How Car Rentals Will Soon Be Completely Destroyed for a While

The global pandemic has undoubtedly left an indelible mark on our history. Supply chain interruptions and closed businesses have been the norm for the last several months. One of the most notable trends seen due to the lockdowns has been in the automotive industry, with a lack of available models for car sales. Rental cars are also hard to come by these days, and things aren’t getting any better. Let’s look at why it happened and what it means for the future of car rentals.

How it all started

A Hertz car rental office in Kissimmee, Florida
A Hertz car rental office | Paul Hennessy/SOPA Images/LightRocket via Getty Images

Rental car companies were hard hit at the beginning of the pandemic. Since no one was traveling, the companies were forced to go into survival mode and sold off many of the cars that they had in their fleets. In 2020, major rental companies like Hertz filed for bankruptcy, according to CNBC

Toward the end of 2020, most people were still not driving anywhere, so it wasn’t an issue. However, when the vaccinations started rolling out and lockdowns were lifted, there was a market for renting out cars. The problem was that the supply had dwindled due to rental companies being forced to sell their stock. Due to the effects of supply and demand, rental rates have now skyrocketed.

What is happening with the rental car industry now

To make matters worse, more people are beginning to drive now instead of flying. With the viral videos of customers refusing to wear masks and holding up flights for hours because of their unwillingness to cooperate with airline companies, it’s no wonder that people are reluctant to fly. With the demand for rental cars up and the lack of rental cars available, the price of renting a car has gone through the roof. 

In some instances, an SUV rental could cost as much as $700 a day, compared to the relatively small price of around $100 a day pre-pandemic. Big cities such as Tampa, Orlando, and Denver have been sold out for weeks. To make matters worse, rental car companies can’t increase their fleets due to a semiconductor shortage that has affected the automotive industry as a whole. With no sign of slowing, it begs the question: What will happen to the rental car industry?

What is in the future for rental cars

It doesn’t look like the situation is going to get better any time soon. Due to the semiconductor shortage, it will be hard for rental car companies to get discounts for fleet vehicles. Most new car sales now are to individuals paying close to MSRP for the few vehicles being sold. It makes sense that car manufacturers will want to sell to whomever they can get the best price from. Right now, it isn’t rental car companies.

With car rentals at all-time highs and no end in sight, car rentals will need to be booked months out to avoid not having transportation when you get to your destination if you are flying. If you aren’t flying, renting a car in less dense areas, like the Midwest, for example, may be easier and cheaper. 

Whatever the future holds for auto rentals, it’s clear that there is no end in sight right now. Once the semiconductor shortage is fixed, that may change. However, for now, travelers may be stuck with ride-sharing apps to get where they are going. If and when the rental car industry returns, perhaps they will have learned some vital lessons for the next pandemic or the next recession, whichever comes first.

RELATED: How Potential Hertz Bankruptcy Could Hurt Used Car Prices