You’re Not Alone: Rental Car Companies Have Also Been Impacted by High Used Car Prices

To put it simply, everything related to cars is expensive. New cars, used cars, and now rental cars. All of this is because of the ongoing supply chain issues and miscalculations due to Covid-19. So if you’re looking at the car market, new or used, with disdain, you’re not alone. Rental car companies have been struggling to stay afloat ever since the pandemic first began.

Avis fleet of rental cars
Avis fleet of rental cars | Lev Radin/Pacific Press/LightRocket via Getty Images

A brief prologue as to how rental car companies were effected during the pandemic

When the pandemic hit, people traveled less (and rightfully so). Because of this, fewer rentals were ever rented. And because much of the rental fleet was simply sitting in place, companies like Hertz and Avis sold off their vehicles. After all, they weren’t being used, and cost money to be maintained.

However, when travel came back, rental car companies found themselves with a shortage of rental cars. So they should just buy more new cars, straight from the manufacturer, right? Well, it wasn’t that easy, because when rental car companies needed to buy new cars, the chip shortage had become a global issue.

Before this, rental car companies bought straight from the manufacturer and received discounts for buying in bulk. That’s what made the cars fairly cheap. However, since regular customers are still waiting on their made-to-order cars, rental car companies have been pushed to the back of the line. Now they have no choice to expand their fleet using unconventional means.

Rental car companies are relying on auto auctions to fill their fleets

Rental cars parked in parking lot
Rental cars parked in parking lot | Jonathan Wiggs/The Boston Globe via Getty Images

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In a recent report, The Washington Post spoke to the owner of AutoLenders, a car auctioning site, where these record-high prices have become the norm. According to them, used cars are selling for more than their sticker price when new. A used 2019 Honda Civic with 4,000 miles, for example, started at $21,000 and sold for $27,200.

These auto auctions were typically just for civilians. But in a desperate grab for cars, rental car companies are looking to these auction sites to build up their fleets again. Only this time, they’re not getting any discounts for their efforts. A 2019 Acura RDX ended up going to Enterprise for $40,200. When new, the car would’ve only cost $37,500.

Though, for many of these rental car companies, paying a little extra isn’t a terrible issue. After all, they’re going to rent out these cars for a couple of hundred dollars a day. But even still, the prices will be more expensive than they once were. And these higher prices are still set to make rental car companies a lot of money.

Rentals will stay expensive due to high demand

Rental cars waiting in line
Rental cars waiting in line | Jeffrey Greenberg/Universal Images Group via Getty Images

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For better or worse, America is traveling again. And the demand for rentals is still quite high. Although, these higher rental prices are causing people to second guess whether they want to travel (myself included). But the people canceling their vacations are vastly outnumbered by the people planning them.

And as rental car companies are expanding their fleets, overpaying for vehicles at auction sites, they’re also hanging on to older cars for as long as possible. Typically, rental cars are sold after about 40,000 miles of use. But a recent AutoBlog report showed the average rental car coming to auction had 79,000 miles on it.

There’s a lot to manage amidst seemingly endless shortages and record-high car prices. And while rental car companies have an inventory shortage, they’re still in the green financially. Unfortunately for many ordinary people, car prices are going to trend upwards for a while. And while now’s not a great time to buy a vehicle, if you don’t buy it fast, someone else (or even a rental company) will.

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