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.
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.
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.
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