Avis dropped the buyout plan as recent market volatility has made it more difficult and expensive to raise money, a source familiar with the matter told Reuters.
The company recently raised money to close its $1 billion acquisition of Avis Europe.
Avis has a total debt of $10.10 billion, including that of Avis Europe, according to a regulatory filing.
"The focus, first and foremost, has been on financing, closing and the integration of Avis Europe," the source said.
Hertz, which has total liabilities of $16.18 billion, as of June 30, will also have to raise money for the acquisition.
Avis and Hertz had been chasing Dollar Thrifty for more than a year, amid growing consolidation pressure in the industry, and were in separate talks for antitrust approval.
Dollar Thrifty shares fell 3 percent to $62.99, as investors saw fewer chances of a higher offer from Hertz whose current bid stands at about $1.92 billion, or $66.16 a share.
"The market is saying that they will be lucky to get the deal that Hertz has put on the table right now," said a Hertz shareholder, who did not want to be named.
"I think on the current terms Hertz should be able to close the deal."
However, Dollar Thrifty's second-largest shareholder, Westchester Capital, said Hertz will have to raise its offer to get the deal done.
"Around $75 a share might be the right number," Mike Shannon, a portfolio manager at Westchester said.
Dollar Thrifty had set a deadline of Oct. 10 for both the companies to make their final buyout offers, to end the continued uncertainty surrounding the deal.
It has also adopted a poison pill to thwart unfriendly takeovers after Hertz raised it buyout offer in May. However, Hertz went ahead with its exchange offer and has received 2.6 million Dollar Thrifty shares as of Sept. 9.
Hertz is widely expected to get antitrust approval as it is already in the process of selling its low-cost Advantage brand.
The company was always seen as having a better chance of getting regulatory clearance than Avis as it serves the high-end market.