How Potential Hertz Bankruptcy Could Hurt Used Car Prices

Rental company Hertz Global Holdings, Inc., has been weathering the COVID-19 storm as best as it can. But there have been fewer people traveling during the global lockdown. Consequently, the car rental company has seen its revenue deflate in recent weeks. The lack of incoming funds it has put the company in a possible bankruptcy situation if things continue for too much longer. This could lead to many used cars flooding the market. What does that mean to you and mean?

Hertz Camaro ZL1
Hertz rental Camaro ZL1 special edition | Hendrick Motorsports

The situation

Hertz has a rental fleet of over 560,000 cars in the United States aloneAccording to Bloomberg, Its debt is near $3 billion. Holders of Hertz’s asset-backed securities want $400 million of it by May 22nd. That is a tall order in a short time frame. So, in order to try and raise funds, the rental company will likely be looking at selling some, or a large portion of their inventory quickly. They could sell it through their own stores. But, more than likely, they will also send cars to local dealerships and auction houses.

What it means for sellers

As written before on Motorbiscuit, there is a glut of vehicles sitting on used car lots and auction yards due to the COVID-19 lockdown. This has forced resale values downward. This means that those trying to sell their vehicle privately will have a harder time trying to get top dollar for it. Also, those that are considering trading in their ride may find dealers a bit apprehensive about making an offer if their lot is already full. This is all magnified in a situation where Hertz may be sending thousands of vehicles to market in the very near future. 

What it means for buyers

For those looking to get a sweet deal on a new or newer ride, however, the Hertz situation would mean that this would be the time to shop around. Incentives from manufacturers, rebates from dealers, and the overstock of vehicles mean that shoppers will find dealers more willing to move used or new metal and sell, sell, sell. Also, rental companies want to avoid liability. So, a reputable rental company, such as Hertz, will likely have better-maintained vehicles than what is normally found for sale. So, if dealers pick them up, a consumer could score a great value on a well maintained, low aged vehicle. 

A sold sign hangs on a truck after making a sale.
A “Sold” sign hangs from the rearview mirror of a Ford Motor Co. F-250 truck at a car dealership | Daniel Acker/Bloomberg via Getty Images

There is no doubt that Hertz has a large obstacle in front of them to climb. $400 million is no small number to raise in any timeframe, let alone by May 22nd. So, the likelihood of them selling a large portion of inventory seems strong. This could be a great thing if a shopper is looking for a vehicle, but also a terrible thing for those wanting to sell vehicles. Good deals on used units will be out there to be had. But, unloading a vehicle as a trade-in or privately when the market is about to get flooded with thousands of other used vehicles could prove to be a challenge.