avis System franchisee, the Company has entered
into certain arrangements with the Franchisor and its affiliates that require
the Company to make payments to the Franchisor and its affiliates, including
monthly payments under the Master License Agreement consisting of a monthly base
royalty of 3.0% of the Company's gross revenue and a supplemental royalty of
1.0% of gross revenue payable quarterly in arrears (which will increase 0.1% per
year commencing July 30, 1999 and in each of the following four years thereafter
to a maximum of 1.5%). Until July 30, 2002, the supplemental royalty or a
portion thereof may be deferred if the Company does not attain certain financial
targets. The Avis System is comprised of approximately 4,200 rental locations,
including locations at the largest airports and cities in the United States and
approximately 160 other countries and territories, and a fleet of approximately
404,000 vehicles during the peak season, all of which are operated by
franchisees. During 1998, the Company's 510 U.S. rental locations (including the
former Hayes locations), produced approximately 90% of the Avis System's revenue
in the United States, with the balance derived from 370 locations operated by 67
other Avis System franchisees, of which five accounted for approximately 4% of
the Avis System's U.S. revenue. The Company is the sole franchisee of the Avis
System in the international markets in which it operates. The Avis System in
Europe, Africa, part of Asia and the Middle East is operated under franchise by
Avis Europe plc, which is not affiliated with the Company. Management believes
that the strong recognition of the Avis brand name, the breadth of the Avis
System and the sophistication of the Wizard System enable the Company and other
Avis System franchisees to provide consistent quality, pricing and service to
business and leisure customers worldwide.


                                       2
<PAGE>

      The Company has historically targeted its marketing efforts toward
business travelers, who accounted for approximately 64% of the Company's
domestic revenue in 1998. The Company believes that business travelers, many of
whom rent the Company's vehicles pursuant to agreements between the Company and
their employers, have represented an important factor in the growth and
stability of its business. While the Company continues to focus on business
travelers, it intends to leverage its strong airport presence by expanding its
marketing efforts toward the leisure travel market in order to increase its
fleet utilization during non-peak business periods and extend the average length
of its rentals. During 1998, leisure travelers accounted for approximately 36%
of the Company's domestic revenue.

      The Company utilizes the Wizard System, which it believes is one of the
most sophisticated information management systems in the car rental industry.
Key functions of the Wizard System include: (i) global reservations processing,
(ii) rental agreement generation and administration and (iii) fleet accounting
and control. The Company has also developed software applications that utilize
the data gathered by the Wizard System and third party reservation systems to
achieve centralized control of its major business operations. These applications
include: (i) a yield management system that is designed to increase profit by
controlling vehicle availability by length of rental and providing decision
support for rate changes, (ii) a competitive rate information system that
monitors industry rate changes by market on a daily basis at different vehicle
rental locations and (iii) a business mix model that analyzes potential profit
contribution data by segment based upon business mix and fleet optimization
recommendations.

      On October 17, 1996 the Franchisor (formerly Avis, Inc.) and its
subsidiaries were purchased by Cendant (formerly HFS Incorporated) for
approximately $806.5 million. The purchase price was comprised of approximately
$367.2 million in cash, $100.9 million in indebtedness and $338.4 million of
common stock (the "Acquisition"). The Company is the successor to the car rental
operations previously owned by the Franchisor and its subsidiaries (collectively
referred to as the "Predecessor Companies"). On September 24, 1997, the Company
completed an initial public offering (the "IPO") of its Common Stock at a price
of $17 per share and received proceeds of approximately $359 million. On March
23, 1998, the Company sold 5,000,000 shares of its common stock through a public
offering (the "Offering") and received proceeds of approximately $162 million.
In addition, in the same offering, Cendant reduced its ownership in the Company
by selling 1,000,000 shares of the Company's common stock and retained the
proceeds. Prior to the Offering, Cendant beneficially owned 8,500,000 shares of
Common Stock. Following the Offering, Cendant beneficially owned 7,500,000
shares of Common Stock representing approximately 20.9% of the then outstanding
shares of the Company. Pursuant to an approved stock repurchase program approved
by the Board of Directors on September 1, 1998 and amended on September 23, 1998
authorizing the repurchase of up to 5,000,000 shares of the Company's Common
Stock, the Company has purchased 4,685,800 shares through March 10, 1999,
including 1,300,000 shares repurchased from Cendant on January 15, 1999. As a
result of these re-purchases, Cendant's beneficial ownership of Common Stock was
reduced to 6,200,000 shares or approximately 20%. Cendant is one of the world's
foremost providers of consumer and business services. Cendant operates in four
principal divisions: Travel Services, Real Estate Services, Alliance Marketing
and Other Consumer and Business Services. In Travel Services, Cendant is the
leading franchisor of hotels and rental car agencies worldwide; the largest
provider of vacation exchange services; a leading fleet management company; the
UK's largest private car park operator; and a leading motorist assistance group
in the UK. In Real Estate Services, Cendant is the world's largest franchisor of
residential real estate brokerage offices, a major provider of mortgage services
to consumers and a global leader in corporate employee relocation. In Alliance
Marketing, Cendant provides access to insurance, travel, shopping, auto, and
other services, primarily through direct marketing to customers of its affinity
partners. Cendant's Other Consumer and Business Services include the tax
preparation services franchise, information technology services, car park and
vehicle emergency support and rescue services in the United Kingdom, Cendant
information services, financial products and other consumer related services.

      The Company is the successor to the car rental operations previously owned
by the Predecessor Companies. Prior to the Acquisition, the principal
shareholder of the Franchisor and the Predecessor Companies was an Employee
Stock Ownership Plan and the minority shareholder was General Motors ("GM"). The
Company was incorporated in Delaware on October 17, 1996 in connection with the
Acquisition. ARACS was incorporated in Delaware on September 18, 1956. The
principal executive offices of the Company are located at 900 Old Country Road,
Garden City, New York 11530, and its telephone number at that location is (516)
222-3000.


                                       3
<PAGE>

The First Gray Line Merger

      On August 20, 1997, ARACS purchased all of the outstanding capital stock
of The First Gray Line Corporation ("First Gray Line"), the then largest
(exclusive of the Company) Avis System franchisee in North America with 70
locations in Southern California, Nevada and Arizona, including Los Angeles
International Airport, McCarran International Airport (Las Vegas) and San Diego
International Airport. On July 31, 1998, First Gray Line was merged into ARACS.

The Hayes Transaction

      On May 1, 1998, ARACS acquired the assets of the car rental business of
Hayes, including the Avis System franchises for the cities of Austin, Fort Worth
and San Antonio, and the counties of Dallas and Tarrant, Texas, for
approximately $86 million in cash, plus the refinancing of fleet related
indebtedness which totaled approximately $136 million for a total purchase price
of approximately $222 million (the "Hayes Transaction"). At that time, Hayes was
the largest (exclusive of the Company) Avis System franchisee in North America,
serving six locations in the state of Texas, including the Dallas/Fort Worth
Airport ("DFW"), San Antonio Airport and Austin Municipal Airport.

Other Asset Acquisitions

      During 1998, ARACS purchased the assets of various former licensees for
approximately $15 million as outlined in the following table:

<TABLE>
<CAPTION>
           Date              Former Licensee            Location
           ----              ---------------            --------
         <S>                <C>                         <C>
         04/03/98           Amelco Leasing Ltd.         Halifax, Nova Scotia and the
                                                        Provinces of New Brunswick and
                                                        Prince Edward Island
         05/12/98           Hazqu Car Inc. and          Hamilton, Ontario
                            The Champ Car, Inc.
         08/31/98           Rent-All-Mart, Inc.         Lima, Ohio
         09/14/98           Economy Leasing Corp.       White Plains, New York
         10/30/98           One Bar, Inc.               Butte, Great Falls, Helena, and
                                                        Glacier Park, Montana
         11/18/98           Northern Rent A Car, Inc.   Burlington, South Burlington, and
                                                        Montpelier, Vermont
</TABLE>

The Rent-A-Car Company, Incorporated Acquisition

      On March 19, 1999, ARACS purchased all of the outstanding capital stock of
Car Co. for approximately $10.2 million. Car Co. was the third largest
(exclusive of the Company) Avis System franchisee in North America with
locations in Delaware, Maryland and Virginia, including Richmond International
Airport.

Strategy

      The Company's objective is to improve its profitability through a strategy
that consists of the following key elements:

      Capitalizing on Changing Industry Dynamics. The domestic car rental
industry is emerging from a period during which rental rates did not keep pace
with rising fleet and operating costs. Management believes that the recent
restructuring of ownership of the Company's major competitors is leading to an
increased focus on profitability and shareholder return, rather than upon
transaction volume and market share, and to more rational pricing behavior.
During 1998, the domestic rental car industry has benefited from what appears to
be the first sustainable and significant price increases the industry has seen
in many years. Management intends to use the proprietary software applications
of the Avis System, including its 


                                       4
<PAGE>

sophisticated yield management, rate information and business mix modeling
systems, to capitalize upon the improving pricing and profit outlook in the
industry.

      Improving Business Mix and Fleet Utilization. Historically, the Company
has capitalized on its strong network of airport rental locations by focusing
its sales and marketing resources principally toward business travelers. While
this has enabled the Company to leverage its overhead costs by capturing a large
share of transaction volume at relatively few locations, fleet utilization
historically has been characterized by peak business travel demand during the
middle of the week and reduced demand during and immediately before and after
the weekend. Management believes that the Company's substantial presence at the
nation's leading airports provides it with the opportunity, without significant
incremental cost, to capitalize on increased air travel by leisure travelers,
who tend to initiate air travel during or close to the weekend. Accordingly,
while continuing to concentrate on its core presence in the business travel
market, the Company has begun to increase its marketing efforts toward the
leisure market in order to improve fleet utilization and extend the average
length of rental. The Company's acquisition of First Gray Line, the Hayes
Transaction and other franchisees have better positioned the Company to improve
its fleet management, primarily in the United States. In addition, the Company
believes that it can further enhance the utilization of its fleet during
non-peak periods by selectively expanding its presence in non-airport markets
through both internal growth and, if appropriate opportunities arise,
acquisitions of other car rental operations including, where feasible, other
Avis System franchises.

      Increasing Brand Loyalty Through Target Marketing. Management believes
that the domestic car rental industry is becoming increasingly focused on such
factors as customer service and loyalty. The customer base of the major domestic
car rental companies, including the Company, has become increasingly diverse.
Management plans to utilize the Avis System's proprietary software applications
to analyze the Company's extensive customer database to identify distinguishing
characteristics and preferences of those customers who have been historically
associated with its most profitable rental transactions and to focus its sales
and marketing efforts and service features to attract additional customers with
similar characteristics and preferences. Management believes that this analysis
will enhance the quality of the car rental experience of such customers and
increase their loyalty to the Avis brand.

      Capitalizing on Cross-Marketing and Other Synergistic Opportunities with
Cendant. The Company has initiated and is expanding cross-marketing
relationships with Cendant's corporate relocation and resort timeshare exchange
businesses, its lodging franchise systems, which include the Days Inn(R), Howard
Johnson(R) and Ramada(R) brands, its real estate brokerage franchise systems,
including the CENTURY 21(R) and Coldwell Banker(R) brands and its
membership-based consumer services. The Company also has begun to reduce its
costs of purchasing media and other non-fleet goods and services through
arrangements with Cendant.

Rental Operations

      General. The Company's fleet includes various categories of automobiles,
most of which are of the current and immediately preceding model years. Rentals
are generally made on a daily, weekend, weekly or monthly basis. Rental charges
in the United States usually are computed on the basis of the duration of the
rental and may include a mileage charge and vary based upon vehicle category,
the day on which the rental begins and local competitive and cost factors.
Additional charges are made for optional refueling services, loss damage waivers
(a waiver of the Company's right to make a renter pay for damage to the
vehicle), concession fee recovery, personal accident insurance, personal effects
protection, optional products such as cellular phones, child seats and ski racks
and, in some instances, additional liability insurance. Most rentals are made
utilizing rate plans under which the customer is responsible for gasoline used
during the rental. The Company also generally offers its customers the
convenience of leaving a rented vehicle at an Avis location in a city other than
the one in which it was rented under Avis's "Rent it Here-Leave it There"
program, although, consistent with industry practices, a drop-off charge or
special intercity rate may be imposed.

      United States Operations. At December 31, 1998, the Company operated 510
vehicle rental facilities at airport, near-airport and downtown locations
throughout the United States. During 1998, approximately 85% of the Company's
United States revenue was generated at 197 airports in the United States with
the balance generated at the Company's 313 non-airport locations. The Company's
emphasis on airport traffic has resulted in a particularly strong rental revenue
market position at the major U.S. airports.


                                       5
<PAGE>

      At most airports, the Company is one of five to seven vehicle rental
concessionaires. In general, concession fees for airport locations are based on
a percentage of total concessionable revenues (as determined by each airport
location), subject to a minimum guaranteed amount. Concessions are typically
awarded by airport authorities every three to five years based upon competitive
bids. As a result of airport authority requirements as to the size of the
minimum guaranteed fee, smaller vehicle rental companies generally are not
located at airports. The Company's concession arrangements with the various
airport authorities generally include minimum requirements for vehicle age,
operating hours and employee conduct, and provide for relocation in the event of
future construction and abatement of fees in the event of extended low passenger
volume.

      International Operations. The Company operates in Canada, Puerto Rico, the
U.S. Virgin Islands, Argentina, Australia and New Zealand. Its operations in
Canada and Australia were the principal contributors of revenue, accounting for
80% of international revenue in 1998. Revenue from international operations in
1998 was approximately $236 million.

      The Company holds a solid market position in each of the countries in
which it operates. In terms of revenue, the operations in Australia and New
Zealand are acknowledged as the largest in their respective markets.

Avis System and Wizard System Services

      As a participant in the Avis System, the Company has the benefits of a
variety of services, including (i) comprehensive safety initiatives, including
the "Avis Cares" Safe Driving Program, which offers vehicle safety information,
directional assistance such as satellite guidance, regional maps, weather
reports and specialized equipment for travelers with disabilities; (ii)
standardized system-identity for rental location presentation and uniforms;
(iii) training program and business policies, quality of service standards and
data designed to monitor service commitment levels; (iv)
marketing/advertising/public relations support for national consumer promotions
including Frequent Flyer/Frequent Stay programs and the Avis on-line internet
website; and (v) brand awareness of the Avis System through the familiar "We try
harder" service announcements.

      Under a long-term computer services agreement, the Company, like other
Avis System franchisees, is provided with access to the Wizard System, a
reservations, data processing and information management system for the vehicle
rental business. The Wizard System is linked to all major travel networks on six
continents through telephone lines and satellite communications. Direct access
with other computerized reservations systems allows real-time processing for
travel agents and corporate travel departments. Among the principal features of
the Wizard System are:

      o     an advanced graphical interface reservation system;

      o     "Roving Rapid Return," which permits customers who are returning
            vehicles to obtain completed charge records from radio-connected
            "Roving Rapid Return" agents who complete and deliver the charge
            record at the vehicle as it is being returned;

      o     "Preferred Service," an expedited rental service that provides
            customers with a Preferred Service rental record printed in their
            pre-assigned vehicle and a fast convenient check-out;


                                       6
<PAGE>

      o     "Wizard on Wheels," which enables the Avis System locations to
            assign vehicles and complete rental agreements while customers are
            being transported to the vehicle;

      o     "Flight Arrival Notification," a flight arrival notification system
            that alerts the Company's rental location when flights have arrived
            so that vehicles can be assigned and paperwork prepared
            automatically;

      o     "Avis Link," which automatically identifies the fact that a user of
            a major credit card is entitled to special rental rates and
            conditions, and therefore sharply reduces the number of instances in
            which the Company inadvertently fails to give renters the benefits
            of negotiated rate arrangements to which they are entitled;

      o     interactive interfaces through third-party computerized reservation
            systems described under "Marketing".

      o     sophisticated automated ready-line programs that, among other
            things, enable rental agents to ensure that a customer who rents a
            particular type of vehicle will receive the available vehicle of
            that type which has the lowest mileage.

      In 1998, the Wizard System enabled the Company to process approximately
30.8 million incoming customer calls, during which customers inquired about
locations, rates and availability and placed or modified reservations. In
addition, millions of inquiries and reservations come to the Company through
travel agents and travel industry partners, such as airlines. Regardless of
where in the world a customer may be located, the Wizard System is designed to
ensure that availability of vehicles, rates and personal profile information is
accurately delivered at the proper time to the customer's rental destination.

Management Information Systems

      The Company also uses data supplied from the Wizard System and third-party
reservation systems in certain management information systems proprietary to the
Avis System to maintain centralized control of major business processes such as
fleet acquisition and logistics, sales to corporate accounts and determination
of rental rates. The principal components of the systems employed by the Company
include:

      o     Fleet Planning Model. The Company has created a comprehensive
            decision tool to develop fleet plans and schedules for the
            acquisition and disposition of its fleet, along with fleet age, mix,
            mileage and cost reports based upon such plans and schedules. This
            tool allows management to monitor and change fleet volume and
            composition on a daily basis and to develop the lowest cost fleet
            alternative based on business levels and available Repurchase
            Programs.

      o     Yield Management. The Company has also created a yield management
            system which is designed to optimize profit by providing greater
            control of vehicle availability and rate availability changes at its
            rental locations. The system monitors and forecasts supply and
            demand to insure that the Company is able to capture the combination
            of rentals that will produce the highest return over time at each
            location. Integrated into this yield management system is a fleet
            distribution module that takes into consideration the costs as well
            as the potential benefits associated with distributing vehicles to
            various rental locations within a geographic area to accommodate
            rental demand at these locations. The fleet distribution module
            makes specific recommendations for movement of vehicles between the
            locations.

      o     Pricing Decision Support System. Pricing in the vehicle rental
            industry is highly competitive and complex. To ensure its ability to
            respond to rental rate changes in the marketplace, the Company has
            developed sophisticated systems to gather and report competitive
            industry rental rate changes each day. The system, using data from
            third-party reservation systems as its source of information,
            automatically scans rate movements and reports significant changes
            to a staff of pricing analysts for evaluation. The system greatly
            enhances the Company's ability to gather and respond to rate changes
            in its markets.


                                       7
<PAGE>

      o     Business Mix Model. The Company has also developed a strategic
            planning model to evaluate the discrete segments of its business
            relative to each other. The model considers revenues and costs to
            determine the potential margin contribution of each discrete
            segment. Using data from the Company's financial systems, the Wizard
            System and the fleet and revenue management systems, along with
            management objectives and targets, the model develops business mix
            and fleet optimization recommendations.

      o     Profitability Model. The Company has developed a sophisticated model
            that blends a corporate customer's rentals into a pattern that
            determines fleet costs by developing a profile of such corporate
            customer's utilization. The model also combines local operations
            costs with division overhead expenses with a resulting benchmark
            profitability which is used to determine the financial merit of
            individual corporate accounts.

      o     Sales and Marketing System. The Company has also developed a
            sophisticated system of on-line data screens which enables its sales
            force to analyze key account information of its corporate customers
            including historical and current rental activity, revenue and
            booking sources, top renting locations, rate usage categories and
            customer satisfaction data. This information, which is updated
            weekly and captured on a country-by-country basis, is utilized by
            management to determine opportunities for revenue growth,
            profitability and improvement.

Fleet Acquisition and Management

  Fleet Purchasing

      The Company participates in a variety of vehicle purchase programs with
major domestic and foreign manufacturers, principally GM, although actual
purchases are made directly through franchised dealers. The average price for
automobiles purchased by the Company in 1998 for its U.S. rental fleet was
approximately $17,895. For the 1998 model year, approximately 80% of new vehicle
purchases were GM vehicles, 9% Chrysler vehicles and 11% Toyota, Nissan, Subaru,
Ford, Mazda and Suzuki vehicles. In model year 1999, approximately 87% of the
Company's fleet in the United States will consist of GM vehicles, approximately
6% will be Chrysler vehicles and the balance will be provided by other
manufacturers. Manufacturers' vehicle purchase programs sometimes provide the
Company with sales incentives for the purchase of certain models, and most of
these programs allow the Company to serve as a drop-ship location for vehicles,
thus enabling the Company to receive a fee from the manufacturers for preparing
newly purchased vehicles for use. There can be no assurance that the Company
will continue to benefit from sales incentives in the future. For its
international operations, vehicles are acquired by way of negotiated
arrangements with local manufacturers and dealers using operating leases or
Repurchase Programs.

      Under the terms of the Company's agreement with GM, which expires at the
end of GM's model year 2002, the Company is required to purchase at least
188,000 GM vehicles for model year 1999 and maintain at least 51% GM vehicles in
the Company's U.S. fleet at all times. The GM Repurchase Program is available
for all vehicles purchased pursuant to the agreement.

  Impact of Seasonality

      The Company's business is subject to seasonal variations in customer
demand, with the summer vacation period representing the peak season for vehicle
rentals. This general seasonal variation in demand, along with more localized
changes in demand at each of the Company's operations, causes the Company to
vary its fleet size over the course of the year. In 1998, the Company's average
monthly fleet size ranged from a low of 187,000 vehicles in January to a high of
231,000 vehicles in July. Fleet utilization, which is based on the number of
hours vehicles are rented compared to the total number of hours vehicles are
available for rental, ranged from 66% in December to 83% in August and averaged
75% for all of 1998.

  Vehicle Disposition

      The Company's current operating strategy is to hold vehicles for not more
than 12 months with the average fleet age 


                                       8
<PAGE>

being less than six months. Approximately 99% of the vehicles purchased for its
domestic fleet under the model year 1998, including most GM vehicles, were
eligible for Repurchase Programs. These programs impose certain return
conditions, including those related to mileage and repair condition over
specified allowances. Less than 3.4% of the Repurchase Program vehicles
purchased by the Company and returned in 1998 were ineligible for return. Upon
return of a Repurchase Program vehicle, the Company receives a price guaranteed
at the time of purchase and is thus protected from a decrease in prevailing used
car prices in the wholesale market. The Company also disposes of its used
vehicles that are not covered by Repurchase Programs to dealers in the United
States through informal arrangements or at auctions. The future percentage of
Repurchase Program vehicles in the Company's fleet will depend on the
availability of Repurchase Programs, over which the Company has no control.

  Maintenance

      The Company places a strong emphasis on vehicle maintenance since quick
and proper repairs are critical to fleet utilization. To accomplish this task
the Company employs two full-time National Institute for Automotive Service
Excellence ("ASE") fully certified technician instructors at its headquarters
who have developed a unique training program for the Company's 325 technicians
who operate at 81 repair centers. The technicians also maintain a strong
relationship with General Motors Service Technology Group ("STG"). The Company
uses "state of the art" diagnostic equipment including GM's "Techline" and "Tech
2" diagnostic computers, and is the only vehicle rental fleet to utilize GM's
"Pulsat Satellite Training Network." The Company's technician training
department also prepares their own technical service bulletins that can be
retrieved electronically at all of the Company's repair locations. Approximately
80% of the Company's technicians are ASE certified versus the national average
of 45%.

Marketing

  United States

      In the United States, approximately 77% of the Company's 1998 rental
transactions were generated by travelers who used the Avis System under
contracts between the Company and their employers or organizations of which they
were members. The Company's corporate sales organization is the principal source
of contracts with corporate accounts. Unaffiliated business travelers are
solicited by direct mail, telesales and advertising campaigns. The Company's
telesales department consists of a centralized staff that handles small
corporate accounts, travel agencies, meetings and conventions, tour operators
and associations. Working with a state-of-the-art system in Tulsa, Oklahoma, the
telesales operation produced revenue for the Avis System that exceeded $325
million in 1998.

      The Company solicits contractual arrangements with corporate accounts by
emphasizing the advantages of the Wizard System. It plays a significant part in
securing business of this type because the Wizard System enables the Company to
offer a wide variety of rental rate combinations, special reports and tracking
techniques tailored to the particular needs of each account, access to a
worldwide rental network and assurance of adherence to agreed-upon rates.

      The Company's presence in the leisure market is substantially less than
its presence in the business market. Leisure rental activity is important in
enabling the Company to balance the use of its fleet. Typically, business
renters use vehicles from Monday through Thursday, while in most areas of the
United States leisure renters use vehicles primarily over weekends. The
Company's concentration on serving business travelers has led to excess capacity
from Friday through Sunday of most weeks. The Company intends to increase its
leisure market penetration by capitalizing on its strength at airports and by
increased focusing of its marketing efforts toward leisure travelers. An
important part of the Company's leisure marketing strategy is to develop and
maintain contractual arrangements with associations that provide member benefits
to their constituents. In addition to developing arrangements with traditional
organizations, the Company has created innovative programs such as the Affinity
Link Program that cross references bankcard numbers with Avis Worldwide
identification numbers and provides discounts to the cardholders for
participating bankcard programs. The Company also uses coupons in dine-out books
and provides discounts to members of shopping and travel clubs whose members
generated approximately $61 million of leisure business revenue in 1998.
Preferred supplier agreements with select travel agencies and contracts with
tour operators have also succeeded in generating leisure business for the
Company.


                                       9
<PAGE>

      Travel agents can make Avis System reservations through all four major
U.S. based global distribution systems and several international based systems.
Users of the U.S. based global distribution systems can obtain access through
these systems to the Company's rental locations, vehicle availability and
applicable rate structures. An automated link between these systems and the
Wizard System gives them the ability to reserve and confirm rentals directly
through these systems. The Company also maintains strong links to the travel
industry. The Company has arrangements with frequent traveler programs of
airlines such as Delta, American, Continental, United and TWA, and of hotels
including the Hilton Corporation, Hyatt Corporation, Best Western, and Starwood
Hotels and Resorts. These arrangements provide various incentives to all program
participants and cooperative marketing opportunities for Avis and the partner.
The Company also has an arrangement with Cendant whereby lodging customers who
are making reservations by telephone will be transferred to the Company if they
desire to rent a vehicle.

  International

      The Company utilizes a multi-faceted approach to sales and marketing
throughout its global network. In its principal international operations, the
Company employs teams of trained and qualified account executives to negotiate
contracts with major corporate accounts and leisure and travel industry
partners. In addition, the Company utilizes centralized telemarketing and direct
mail initiatives to continuously broaden its customer base. Sales efforts are
designed to secure customer commitment and support customer requirements for
both domestic and international car rental needs.

      International sales and marketing activities promote the Company's
reputation for delivering a high quality of service, contract rates, competitive
pricing and customer benefits from special services such as Preferred Service,
Roving Rapid Return and other benefits of the Wizard System.

      The Company's international operations maintain close relationships with
the travel industry including participation in several airline frequent flyer
programs, such as those operated by Air Canada, British Airways, Lufthansa,
Ansett Airlines (Australia), and Varig Brazilian Airlines.

Competition

      The vehicle rental industry is characterized by intense price and service
competition. In any given location, the Company may encounter competition from
national, regional and local companies, many of which, particularly those owned
by the major automobile manufacturers, have greater financial resources than the
Company. The Company's principal competitors for commercial accounts in the
United States are The Hertz Corporation ("Hertz") and National Car Rental
System, Inc. ("National"). Its principal competitors for unaffiliated business
and leisure travelers in the United States are Budget Rent A Car Corporation,
Hertz and National, and, particularly with regard to leisure travelers, Alamo
and Dollar. In addition, the Company competes with a variety of smaller vehicle
rental companies throughout the country.

      Competition in the U.S. vehicle rental business is based primarily upon
price, reliability, ease of rental and return and other elements of customer
service. In addition, competition is influenced strongly by advertising and
marketing. The Company believes it is capable of competing for virtually all
aspects of the vehicle rental business, except the insurance replacement vehicle
business (in which the Company has agreed not to engage in certain markets until
June 13, 2000 pursuant to an agreement relating to the sale of its replacement
vehicle rental business). In part because of the Wizard System, the Company has
been particularly successful in competing for commercial accounts. There have
been many occasions during the history of the vehicle rental industry in which
all of the major vehicle rental companies have been adversely affected by severe
industry-wide rental rate cutting, and the Company has, on such occasions,
lowered its rates in response to such rate cutting. However, during the past two
years, industry-wide rates have increased, reflecting, in part, both increased
costs of owning and maintaining vehicles and the need to generate returns on
invested capital.

Insurance

      The Company generally assumes the risk of liability to third parties
arising from vehicle rental services in the United States, Canada, Puerto Rico
and the U.S. Virgin Islands, for up to $1.0 million per occurrence, through a
combination of certificates of self-insurance, insurance coverage provided by
its wholly-owned domestic subsidiary, Pathfinder Insurance 


                                       10
<PAGE>

Company ("Pathfinder"), and insurance coverage secured from an unaffiliated
domestic insurance carrier. The Company maintains additional insurance with
unaffiliated carriers in excess of such level up to $200.0 million per
occurrence.

      Currently, the Company provides primary automobile insurance for a
majority of its fleet through Pathfinder or through self-insurance. In addition,
the Company provides claims management services from its headquarters in New
York to all of its locations in the United States, Canada, Puerto Rico and the
U.S. Virgin Islands.

      The Company insures the risk of liability to third parties in Argentina,
Australia and New Zealand through a combination of unaffiliated carriers and
Global Excess & Reinsurance, Ltd., a wholly-owned subsidiary established under
the laws of Bermuda ("Global Excess"). These carriers provide coverage
supplemental to minimum local requirements.

      To further control its insurance costs, the Company reinsures some of its
risks through its wholly-owned subsidiary, Constellation Reinsurance Company
Limited ("Constellation"), an insurance company established under the laws of
Barbados.

      Under its standard rental contract, the Company provides its renters
primary automobile liability coverage in most states up to the minimum financial
responsibility limits required by applicable law. In many, the renters'
insurance is primary and in the states of California and Texas Avis does not
provide automobile liability coverage for the renter. Higher limits are provided
to some United States national corporate accounts and the Company makes
available to renters, for an additional daily charge, participation in a group
policy of "Additional Liability Insurance" underwritten by CNA (Continental
Group), which increases renters' liability coverage up to $1.0 million. The
Company also offers renters, for additional daily charges, "Personal Accident
Insurance," which pays medical expenses and accidental death benefits for
accidents during the rental period, and "Personal Effects Protection," which
insures against loss or damage to the renters' personal belongings during the
rental period. Coverages are underwritten by Gulf Insurance Company.

Regulatory Matters

      The Company is subject to federal, state and local laws and regulations
including those relating to taxing and licensing of vehicles, franchising,
consumer credit, environmental protection, retail vehicle sales and labor
matters. The principal environmental regulatory requirements applicable to the
Company's operations relate to the ownership or use of tanks for the storage of
petroleum products, such as gasoline, diesel fuel and waste oils; the treatment
or discharge of waste waters; and the generation, storage, transportation and
off-site treatment or disposal of solid or liquid wastes. The Company operates
242 locations at which petroleum products are stored in underground or
aboveground tanks. The Company has instituted an environmental compliance
program designed to ensure that these tanks are in compliance with applicable
technical and operational requirements, including the replacement of underground
steel tanks and periodic testing of underground storage tanks. The Company
believes that the locations where it currently operates are in compliance, in
all material respects, with such regulatory requirements.

      The Company may also be subject to requirements related to the remediation
of, or the liability for remediation of, substances that have been released to
the environment at properties owned or operated by the Company or at properties
to which the Company sends substances for treatment or disposal. Such
remediation requirements may be imposed without regard to fault and liability
for environmental remediation can be substantial.

      The Company may be eligible for reimbursement or payment of remediation
costs associated with future releases from its regulated underground storage
tanks. Certain of the states in which the Company maintains underground storage
tanks have established funds to assist in the payment of remediation costs for
releases from certain registered underground tanks. Subject to certain
deductibles, the availability of funds, compliance status of the tanks and the
nature of the release, these tank funds may be available to the Company for use
in remediating future releases from its tank systems.

      A traditional revenue source for the vehicle rental industry has been the
sale of loss damage waivers, by which rental companies agree to relieve a
customer from financial responsibility arising from vehicle damage incurred
during the rental period. Approximately 3.3% of the Company's revenue during
1998 was generated by the sale of loss damage waivers. The U.S. House of
Representatives has from time to time considered legislation that would regulate
the conditions under which loss damage waivers may be sold by vehicle rental
companies. Approximately 40 states have considered legislation affecting 


                                       11
<PAGE>

the loss damage waivers. To date, 24 states have enacted legislation which
requires disclosure to each customer at the time of rental that damage to the
rented vehicle may be covered by the customer's personal automobile insurance
and that loss damage waivers may not be necessary. In addition, in the late
1980's, New York enacted legislation which eliminated the Company's right to
offer loss damage waivers for sale and limited potential customer liability to
$100. Moreover, California and Nevada have capped rates that may be charged for
loss damage waivers to $9.00 and $10.00 per day, respectively. Texas requires
that the rate charged for loss damage waivers be reasonably related to the
direct cost of the repairs. Adoption of national or additional state legislation
affecting or limiting the sale of loss damage waivers could result in the loss
of this revenue source and additional limitations on potential customers
liability could increase the Company's costs.

      The Company is also subject to regulation under the insurance statutes,
including insurance holding company statutes, of the jurisdictions in which its
insurance company subsidiaries are domiciled. These regulations vary from state
to state, but generally require insurance holding companies and insurers that
are subsidiaries of insurance holding companies to register and file certain
reports including information concerning their capital structure, ownership,
financial condition and general business operations with the state regulatory
authority, and require prior regulatory agency approval of changes in control of
an insurer and intercorporate transfers of assets within the holding company
structure.

      Pathfinder, as a licensed stock insurance company in the State of
Colorado, is subject to the applicable rules and regulations of the Colorado
Insurance Department. The Colorado Insurance Law provides that no person may
acquire control of the Company, and thus indirect control of Pathfinder, unless
it has obtained prior approval of the Colorado Insurance Commissioner for such
acquisition. "Control" is generally presumed to exist through the ownership of
10% or more of the voting securities of a Colorado domestic insurance company or
of any company which controls a Colorado domestic insurance company. Any
purchaser of 10% or more of the outstanding Common Stock would be presumed to
have acquired control of the Company, unless such presumption is rebutted by a
showing that such control does not in fact exist. Accordingly, any purchase of
shares of Common Stock representing 10% or more of the voting power of the
Company would require prior approval by the Colorado Insurance Department.

      Global Excess is subject to Bermuda Insurance Laws, which require Global
Excess to file at least a Bermuda statutory financial return in the form
prescribed by Bermuda Insurance Laws. Furthermore, any transfer of shares of
Global Excess by the Company will require the approval of the Bermuda Monetary
Authority, Foreign Exchange Control. In addition, Constellation is required to
file an annual financial return in accordance with Barbados Insurance
Regulations.

      The payment of dividends to the Company by its insurance company
subsidiaries, Pathfinder, Global Excess and Constellation, will be restricted by
government regulations in Colorado, Bermuda and Barbados affecting insurance
companies domiciled in those jurisdictions.

Employees

      The Company has approximately 19,000 employees worldwide, of whom
approximately 18,000 serve in various capacities at the Company's rental
locations and the balance are engaged in executive, financial, sales and
marketing, and administrative capacities. Approximately 33% of the Company's
employees are represented by various unions under contracts expiring at various
dates. No local union represents more than 3.5% of the Company's employees. The
Company believes its relationships with its employees are good.

Item 2.

Properties

      The Company leases or has concessions relating to space at 466 locations
in the United States and 162 locations outside the United States. Of those
locations, 197 in the United States and 64 outside the United States are at
airports. Typically, an airport receives a percentage of vehicle rental
revenues, with a guaranteed minimum. Because there is a limit to the number of
vehicle rental locations in an airport, vehicle rental companies frequently bid
for the available locations, usually on the basis of the size of the guaranteed
minimums. The Company and other vehicle lease firms also lease parking space at
or near airports and at their other vehicle rental locations.


                                       12
<PAGE>

      The Company leases almost all of its vehicle rental facilities. The
airport facilities are located on airport property owned by airport authorities
or located near the airport in locations convenient for bus transport of
customers to and from the airport. The Company's airport locations serve as the
administrative headquarters for the Company's non-airport locations nearest to
those airport locations and, as a general rule, each airport location includes
vehicle storage areas, a vehicle maintenance facility, a car wash, a refueling
station and rental and return facilities. The Company's non-airport facilities
generally consist of a limited parking facility and a rental and return counter
and are generally subject to long-term leases with renewal options. Certain of
these leases also have purchase options at the end of their terms.

      The Company's principal offices are in Garden City, New York where the
Company leases approximately 250,000 square feet under a sublease agreement with
WizCom which, by exercising renewal options, can be extended through the year
2015. The Avis reservation system is operated by Cendant from leased space in
Tulsa and Drumright, Oklahoma where the Company subleases approximately 26,000
square feet from Cendant pursuant to a sublease agreement for certain marketing
activities. The Company maintains terminal network facilities which it uses in
connection with the Wizard System in Garden City and Tulsa. The Company also
leases approximately 58,000 square feet in a building owned by Cendant in
Virginia Beach, Virginia that serves as a satellite administrative and
reservation facility.

Item 3.

Legal Matters

      From time to time, the Company is subject to routine litigation incidental
to its business. The Company maintains insurance policies that cover most of the
actions brought against the Company. The Company is not currently involved in
any legal proceeding which it believes would have a material adverse effect upon
its financial condition or results of operations.

Item 4.

Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of the stockholders of the Company
during the fourth quarter of the fiscal year ended December 31, 1998.

                                     PART II

Item 5.

Market for the Registrant's Common Equity and Related Stockholder Matters

      Reference is made to Page 14("Market Information") of the Registrant's
1998 Annual Report to Shareholders filed as Exhibit 13 hereto, which information
is incorporated herein by reference.

Item 6.

Selected Financial Data

      Reference is made to Page 5 of the Registrant's 1998 Annual Report to
shareholders filed as Exhibit 13 hereto, which information is incorporated
herein by reference.


                                       13
<PAGE>

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

      Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Registrant's 1998 Annual Report to
Shareholders filed as Exhibit 13 hereto, which information is incorporated
herein by reference.

Item 7a.

Quantitative and Qualitative Disclosures about Market Risk

      Reference is made to page 11 of the Registrants' 1998 Annual Report to
Shareholders filed as Exhibit 13, hereto, which information is incorporated
herein by reference.

Item 8.

Financial Statements and Supplementary Data

      The following Consolidated Financial Statements and Notes to the
Consolidated Financial Statements (which includes the Supplementary Data) are
incorporated herein by reference to the Registrant's Annual Report to
Shareholders for the year ended December 31, 1998 filed as Exhibit 13 hereto:


Avis Rent A Car, Inc.
Consolidated Financial Statements:
  Independent Auditors' Report
  Consolidated Statements of Financial Position at December 31, 1997 and 1998
  Consolidated Statements of Operations for the periods January 1, 1996 to
    October 16, 1996 and October 17, 1996 (Date of Acquisition) to December 31,
    1996 and for the years ended December 31, 1997 and 1998.
  Consolidated Statements of Stockholders' Equity for the periods January 1,
    1996 to October 16, 1996 and October 17, 1996 (Date of Acquisition) to
    December 31, 1996 and for the years ended December 31, 1997 and 1998.
  Consolidated Statements of Cash Flows for the periods January 1, 1996 to
    October 16, 1996 and October 17, 1996 (Date of Acquisition) to December 31,
    1996 and for the years ended December 31, 1997 and 1998.
  Notes to the Consolidated Financial Statements

Item 9.

Changes in and Disagreements with Accountants On Accounting and Financial
Disclosure

      None

                                    PART III

      The information required by Items 10, 11, 12 and 13 of Part III of Form
10-K will be set forth in the Proxy Statement of the Company relating to the
1999 Annual Meeting of Stockholders, which information is incorporated herein by
reference.


                                       14
<PAGE>

                                     PART IV

Item 14.

Exhibits, Financial Statement Schedules, and Reports on Form 8-K

      (a)   (1)   Index to Financial Statements-see Consolidated Financial
                  Statements and Notes to the Consolidated Financial Statements
                  of the Company listed in Item 8 and set forth in the
                  Registrant's 1998 Annual Report to Shareholders included as
                  Exhibit 13 hereto.

            (2)   Index to Financial Statement Schedules-Valuation and
                  Qualifying Accounts.

            (3)   Exhibits-(See Index to Exhibits included elsewhere herein).

      All Schedules, except those set forth above have been omitted since the
information required to be submitted has been included in the Consolidated
Financial Statements or notes thereto or has been omitted as not applicable or
not required.

      (b)   The Registrant filed a report on form 8-K on December 23, 1998 which
            disclosed in Item 5 that R. Craig Hoenshell, former Chairman and
            Chief Executive Officer of the Registrant, would step down from
            these offices on December 31, 1998 and that Martin L. Edelman, a
            director of the Registrant, would act as Chariman until a successor
            was appointed by the Board of Directors.


                                       15
<PAGE>

          INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders of
Avis Rent A Car, Inc.
Garden City, NY

      We have audited the consolidated statements of financial position of Avis
Rent A Car, Inc. and subsidiaries (successors to Rental Car System Holdings,
Inc. and subsidiaries, Avis International, Ltd. and subsidiaries, Avis
Enterprises, Inc. and subsidiaries, Pathfinder Insurance Company and Global
Excess & Reinsurance, Ltd., all previously wholly-owned by Avis, Inc.,
collectively the "Predecessor Companies") (collectively referred to as "Avis
Rent A Car, Inc." or the "Company") as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1998 and 1997 and for the period October
17, 1996 (Date of Acquisition) to December 31, 1996 and as to the Predecessor
Companies the related consolidated statements of operations, stockholders'
equity and cash flows for the period January 1, 1996 to October 16, 1996, and
have issued our report thereon dated January 25, 1999 (March 19, 1999 as to Note
21); such financial statements and report are included in your 1998 Annual
Report to Stockholders and are incorporated herein by reference. Our audits also
included the financial statement schedule of the Company and the Predecessor
Companies, listed in Item 14. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP

New York, New York
January 25, 1999
(March 19,1999 as to Note 21)


                                       16
<PAGE>

                              AVIS RENT A CAR, INC.

                          FINANCIAL STATEMENT SCHEDULE

                  SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                           Additions
                                                     ---------------------
                                        Balance at   Charged to    Other                   Balance at
                                        Beginning    Costs and   Additions,                  End of
Description                             of Period     Expenses     Net(a)    Deductions      Period
-----------                             ---------     --------     ------    ----------      ------
<S>                                      <C>          <C>          <C>         <C>          <C>     
January 1, 1996 to October 16, 1996:
Allowance for doubtful
  accounts_accounts receivable .....     $  2,746     $  1,238                 $    794     $  3,190
Accumulated amortization_goodwill ..     $ 37,471     $  3,782                              $ 41,253
Public liability and property
  damage and other insurance
  liabilities ......................     $194,677     $ 74,109                 $ 56,315     $212,471

October 17, 1996 (Date of
  Acquisition) to
December 31, 1996:
Allowance for doubtful
  accounts_accounts receivable .....                  $    227                              $    227
Accumulated amortization_goodwill ..                  $  1,026                              $  1,026
Public liability and property
  damage and other insurance
  liabilities ......................     $212,471     $ 17,355                 $ 16,041     $213,785

Year ended December 31, 1997:
Allowance for doubtful
  accounts_accounts receivable .....     $    227     $  3,208                 $  1,149     $  2,286
Accumulated amortization_goodwill ..     $  1,026     $  6,860                              $  7,886
Public liability and property
  damage and other insurance
  liabilities ......................     $213,785     $ 96,663     $16,670     $ 71,089     $256,029

Year ended December 31, 1998:
Allowance for doubtful accounts -
  accounts receivable ..............     $  2,286     $  2,961                 $  1,897     $  3,350
Accumulated amortization-goodwill ..     $  7,886     $ 11,854                              $ 19,740
Public liability and property
  damage and other insurance
  liabilities ......................     $256,029     $ 93,038                 $ 79,858     $269,209
</TABLE>

-----------
a)    Includes additions of $16,838 relating to the acquisition of The First
      Gray Line Corporation on August 20, 1997.


                                       17
<PAGE>

                                   SIGNATURES

                                                                      SIGNATURES

      Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on March , 1999.

                                        AVIS RENT A CAR, INC.
                                        (Registrant)

                                        By: /s/ Kevin M. Sheehan
                                            ------------------------------------
                                            Name:  Kevin M. Sheehan
                                            Title: Executive Vice President
                                                   and Chief Financial Officer


                                       18
<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

           Signature                                Title                        Date
           ---------                                -----                        ----
<S>                              <C>                                          <C>
     /s/ MARTIN  L. EDELMAN
-------------------------------
         Martin L. Edelman       Interim Chairman of the Board and Director   March  22, 1999
                                 (Principal Executive Officer)

      /s/ F. ROBERT SALERNO
-------------------------------
      F. Robert Salerno          President, Chief Operating Officer and       March  22, 1999
                                 Director                     
      /s/ KEVIN M. SHEEHAN
-------------------------------
      Kevin M. Sheehan           Executive Vice President and Chief           March 22, 1999
                                 Financial Officer        
                                 (Principal Financial Officer) 

      /s/ TIMOTHY M. SHANLEY
-------------------------------
      Timothy M. Shanley         Vice President and Controller                March 22, 1999
                                 (Principal Accounting Officer)  

     /s/ STEPHEN P. HOLMES
-------------------------------
     Stephen P. Holmes           Director                                     March 22, 1999

     /s/ MICHAEL P. MONACO
-------------------------------
     Michael P. Monaco           Director                                     March 22, 1999

     /s/ W. ALUN CATHCART
-------------------------------
     W. Alun Cathcart            Director                                     March 22, 1999

   /s/ LEONARD S. COLEMAN,  Jr.
-------------------------------
    Leonard S. Coleman, Jr.      Director                                     March 22, 1999
                                 

      /s/ DEBORAH  L. HARMON
-------------------------------
      Deborah L. Harmon          Director                                     March  22, 1999

      /s/ R. CRAIG HOENSHELL
-------------------------------
      R. Craig Hoenshell         Director                                     March 22, 1999

      /s/ MICHAEL J. KENNEDY
-------------------------------
      Michael J. Kennedy         Director                                     March 22, 1999

     /s/ MICHAEL L. TARNOPOL
-------------------------------
     Michael L. Tarnopol         Director                                     March 22, 1999
</TABLE>


                                       19
<PAGE>

ITEM 14(a)(3)

                                  EXHIBIT INDEX

 Exhibit
   No.                                  Description
   ---                                  -----------

3.       Certificate of Incorporation and By-Laws
3.1      Amended and Restated  Certificate of Incorporation of the Registrant***
3.2      Amended and Restated By-Laws of the Registrant***
4.       Instruments defining the rights of securityholders, including
         indentures
4.1      Form of Certificate of Common Stock**
4.2      Amended and Restated Base Indenture, dated as of July 30, 1997,
         between AESOP Funding II L.L.C., as issuer, and Harris Trust and
         Savings Bank, as trustee.**
4.3      Series 1997-1 Supplement, dated as of July 30, 1997 between AESOP
         Funding II L.L.C. and Harris Trust and Savings Bank, as trustee, to
         the Amended and Restated Base Indenture, dated as of July 30, 1997,
         between AESOP Funding II and the Trustee.**
4.4      Series 1997-2 Supplement, dated as of July 30, 1997 between AESOP
         Funding II L.L.C. and Harris Trust and Savings Bank, as trustee, to
         the Amended and Restated Base Indenture, dated as of July 30, 1997,
         between AESOP Funding II and the Trustee.**
4.5      Loan Agreement, dated as of July 30, 1997, between AESOP Leasing L.P.,
         as borrower, and AESOP Funding II L.L.C., as lender.**
4.6      Loan Agreement, dated as of July 30, 1997, among AESOP Leasing L.P.,
         as borrower, PV Holding Corp., as a permitted nominee of the borrower,
         Quartx Fleet Management, Inc., as a permitted nominee of the
         borrower, and AESOP Funding II L.L.C., as lender.** 
4.7      Loan Agreement, dated as of July 30, 1997, between AESOP Leasing
         Corp. II, as borrower, AESOP Leasing Corp., as permitted nominee of
         the borrower, and AESOP Funding II L.L.C., as lender.**
4.8      Master Motor Vehicle Finance Lease Agreement, dated as of July 30,
         1997, by and among AESOP Leasing L.P., as lessor, Avis Rent A Car
         System, Inc., as lessee, individually and as the Administrator and
         Avis Rent A Car, Inc., as guarantor.**
4.9      Master Motor Vehicle Operating Lease Agreement, dated as of July 30,
         1997, by and among AESOP Leasing L.P., as lessor, Avis Rent A Car
         System, Inc., individually and as the Administrator, certain Eligible
         Rental Car Companies, as lessees, and Avis Rent A Car, Inc., as
         guarantor.**
4.10     Master Motor Vehicle Operating Lease Agreement, dated as of July 30,
         1997, by and among AESOP Leasing Corp. II, as lessor, Avis Rent A Car
         System, Inc., individually and as the Administrator, certain Eligible
         Rental Car Companies, as lessees and Avis Rent A Car, Inc., as
         guarantor.**
4.11     Credit Agreement, dated as of July 30, 1997, among Avis Rent A Car,
         Inc., Avis Rent A Car System, Inc., The Chase Manhattan Bank, as
         administrative agent, Lehman Commercial Paper, Inc., as syndication
         agent and the other lenders party thereto (the "Credit Agreement").**
4.12     Guarantee, dated as of July 30, 1997, in favor of The Chase Manhattan
         Bank, as administrative agent for the lenders from time to time
         parties to the Credit Agreement.**
4.13     Security Agreement, dated as of July 30, 1997, in favor of The Chase
         Manhattan Bank, as administrative agent for the lenders from time to
         time parties to the Credit Agreement.**
4.14     Pledge Agreement, dated as of July 30, 1997, in favor of The Chase
         Manhattan Bank, as administrative agent for the lenders from time to
         time parties to the Credit Agreement.**
4.15     Supplemental Indenture No. 1, dated as of July 31, 1998, to Amended
         and Restated Base Indenture, dated as of July 30, 1997 between AESOP
         Funding II L.L.C. as issuer and Harris Trust and Savings Bank, as
         trustee.*


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<PAGE>

4.16     Amendment No. 1, dated as of July 31, 1998, to Loan Agreement, dated
         as of July 30, 1997, between AESOP Leasing L.P., as borrower, and
         AESOP Funding II L.L.C., as lender.*
4.17     Amendment No. 1, dated as of July 31, 1998, to Loan Agreement, dated
         as of July 30, 1997, among AESOP Leasing L.P., as borrower, PV
         Holding Corp., as a permitted nominee of the borrower, Quartz Fleet
         Management, Inc., as a permitted nominee of the borrower, and AESOP
         Funding II L.L.C. as lender.*
4.18     Amendment No. 1, dated as of July 31, 1998, to Master Motor Vehicle
         Finance Lease Agreement, dated as of July 30, 1997, among AESOP
         Leasing L.P., as lessor, Avis Rent A Car Systems, Inc., as lessee
         individually and as Administrator, and Avis Rent A Car, Inc., as
         guarantor.*
4.19     Amended and Restated Loan Agreement, dated as of September 15, 1998
         among AESOP Leasing L.P., as borrower, PV Holding Corp., as a
         permitted nominee of the borrower, Quartz Fleet Management, Inc., as
         a permitted nominee of the borrower, and AESOP Funding II L.L.C.*
4.20     Amended and Restated Master Motor Vehicle Operating Lease Agreement,
         dated as of September 15, 1998 among AESOP Leasing L.P., as lessor,
         Avis Rent A Car System, Inc., individually and as the Administrator,
         certain Eligible Rental Car Companies, as lessees, and Avis Rent A
         Car, Inc., as guarantor.*
4.21     Supplemental Indenture No. 2, dated as of September 15, 1998, to
         Amended and Restated Base Indenture, dated as of July 30, 1997,
         between AESOP Funding II L.L.C., as issuer, and Harris Trust and
         Savings Bank, as trustee.*
4.22     Series 1998-1 Supplement, dated as of February 26, 1998 between AESOP
         Funding II L.L.C., as issuer, and Harris Trust and Savings Bank, as
         trustee and Series 1998-1 agent, to the Amended and Restated Base
         Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C.,
         as issuer, and Harris Trust and Savings Bank, as trustee.*
10.      Material Contracts
10.1     Form of Registration Rights Agreement**
10.2     Separation Agreement between Cendant Car Rental, Inc. and Avis Rent A
         Car, Inc.**
10.3     Master License Agreement among Cendant Car Rental, Inc., Avis Rent A
         Car System, Inc. and Wizard Co., Inc.**
10.4     Computer Services Agreement between Avis Rent A Car System, Inc. and
         WizCom International, Ltd.**
10.5     Reservation Services Agreement between Cendant Incorporated and Avis
         Rent A Car System, Inc.**
10.6     Form of Tax Disaffiliation Agreement among Cendant Incorporated,
         Cendant Car Rental, Inc. and Avis Rent A Car, Inc.**
10.7     Form of Lease Agreement by and between WizCom International, Ltd., as
         lessor, and Avis Rent A Car System, Inc. as lessee (Virginia Beach,
         Virginia).**
10.8     Form of Sublease Agreement by and between WizCom International, Ltd.,
         as sublessor, and Avis Rent A Car System, Inc., as sublessee (Tulsa,
         Oklahoma).**
10.9     Form of Sublease Agreement by and between WizCom International, Ltd.,
         as sublessor, and Avis Rent A Car System, Inc., as sublessee (Garden
         City, New York).**
10.10    Wizard Note Assignment, Assumption and Release Agreement, dated as of
         July 30, 1997 by and between Wizard Co., Inc., Avis Rent A Car System,
         Inc. and Reserve Claims Management Co.**
10.11    Termination Services Agreement, among Harris Trust and Savings Bank,
         AESOP Funding II L.L.C., Avis Rent A Car System, Inc., and Wizcom
         International, Ltd.**
10.13    Call Transfer Agreement, dated March 4, 1997, between HFS Incorporated
         and Avis Rent A Car System, Inc.**
10.14    Form of Amended and Restated Employment Agreement, dated as of
         February 9, 1996, between HFS Car Rental, Inc. and F. Robert Salerno**
10.15    Retention Agreement, dated as of January 1, 1999, between Avis Rent A
         Car, Inc. and F. Robert Salerno*
10.16    Retention Agreement, dated as of January 1, 1999, between Avis Rent A
         Car, Inc. and Kevin M. Sheehan*


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<PAGE>

10.17    Avis Rent A Car, Inc. 1997 Stock Option Plan**
10.18    Avis Rent A Car System, Inc. Nonqualified Deferred Compensation Plan*
13       Annual Report to Shareholders for the year ended December 31, 1998*
20       Proxy Statement of the Registrant for Annual Meeting of 
         Stockholders-June 15, 1999****
21       Subsidiaries of the Registrant**
23.1     Consent of Deloitte & Touche LLP, Independent Auditors of the
         Company to be incorporated by reference to the Registrant's
         Registration Statement Nos. 333-59693, 333-59695 and 333-63269 on Form
         S-8 from the 1998 Annual Report filed herewith*
27       Financial Data Schedule
27.1     Financial Data Schedule-December 31, 1996***
27.2     Financial Data Schedule-December 31, 1997***
27.3     Financial Data Schedule-December 31, 1998*

-----------
*     Filed herewith.

**    Incorporated by reference to the Registrant's Registration Statement on
      Form S-1, 333-28609.

***   Incorporated by reference to the Registrant's Registration Statement on
      Form S-1, 333-46737.

****  To be filed.


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