<PAGE>
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
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<S>           <C>
(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, 1997
 
                                            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
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                             AVIS RENT A CAR, INC.
             (Exact Name Of Registrant As Specified In Its Charter)
 
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<S>                                                       <C>
                        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 VALUE $.01 PER SHARE                           NEW YORK STOCK EXCHANGE
 
                           Securities registered pursuant to Section 12(g) of the Act:
 
                                                       NONE
                                                 (Title of Class)
</TABLE>
 
    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. X__________
 
    As of March 23, 1998, the registrant had 35,925,000 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
$1,149,600,000.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the Annual Report to Shareholders for the year ended December 31,
1997 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 May 21, 1998 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
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                                                                                                     PAGE NUMBER
                                                                                                  -----------------
 
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                                                      PART I
 
Item 1.       Business..........................................................................              2
 
Item 2.       Properties........................................................................             13
 
Item 3.       Legal Matters.....................................................................             14
 
Item 4.       Submission of Matters to a Vote of Security Holders...............................             14
 
<CAPTION>
 
                                                      PART II
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Item 5.       Market for the Registrant's Common Equity and Related Stockholder Matters.........             15
 
Item 6.       Selected Financial Data...........................................................             15
 
Item 7.       Management's Discussion and Analysis of Financial Condition and Results Of
              Operations........................................................................             15
 
Item 8.       Financial Statements and Supplementary Data.......................................             15
 
Item 9.       Changes in and Disagreements With Accountants on Accounting and Financial
              Disclosure........................................................................             15
<CAPTION>
 
                                                     PART III
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Item 10.      Directors and Executive Officers of the Registrant................................             16
 
Item 11.      Executive Compensation............................................................             16
 
Item 12.      Security Ownership of Certain Beneficial Owners and Management....................             16
 
Item 13.      Certain Relationships and Related Transactions....................................             16
<CAPTION>
 
                                                      PART IV
<S>           <C>                                                                                 <C>
 
Item 14.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K..................             16
</TABLE>
<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, (iv) the "Franchisor" refers to
Cendant Car Rental, Inc., a wholly-owned subsidiary of Cendant, and (v) "Wizcom"
refers to Wizcom International Ltd., an indirect 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"). WizCom, the owner of the data processing and
information system used in connection with the vehicle rental business and which
forms a part of the Avis System (the "Wizard System"), entered into a 50 year
computer services agreement with the Company with respect to its 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 612 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 August 20, 1997, ARACS purchased The First Gray
Line Corporation ("First Gray Line"), the then second largest Avis System
franchisee in North America. During 1997, including First Gray Line on a pro
forma basis from January 1, 1997, the Company completed over 14.5 million rental
transactions with a fleet that averaged approximately 200,000 vehicles and
generated total revenue of approximately $2.2 billion, of which approximately
89% was derived from its operations in the United States. On February 20, 1998,
ARACS signed an agreement with Hayes Leasing Company, Inc. ("Hayes"), the second
largest Avis System franchisee in North America with six locations in the state
of Texas, including Dallas/Fort Worth Airport ("DFW"), San Antonio Airport and
Austin Municipal Airport, to acquire the assets of its car rental business for
approximately $85 million in cash, plus the refinancing of fleet-related
indebtedness. See Note 15 to the Audited Consolidated Financial Statements for
financial information presented based upon the Company's major geographic areas.
 
    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 in 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
378,000 vehicles during the peak season, all of which
 
                                       2
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are operated by franchisees. During 1997, the Company's 485 domestic rental
locations (including First Gray Line) produced approximately 87% of the Avis
System's revenue in the United States, with the balance derived from 391
locations operated by 71 other Avis System franchisees, of which five (including
Hayes) accounted for approximately 7% 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.
 
    The Company has historically targeted its marketing efforts toward business
travelers, who accounted for approximately 63% of the Company's domestic revenue
in 1997. 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 1997, leisure travelers accounted for approximately 37% 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. After the IPO, Cendant owned approximately 27.5% of the
outstanding shares of Common Stock of the Company. 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. The Company
granted it's Underwriters a 30-day option to purchase in the aggregate up to
900,000 shares of Common Stock to cover over-allotments. 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 20.4% of the outstanding shares of Common Stock if
the underwriters' over-allotment is exercised. If the underwriters'
over-allotment is not exercised, Cendant will own approximately 20.9% of the
outstanding shares. Cendant is a global provider of consumer and business
services and operates in three principal segments: Membership, Travel and Real
Estate Services. In Membership Services, Cendant provides access to travel,
shopping, auto, dining and other services through more than 66.5 million
memberships worldwide. In Travel Services, Cendant is the leading franchisor of
hotels and rental car agencies worldwide, the
 
                                       3
<PAGE>
premier provider of vacation exchange services and the second largest fleet
management company. In Real Estate Services, Cendant is the world's premier
franchisor of residential real estate brokerage offices, a major provider of
mortgage services to consumers and a global leader in corporate employee
relocation. Cendant is also a major online commerce facilitator, with more than
$1 billion in yearly sales through its netMarket-Registered Trademark- and other
interactive 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 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.
 
THE FIRST GRAY LINE ACQUISITION
 
    On August 20, 1997, ARACS purchased all of the outstanding capital stock of
First Gray Line for approximately $195 million in cash, plus expenses. At that
time, First Gray Line was the second largest Avis System franchisee in North
America with 70 locations in Southern California, Nevada and Arizona. Its
operations represented approximately 9.0% of the Avis System's domestic revenue
in 1997.
 
    The Company, through First Gray Line, operates 12 airport vehicle rental
locations, including Los Angeles International Airport ("LAX"), McCarran
International Airport (Las Vegas) and San Diego International Airport. The
Company estimates that First Gray Line's share of the overall airport markets
which it serves was approximately 20% for the first eleven months of 1997. First
Gray Line also operates 58 other locations throughout Southern California and in
Las Vegas, Nevada, and Yuma, Arizona.
 
    First Gray Line's principal operation is located at LAX, one of the world's
largest airport rental vehicle markets based on vehicle rental revenues. First
Gray Line's operation at LAX is well-integrated with most of its other Southern
California operations, which operate largely in contiguous geographical areas.
First Gray Line's Las Vegas and San Diego operations have experienced
substantial growth in recent years, reflecting the continued high growth of
these areas as destination resorts and convention sites.
 
THE HAYES TRANSACTION
 
    On February 20, 1998, ARACS signed an agreement with Hayes to purchase the
assets of its car rental business, 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 $85 million in cash, plus the refinancing of
fleet related indebtedness (the "Hayes Transaction" ). It is anticipated that
the Hayes Transaction will close in the second quarter of 1998, subject to the
satisfaction or waiver of certain conditions, including, but not limited to, the
expiration or termination of any waiting periods required pursuant to the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended; the obtaining of
all necessary approvals of any governmental entities and third parties; and
there having not been any changes in the vehicle rental business which would, in
the aggregate, have a material adverse effect.
 
    Hayes is the second largest Avis System franchisee in North America with a
fleet averaging 8,000 vehicles in 1997, serving six locations in the state of
Texas, including DFW, San Antonio Airport and Austin Municipal Airport. Business
travelers account for a substantial portion of Hayes' rentals. In 1997, Hayes
completed approximately 640,000 transactions and recorded $77 million in
revenues, representing approximately 3.7% of the Avis System's domestic revenues
for the year. The Company estimates that Hayes' overall share of the airport
markets it serves was approximately 25% for the first eleven months of 1997.
 
                                       4
<PAGE>
Hayes' principal operating location is at DFW, one of the nation's largest
airport rental vehicle markets based on vehicle rental revenues.
 
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 1997, average domestic vehicle rental rates for the Company, increased by
6.1%. Management intends to use the proprietary software applications of the
Avis System, including its 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 has 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 ARRANGEMENTS 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-Registered Trademark-, Howard Johnson-Registered Trademark- and
Ramada-Registered Trademark- brands, its real estate brokerage franchise
systems, including the CENTURY 21-Registered Trademark- and Coldwell
Banker-Registered Trademark- 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.
 
                                       5
<PAGE>
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), 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, 1997, the Company operated 485
vehicle rental facilities at airport, near-airport and downtown locations
throughout the United States. During 1997, approximately 86% of the Company's
United States revenue was generated at 183 airports in the United States with
the balance generated at the Company's 302 non-airport locations. The Company's
emphasis on airport traffic has resulted in a particularly strong market
position in the major domestic rental revenue airports.
 
    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
35% and 44%, respectively, of international revenue in 1997. Revenue from
international operations in 1997 were approximately $242 million.
 
    The Company holds a solid market position in each of the countries in which
it operates internationally. The operations in Australia and New Zealand are
acknowledged as the largest in their respective markets in terms of revenue.
 
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 System internet
website; and (v) brand awareness of the Avis System through the familiar "We try
harder" service announcements.
 
                                       6
<PAGE>
    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:
 
    - an advanced graphical interface reservation system;
 
    - "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;
 
    - "Preferred Service," an expedited rental service that provides customers
      with a preferred service rental record printed prior to arrival, a
      pre-assigned vehicle and fast, convenient check-out;
 
    - "Wizard on Wheels," which enables the Avis System locations to assign
      vehicles and complete rental agreements while customers are being
      transported to the vehicle;
 
    - 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;
 
    - "Flight Check," a system that provides flight arrival and departure times
      and the next three available flights to the Roving Rapid Return terminals
      and Wizard System terminals;
 
    - "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;
 
    - interactive interfaces through third-party computerized reservation
      systems described under "-- "MARKETING"; and
 
    - 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 1997, 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:
 
    - 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.
 
                                       7
<PAGE>
    - 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.
 
    - 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.
 
    - 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.
 
    - PROFITABILITY MODEL. The Company has developed a sophisticated model that
      blends a corporate customer's individual rental 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.
 
    - 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 1997 for its U.S. rental fleet was
approximately $17,340. For the 1997 model year, approximately 69% of new vehicle
purchases were comprised of GM vehicles, 14% of Chrysler vehicles and 17% of
Toyota, Nissan, Subaru, Hyundai, Ford and Land Rover vehicles. In model year
1998, approximately 77% of the Company's fleet in the United States will consist
of GM vehicles, approximately 10% 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,
 
                                       8
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vehicles are acquired by way of negotiated arrangements with local manufacturers
and, or 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 2000, the Company is required to purchase at least 150,150 GM
vehicles for model year 1998 and maintain at least 51% GM vehicles in the
Company's domestic 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 1997, the Company's average
monthly fleet size ranged from a low of 186,000 vehicles in January to a high of
217,000 vehicles in August. 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 64% in December to 82% in August and averaged
74% for all of 1997.
 
  VEHICLE DISPOSITION
 
    The Company's current operating strategy is to hold vehicles for not more
than 12 months with the average fleet age being less than six months.
Approximately 91% of the vehicles purchased for its domestic fleet under the
model year 1997, 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
3.5% of the Repurchase Program vehicles purchased by the Company and returned in
1997 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 250 technicians
who operate at 75 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
70% of the Company's technicians are ASE certified versus the national average
of 44%.
 
MARKETING
 
  UNITED STATES
 
    In the United States, approximately 77% of the Company's 1997 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,
 
                                       9
<PAGE>
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 $275 million in 1997.
 
    The Company solicits contractual arrangements with corporate accounts by
emphasizing the Wizard System's customer service, rental rates, a worldwide
rental network, advanced technology and centralized account servicing. The
Wizard System 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, and to assure 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 $60 million of leisure business revenue in 1997.
Preferred supplier agreements with select travel agencies and contracts with
tour operators have also succeeded in generating leisure business for the
Company.
 
    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 hotel industry. The
Company has arrangements with the Hilton Corporation, the Hyatt Corporation and
Best Western frequent traveler programs, which provide various incentives to all
program participants. 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 airline frequent flyer programs
operated by Air Canada and Ansett Airlines (Australia).
 
                                       10
<PAGE>
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 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
liability coverage up to the minimum financial responsibility limits required by
applicable law. 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
 
                                       11
<PAGE>
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
239 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 3.4% of the Company's revenue during
1997 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. House Bill H.R. 175, introduced in January 1995, seeks to prohibit
the imposition of liability on renters for loss of, or damage to, rented
vehicles, except in certain circumstances, and would prohibit the sale of loss
damage waivers. To date, no action has been taken on this bill. In addition,
approximately 40 states have considered legislation affecting 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
 
                                       12
<PAGE>
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 more than 18,000 employees worldwide, of whom approximately
17,000 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 2.5% 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 402 locations in
the United States and 127 locations outside the United States. Of those
locations, 182 in the United States and 59 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 rental firms also rent parking space at
or near airports and at their other vehicle rental locations.
 
    The Company leases 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
 
                                       13
<PAGE>
limited parking facility and a rental and return desk 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 WizCom 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 61,000 square feet in a building owned by WizCom 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 operations. However the Company is involved in the
following litigation:
 
    In the case of LINDA A. PUGH, ET AL., V. AVIS RENT A CAR SYSTEMS, INC. AND
NEW HANOVER RENT-A-CAR, INC., 7-96-CV-91-F(2), (E.D.N.C.), a suit in federal
court in North Carolina alleging race discrimination, the Company and the
plaintiffs have entered into a Settlement Agreement, subject to court approval,
providing for payment of $1.875 million plus approximately $1.4 million in
attorneys fees, administration costs and costs of notice to potential class
members, to settle and dismiss all plaintiffs'claims against the Company. In the
case of DAVID RUTSTEIN V. AVIS RENT A CAR SYSTEMS, INC., 97-0807 CIV-G
(S.D.FL.), a suit brought as a purported class action suit in federal court in
Florida alleging discrimination based upon religion, the Company has filed a
motion to dismiss the action, which is pending before the court. Following the
commencement of the PUGH and RUTSTEIN suits described above, certain
governmental agencies initiated inquiries and made requests for information in
connection with allegations of discrimination involving the Company and certain
of its licensees. The Company has been cooperating with all such governmental
requests. To date, an administrative proceeding has been commenced at the
Commonwealth of Pennsylvania Human Rights Commission. In that proceeding, the
Attorney General of the Commonwealth of Pennsylvania has filed an administrative
complaint alleging that the Company is vicariously liable for race
discrimination allegedly committed by a licensee. The Company has not yet been
apprised of the specifics underlying these allegations, but the Company believes
that the claims are without merit. The Company does not believe that the outcome
of those inquiries or the administrative proceeding will have a material adverse
effect on its financial condition or results of operations.
 
    In connection with the IPO, the Company and Cendant entered into an
agreement whereby Cendant agreed to indemnify the Company for the costs and
expenses of defending all such claims described above, any other claims of
illegal discrimination related to customers and alleged to have occurred prior
to the IPO and from any liability arising therefrom.
 
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, 1997.
 
                                       14
<PAGE>
                                    PART II
 
ITEM 5.
 
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
    Reference is made to Page 13 ("Market Information") of the Registrant's 1997
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 1997 Annual Report to
shareholders filed as Exhibit 13 hereto, which information is incorporated
herein by reference.
 
ITEM 7.
 
MANAGEMENTS 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 1997 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 Pages 14 to 42 of the Registrant's Annual
Report to Shareholders for the year ended December 31, 1997 filed as Exhibit 13
hereto:
 
<TABLE>
<S>                                                                                   <C>
AVIS RENT A CAR, INC.
 
Consolidated Financial Statements:
 
  Independent Auditors' Report
 
  Consolidated Statements of Financial Position at December 31, 1996 and 1997
 
  Consolidated Statements of Operations for the year ended December 31, 1995, and
    for the periods January 1, 1996 to October 16, 1996 and October 17, 1996 (Date
    of Acquisition) to December 31, 1996 and for the year ended December 31, 1997
 
  Consolidated Statements of Stockholders' Equity for the year ended December 31,
    1995, and for the periods January 1, 1996 to October 16, 1996 and October 17,
    1996 (Date of Acquisition) to December 31, 1996 and for the year ended December
    31, 1997
 
  Consolidated Statements of Cash Flows for the year ended December 31, 1995, and
    for the periods January 1, 1996 to October 16, 1996 and October 17, 1996 (Date
    of Acquisition) to December 31, 1996 and for the year ended December 31, 1997
 
  Notes to the Consolidated Financial Statements
</TABLE>
 
ITEM 9.
 
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
 
    None
 
                                       15
<PAGE>
                                    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 1998
Annual Meeting of Stockholders filed as Exhibit 20 hereto, which information is
incorporated herein by reference.
 
                                    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
              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 did not file any reports on form 8-K during the quarter
         ended December 31, 1997.
 
                                       16
<PAGE>
          INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
 
To the Board of Directors and Stockholders of
Avis Rent A Car, Inc.
 
    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, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 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 for the year ended
December 31, 1995, and have issued our report thereon dated January 29, 1998
(March 23, 1998 as to Note 19); such financial statements and report are
included in your 1997 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.
 
Deloitte & Touche LLP
New York, New York
January 29, 1998
 
(March 23, 1998 as to Note 19)
 
                                       17
<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>
Year Ended December 31, 1995:
Allowance for doubtful accounts--accounts receivable......  $    3,731   $     (48)                $     937   $    2,746
Accumulated amortization--goodwill........................  $   32,714   $   4,757                             $   37,471
Public liability and property damage and other insurance
  liabilities.............................................  $  184,002   $  81,800                 $  71,125   $  194,677
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                 $   2,556   $      879
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
</TABLE>
 
------------------------
 
a)  Includes additions of $16,838 relating to the acquisition of The First Gray
    Line Corporation on
    August 20, 1997.
 
                                       18
<PAGE>
                                   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 26, 1998.
 
<TABLE>
<S>                                          <C>        <C>
                                             AVIS RENT A CAR, INC.
                                             (Registrant)
 
                                             By:        /s/ KEVIN M. SHEEHAN
                                                        ------------------------------------------
                                                        Name: Kevin M. Sheehan
                                                        Title: Executive Vice President
                                                             and Chief Financial Officer
</TABLE>
 
                                       19
<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
--------------------------------------------------  ------------------------------------------  -----------------
<C>                                                 <S>                                         <C>
 
    /s/ R. CRAIG HOENSHELL                          Chairman of the Board, Chief Executive       March 26, 1998
---------------------------------------               Officer and Director
    R. Craig Hoenshell                                (Principal Executive Officer)
 
    /s/ F. ROBERT SALERNO                           President, Chief Operating Officer and       March 26, 1998
---------------------------------------               Director
    F. Robert Salerno
 
    /s/ KEVIN M. SHEEHAN                            Executive Vice President and Chief           March 26, 1998
---------------------------------------               Financial Officer
    Kevin M. Sheehan                                  (Principal Financial Officer)
 
    /s/ TIMOTHY M. SHANLEY                          Vice President and Controller                March 26, 1998
---------------------------------------               (Principal Accounting Officer)
    Timothy M. Shanley
 
    /s/ STEPHEN P. HOLMES                           Director                                     March 26, 1998
---------------------------------------
    Stephen P. Holmes
 
    /s/ MICHAEL P. MONACO                           Director                                     March 26, 1998
---------------------------------------
    Michael P. Monaco
 
    /s/ W. ALUN CATHCART                            Director                                     March 26, 1998
---------------------------------------
    W. Alun Cathcart
 
    /s/ LEONARD S. COLEMAN, JR.                     Director                                     March 26, 1998
---------------------------------------
    Leonard S. Coleman, Jr.
 
    /s/ MICHAEL J. KENNEDY                          Director                                     March 26, 1998
---------------------------------------
    Michael J. Kennedy
 
    /s/ MARTIN L. EDELMAN                           Director                                     March 26, 1998
---------------------------------------
    Martin L. Edelman
 
    /s/ DEBORAH L. HARMON                           Director                                     March 26, 1998
---------------------------------------
    Deborah L. Harmon
 
    /s/ MICHAEL L. TARNOPOL                         Director                                     March 26, 1998
---------------------------------------
    Michael L. Tarnopol
</TABLE>
 
                                       20
<PAGE>
ITEM 14(A)(3)
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
 EXHIBIT
   NO.                                              DESCRIPTION
---------  ----------------------------------------------------------------------------------------------
<S>        <C>                                                                                             <C>
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.**
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<CAPTION>
 EXHIBIT
   NO.                                              DESCRIPTION
---------  ----------------------------------------------------------------------------------------------
<S>        <C>                                                                                             <C>
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      Offer Letter, dated as of February 24, 1997, between Craig Hoenshell and HFS Incorporated.**
10.16      Amended and Restated Employment Agreement, dated February 9, 1996, between HFS Car Rental,
           Inc. and John Forsythe.**
10.17      Avis Rent A Car, Inc. 1997 Stock Option Plan**
13         Annual Report to Shareholders for the year ended December 31, 1997*
20         Proxy Statement of the Registrant for Annual Meeting of Stockholders--May 21, 1998*
21         Subsidiaries of the Registrant**
23.1       Consent of Deloitte & Touche LLP, Independent Auditors of the Company.***
23.2       Consent of Ernst & Young LLP, Independent Auditors of The First Gray Line Corporation.***
23.3       Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
           Exhibit 5)***
27         FINANCIAL DATA SCHEDULE
27.1       Financial Data Schedule--December 31, 1996***
27.2       Financial Data Schedule--December 31, 1997***
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------------------------
 
*   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.