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Rental-car agencies, shunned by a population that didn’t know whether it was safe to go outside for most of the year, have reportedly started to turn things around. While the recovery didn’t come soon enough to save Hertz from having to declare bankruptcy, the summer months were much kinder to the industry as a whole. Despite the likelihood of 2020 remaining an unprofitable year, the final two quarters should help rental groups recoup some of the sustained losses.
A recent assessment conducted by the Wall Street Journal suggested that the industry is benefiting from a population that continues to shun air travel during the pandemic and elevated used vehicle pricing. While discount prices actually hampered Hertz right when it needed a miracle, secondhand auto rates surged through the latter half of the summer and helped stabilize the rest of the vehicle rental industry.
From WSJ:
These trends helped Avis Budget Group Inc. swing to a net profit of $45 million in the third quarter, reversing losses in the first half of the year, the company said Friday. Privately held Enterprise Holdings Inc. also said it has benefited from an uptick in leisure travel, with bookings improving over the summer and customers renting vehicles for longer periods.
Both Avis and Enterprise say they plan to resume buying vehicles to update their fleets after some downsizing earlier in the year, a move that could bolster sales for car companies reliant on rental-car firms for a portion of their business.
Hertz, still in bankruptcy and recently delisted from the New York Stock Exchange, this summer pointed to record used-car prices as aiding efforts to whittle down the company’s fleet to raise cash.
“We’re starting to see new usage cases for rental cars,” Chris Woronka, an analyst for Deutsche Bank, told the outlet. “In big cities, people are renting cars to get to work, and some companies are even paying for that instead of public transportation. That just didn’t exist before.”
As someone who is dumb enough to live in one of those big cities right now, your author can attest to how difficult it is to snag a trouble-free rental. By August, the spring’s rock-bottom pricing and bloated inventories had completely evaporated — leaving customers with fewer options and higher prices. Worse yet, most facilities have incredibly aggressive health protocols in place that make the whole affair kind of frustrating. That, working in collaboration with low fuel prices, convinced me to take my vintage gas guzzler outside the city limits for the first time in ages. But I’ll be back with the rest of the suckers come the holidays, as plane travel comes with new restrictions I’d rather not deal with.
Many Americans are also avoiding ground-based mass transit whenever possible, Uber/Lyft ridership remains heavily suppressed, and there has been a mass exodus from cities. All of that has contributed to jacking up used vehicle prices and rental demands. While June offered the first real signs of the industry turning a corner, things just kept getting better. By September, it had become clear that rental firms no longer needed to worry about staying afloat and instead needed to begin planning for what will presumably be an extremely busy winter.
“Rental-car companies suddenly were in a very ideal position,” said Jonathan Banks, an automotive analyst with J.D. Power who tracks vehicle valuations. “There was some initial worry that they would flood the used-car market, but it ended up being a boon.”
[Image: Roman Tiraspolsky/Shutterstock]
