Rental car companies typically account for about 10% or more of annual new car sales in the United States. It’s estimated that anywhere from 1.7 million to 2 million new cars were purchased through rental companies in 2019 alone. However, like most industries in the world right now, the coronavirus pandemic has caused rental car companies to suffer greatly.
Rental car companies get around two-thirds of their business from airport locations, but obviously not a lot of individuals are utilizing those facilities at the moment. In fact, the rate of flying via airplane in the United States has decreased by a whopping 94% since the beginning of April. As a direct result of this drop-off, way less people are needing to rent cars.
Hertz recently made headlines when they announced that they were filing for bankruptcy last week as a result of missing multiple payments to their group of lenders due to a massive drop off in new car purchases. Hertz’ main rival, Avis Budget, has been able to keep themselves in business by immediately cutting off all plans to sell new cars when the pandemic began, and by planning to continue cutting purchases of new cars by 80% within the coming months; Avis is still struggling and losing money, but because of this quick thinking they’re remaining economically viable for now.
Enterprise has also found themselves in a relatively viable position as well, however, it’s important to note that even the rental companies that are doing the most “successfully” amid the pandemic still have to deal with lots upon lots of thousands of unused cars that they normally would be gearing up to sell to third-party dealers right now.
At the moment, major sports stadiums throughout the country, such as the Dodgers and Angel Stadium in California, have been called upon to store these unused cars for the time being while no one is attending any sports games. The Los Angeles Times posted a photo of these parking lots, joking that it seemed as though Californians were all in the stadium still cheering for their favorite teams.
“Hertz said it has sold 41,000 cars from its US fleet and another 13,000 cars in Europe in early March, but that the halting of used car auctions and closure of many used and new car dealerships essentially brought sales to a halt. The difficulty in continuing to sell cars is one of the reasons it cited as the cause of its bankruptcy filing. Avis Budget said it already cut its US fleet by 35,000 in the first half of March,” according to reports from CNN.
Rental companies are still preparing to sell these cars, however, and are even estimating they can sell hundreds upon thousands of cars; there are currently about 1.5 million unused rental cars in the US.
All companies are considering some pretty severe price cuts to get rid of the vehicles, which could be extremely beneficial to anyone in the market for a new car. Now, buyers can likely expect to see these companies listing these late-model cars with relatively low mileage, barely any use, and at a significantly lower price than what’s to be expected (depending on the specific car of course).
“The sales to rental car companies typically are among lowest-margin sales made by the automakers, especially compared to retail buyers who are more likely to pay for the higher priced options. But while sales to rental car companies “aren’t necessarily the most profitable sales, they move the metal, and generate cash that is needed right now,” said Jeff Schuster, president of global forecasting for automotive research firm LMC.
Like all industries throughout the world right now, only time will tell how this pandemic continues to impact business and its economic viability.