Car rental giant Avis Budget Group has revealed it will buy smaller rival Zipcar for $500 million in cash.

The move will allow Avis Budget to enter the fast-growing United States car-sharing market.

The offer of $12.25 per share is at a premium of 49 per cent on the Zipcar share price at the close of trading on Monday.

“We see car sharing as highly complementary to traditional car rental, with rapid growth potential and representing a scalable opportunity for us as a combined company,” Ronald Nelson, Avis’ chief executive, said in a statement.

Rising petrol prices have driven demand for car sharing, attracting car rental companies in the United States.

However, Zipcar has struggled to grow its presence in smaller cities to counter the threat of a saturating market in bigger cities.

The deal, expected to close in the spring of 2013.