The Rental Car Rebound

Rental Demand and Used Car Prices Climb

When the COVID-19 pandemic first hit the US in March, the rental car industry suffered severely. Customers abandoned plans to travel for business and leisure. The price of used cars also plummeted, which disrupted business practices for rental car companies because they regularly turn over their supply of vehicles and are vulnerable to changes in used car prices. These two issues combined put strain on rental car companies and even forced Hertz, a leader in the industry, into bankruptcy.

However, recent trends have helped the rental car industry make an impressive recovery. Many people were looking to travel over the summer and fall, but were reluctant to take planes or public transportation because of COVID-19. For this reason, many were eager to rent or buy cars. This caused a spike in rental car business and helped used car prices bounce back.

Companies Recover

Avis Budget Group (CAR) reported a net profit of $45 million for the third quarter, which made up for losses during the first half of the year. Privately held Enterprise Holdings also reported that its business is recovering from a slump when the pandemic began. Both Avis and Enterprise plan to add vehicles to their fleets after scaling down their inventories earlier in the year. This move will be helpful for car companies which rely on the rental car industry for a portion of their sales.

Hertz is still in bankruptcy and was delisted from the New York Stock Exchange recently. However, the company is shoring up its balance sheets by selling its vehicles. The fact that used car prices have recovered could help Hertz weather its current challenges.

Looking Ahead

The rental car industry is one of many sectors finding innovative ways to meet customers’ needs as their lifestyles change because of the pandemic. Rental car firms are moving their fleets from airports to urban centers to respond to changes in demand. Some are also offering longer-term rental deals for people using rental cars to commute rather than to go on vacation.

As the weather gets colder and walking and biking become less viable transportation options, rental car demand may climb. Additionally, people may choose to rent cars and drive to visit family and friends over the holidays rather than fly or take busses or trains. Though there may be more roadblocks ahead for rental car companies, they are finding ways to adapt and recover from a difficult downturn.

---

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS110301